MUTUAL FUND

2.1 INDUSTRY PROFILE

The first introduction of a mutual fund in India occurred in 1963, when the Government of India
launched Unit Trust of India (UTI). UTI enjoyed a monopoly in the Indian mutual fund market
until 1987, when a host of other government-controlled Indian financial companies established
their own funds, including State Bank of India, Canara Bank and by Punjab National Bank.

As the industry expanded, a non-profit organization, the Association of Mutual Funds in India
(AMFI), was established on 1995. Its objective is to promote healthy and ethical marketing
practices in the Indian mutual fund Industry. SEBI has made AMFI certification mandatory for
all those engaged in selling or marketing mutual fund products.

2.2 MUTUAL FUNDS IN INDIA

By the year 1970, the industry had 361 Funds with combined total assets of 47.6 billion dollars
in 10.7 million shareholder’s account. However, from 1970 and on wards rising interest rates,
stock market stagnation, inflation and investors some other reservations about the profitability of
Mutual Funds, Adversely affected the growth of mutual funds. Hence Mutual Funds realized the
need to introduce new types of Mutual Funds, which were in tune with changing requirements
and interests of the investors. The 1970’s saw a new kind of fund innovation; Funds with no
sales commissions called “no load “funds. The largest and most successful no load family of
funds is the Vanguard Funds, created by John Bogle in 1977. in the series of new product, the
First Money Market Mutual Fund (MMMF) e.g. The Reserve Fund” was started in November
1971. This new concept signaled a dramatic change in Mutual Fund Industry. Most importantly,
it attracted new small and individual investors to mutual fund concept and sparked a surge of
creativity in the industry.

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2.3 STRUCTURE OF MUTUAL FUNDS IN INDIA

The structure of Mutual Funds in India is a three-tier one. There are three distinct entities
involved in the process – the sponsor (who creates a Mutual Fund), trustees and the asset
management company (which oversees the fund management). The structure of Mutual Funds
has come into existence due to SEBI (Securities and Exchange Board of India) Mutual Fund
Regulations, 1996. Under these regulations, a Mutual Fund is created as a Public Trust. We will
look into the structure of Mutual Funds in a detailed manner.

The structure of Mutual Funds in India is a three-tier one. There are three distinct entities
involved in the process – the sponsor (who creates a Mutual Fund), trustees and the asset
management company (which oversees the fund management). The structure of Mutual Funds
has come into existence due to SEBI (Securities and Exchange Board of India) Mutual Fund
Regulations, 1996.

Figure .4 Showing Structure of mutual fund in India

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2.4 TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk
tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a
collection of many stocks, an investors can go for picking a mutual fund might be easy. There
are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in
categories, mentioned below:

Figure.5 Showing Types of Mutual Funds In India

A) BY STRUCTURE:

1. Open - Ended Schemes: An open-end fund is one that is available for subscription all
through the year. These do not have a fixed maturity. Investors can conveniently buy and sell
units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is
liquidity.

2. Close - Ended Schemes: A closed-end fund has a stipulated maturity period which generally
ranging from 3 to 15years. The fund is open for subscription only during a specified period.
Investors can invest in the scheme at the time of the initial public issue and thereafter they can

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buy or sell the units of the scheme on the stock exchanges where they are listed. In order to
provide an exit route to the investors, some close-ended funds give an option of selling back the
units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations
stipulate that at least one of the two exit routes is provided to the investor.

3. Interval Schemes: Interval Schemes are that scheme, which combines the features of open-
ended and close-ended schemes. The units may be traded on the stock exchange or may be open
for sale or redemption during pre-determined intervals at NAV related prices.

B) BY NATURE:

1. Equity Fund: These funds invest a maximum part of their corpus into equities holdings. The
structure of the fund may vary different for different schemes and the fund manager’s outlook on
different stocks. The Equity Funds are sub-classified depending upon their investment objective,
as follows:

 Diversified Equity Funds

 Mid-Cap Funds
 Sector Specific Funds
 Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-
return matrix.

2. Debt Funds: The objective of these Funds is to invest in debt papers. Government authorities,
private companies, banks and financial institutions are some of the major issuers of debt papers.
By investing in debt instruments, these funds ensure low risk and provide stable income to the
investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated with
Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

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Income Funds: Invest a major portion into various debt instruments such as bonds, corporate
debentures and Government securities.

MIPs: Invests maximum of their total corpus in debt instruments while they take minimum
exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly
high on the risk-return matrix when compared with other debt schemes.

Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds
primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers
(CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and
preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-
bank call money market, CPs and CDs. These funds are meant for short-term cash management
of corporate houses and are meant for an investment horizon of 1day to 3 months. These
schemes rank low on risk-return matrix and are considered to be the safest amongst all categories
of mutual funds.

3. Balanced Funds: As the name suggest they, are a mix of both equity and debt funds. They
invest in both equities and fixed income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors with the best of both the
worlds. Equity part provides growth and the debt part provides stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter viz,

Each category of funds is backed by an investment philosophy, which is pre-defined in the

objectives of the fund. The investor can align his own investment needs with the funds objective
and invest accordingly.

C) BY INVESTMENT OBJECTIVE:

1. Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these
schemes is to provide capital appreciation over medium to long term. These schemes normally
invest a major part of their fund in equities and are willing to bear short-term decline in value for
possible future appreciation.

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2. Income Schemes: Income Schemes are also known as debt schemes. The aim of these
schemes is to provide regular and steady income to investors. These schemes generally invest in
fixed income securities such as bonds and corporate debentures. Capital appreciation in such
schemes may be limited.

3. Balanced Schemes: Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they earn. These schemes invest in
both shares and fixed income securities, in the proportion indicated in their offer documents
(normally 50:50).

4. Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation
of capital and moderate income. These schemes generally invest in safer, short-term instruments,
such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.

5. Load Funds: A Load Fund is one that charges a commission for entry or exit. That is, each
time you buy or sell units in the fund, a commission will be payable. Typically entry and exit
loads range from 1% to 2%. It could be worth paying the load, if the fund has a good
performance history.

6. No-Load Funds: A No-Load Fund is one that does not charge a commission for entry or exit.
That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no
load fund is that the entire corpus is put to work.

D) OTHER SCHEMES:

1. Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws
prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any
Equity Linked Savings Scheme (ELSS) are eligible for rebate.

2. Index Schemes: Index schemes attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those
stocks that constitute the index. The percentage of each stock to the total holding will be
identical to the stocks index weightage. And hence, the returns from such schemes would be
more or less equivalent to those of the Index.

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3. Sector Specific Schemes: These are the funds/schemes which invest in the securities of only
those sectors or industries as specified in the offer documents. E.g. Pharmaceuticals, Software,
Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are
dependent on the performance of the respective sectors/industries. While these funds may give
higher returns, they are more risky compared to diversified funds. Investors need to keep a watch
on the performance of those sectors/industries and must exit at an appropriate time.

2.5 GROWTH OF MUTUAL FUNDS IN INDIA

The Indian Mutual Fund has passed through three phases. The first phase was between 1964 and
1987 and the only player was the Unit Trust of India, which had a total asset of Rs. 6,700 crores
at the end of 1988. The second phase is between 1987 and 1993 during which period 8 Funds
were established (6 by banks and one each by LIC and GIC). The total assets under management
had grown to 61,028 crores at the end of 1994 and the number of schemes was 167.

The third phase began with the entry of private and foreign sectors in the Mutual Fund industry
in 1993. Kothari Pioneer Mutual Fund was the first Fund to be established by the private sector
in association with a foreign Fund.

As at the end of financial year 2000(31st march) 32 Funds were functioning with Rs. 1, 13,005
crores as total assets under management. As on august end 2000, there were 33 Funds with 391
schemes and assets under management with Rs 1, 02,849 crores The securities and Exchange
Board of India (SEBI) came out with comprehensive regulation in 1993 which defined the
structure of Mutual Fund and Asset Management Companies for the first time. Several private
sectors Mutual Funds were launched in 1993 and 1994. The share of the private players has risen
rapidly since then. Currently there are 34 Mutual Fund organizations in India managing 1,
02,000 crores.

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Figure .6 Showing the Graph Indicates the Growth of Mutual Funds in India

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2.6 INDUSTARY PROFILE

ICICI prudential mutual fund

ICICI Prudential Asset Management Company Ltd. is a leading asset management company
(AMC) in the country focused on bridging the gap between savings & investments and creating
long term wealth for investors through a range of simple and relevant investment solutions.

The AMC is a joint venture between ICICI Bank, a well-known and trusted name in financial
services in India and Prudential Plc, one of UK’s largest players in the financial services sectors.
Throughout these years of the joint venture, the company has forged a position of pre-eminence
in the Indian Mutual Fund industry.

The AMC manages significant Assets under Management (AUM) in the mutual fund segment.
The AMC also caters to Portfolio Management Services for investors, spread across the country,
along with International Advisory Mandates for clients across international markets in asset
classes like Debt, Equity and Real Estate.

The AMC has witnessed substantial growth in scale; from 2 locations and 6 employees at the
inception of the joint venture in 1998, to a current strength of 1476 employees with a reach
across over 215 locations reaching out to an investor base of more than 2.5 million investors (As
on March 31, 2017). The company’s growth momentum has been exponential and it has always
focused on increasing accessibility for its investors.

Driven by an entirely investor centric approach, the organization today is a suitable mix of
investment expertise, resource bandwidth and process orientation. The AMC endeavors to
simplify its investor’s journey to meet their financial goals, and give a good investor experience
through innovation, consistency and sustained risk adjusted performance.

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2.7 BOARD OF DIRECTORS

1. Ms. Chanda D. Kochhar

2. Chairperson
3. Mr. N. S. Kannan
4. Director
5. Mr. Raghunath Hariharan
6. Director
7. Mr. Vinod Kumar Dhall
8. Independent Director
9. Mr. V. Sridar
10. Independent Director
11. Mr. M. S. Ramachandran
12. Independent Director
13. Mr. Dilip Karnik
14. Independent Director
15. Mr. R. K. Nair
16. Independent Director
17. Mr. Dileep Choksi
18. Independent Director
19. Mr. Sandeep Bakhshi
20. Managing Director and CEO
21. Mr. Puneet Nanda
22. Executive Director
23. Mr. Sandeep Batra
24. Executive Director

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2.8 MANAGEMENT TEAM

 Mr. Nimesh Shah - Chief Executive Officer

 Mr. B Ramakrishna - Executive Vice President

 Mr. Raghav Iyengar - Executive Vice President & Head of Retail & Institutional Business
 Mr. Hemant Agarwal - Head of Operations

 Mr. Vivek Sridharan - Head of Institutional Business

 Mr. Amar Shah - Head of Retail Business

 Ms.Supriya Sapre - Head of Compliance & Legal

 Mr. Abhijit Shah - Head of Marketing, Digital & Customer Experience

 Mr. Amit Bhosale - Head of Risk Management

 Mr. Nikhil Bhende - Head of Human Resources

 Mr. Adil Bakhshi - Head of Public Relations & Communication

 Mr. Lalit Popli - Head of Information Technology

 Mr. Rahul Rai - Head - Real Estate Business

 Mr. Anish Tawakley - Head of Research.

Investment Management
 Mr. S. Naren - Chief Investment Officer
 Mr. Rahul Goswami - Chief Investment Officer– Fixed Income

 Mr. Rahul Rai - Head of Real Estate Business

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2.9TABLE NO 1: BOARD OF ICICI PRUDENTIOAL

Board Customer Service &

Board Audit Committee
Policyholders’ Protection Committee
Mr. V. Sridar (Chairman) Mr. Vinod Kumar Dhall (Chairman)
Mr. Vinod Kumar Dhall Mr. Dilip Karnik
Mr. M. S. Ramachandran Mr. N. S. Kannan
Mr. R. K. Nair Mr. Raghunath Hariharan
Mr. N. S. Kannan
Mr. Raghunath Hariharan
Board Corporate Social
Board Investment Committee
Responsibility Committee
Mr. Vinod Kumar Dhall (Chairman) Mr. M. S. Ramachandran (Chairman)
Mr. Dilip Karnik Mr. R. K. Nair
Mr. N. S. Kannan Mr. N. S. Kannan
Mr. Raghunath Hariharan Mr. Raghunath Hariharan
Mr. Sandeep Bakhshi
Mr. Sandeep Batra
Mr. Satyan Jambunathan
Mr. Manish Kumar
Mr. Deepak Kinger
Ms. Asha Murali
Board Nomination & Remuneration
Board Risk Management Committee
Committee
Mr. M. S. Ramachandran (Chairman) Mr. M. S. Ramachandran (Chairman)
Mr. Vinod Kumar Dhall Mr. N. S. Kannan
Mr. N. S. Kannan Mr. Raghunath Hariharan
Mr. Raghunath Hariharan
Stakeholders Relationship Committee With Profits Committee

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Mr. Vinod Kumar Dhall (Chairman) Mr. V. Sridar (Chairman)

Mr. Sandeep Bakhshi Mr. R. K. Nair
Mr. Sandeep Batra Mr. N. S. Kannan
Mr. Raghunath Hariharan
Mr. Sandeep Bakhshi
Mr. N. M. Govardhan
Ms. Asha Murali

Products & Services

The AMC manages significant Assets under Management (AUM) in the Mutual Fund segment
across asset classes. The AMC also caters to Portfolio Management Services and Real Estate Di-
vision for investors, spread across the country, along with International Advisory Mandates for
clients across international markets.

Mutual Fund
The Mutual Fund caters primarily to retail investors. ICICI Prudential AMC has introduced prod-
ucts aligned to meet customer needs leading to a well-diversified portfolio of mutual fund
products.

Portfolio Management Services

The Portfolio Management Services allow high net worth investors to invest in a more concen-
trated portfolio aiming at higher returns. In the year 2000, ICICI Prudential AMC was the first
institutional participant to offer the service, and has now got a successful track record of over 10
years.

Real Estate Business

The Real Estate division caters to high net worth investors and domestic institutional investors,
with ICICI Prudential AMC starting the Real Estate Investment Series Portfolio in the year 2007.

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Major Competitors
A few of the competitors for ICICI Prudential Mutual Fund in the mutual fund sector are Mutual
Fund, Reliance Mutual Fund, SBI Mutual Fund, and Birla Sun Life Mutual Fund & UTI Mutual
Fund.

2.10 AWARDS

 ICICI won the 'Insurance Company of the Year Award 2011' and ‘Company of the Year
Award 2011 - Life Insurance’ at the Indian Insurance Awards.
ICICI received the award for the ‘Best Life Insurance Provider - Private’ at the CNBC TV18
Best Bank and Financial Institution Awards for FY11
 ICICI were declared as the winner of the 'Shared Services in India – Insurance Domain
category', at the 2nd Excellence Award and Recognition for Shared Services, 2012.
 ICICI brand campaign 'Achche Bandeh', was awarded the ‘Silver Effie’ in the financial
services category.
 ICICI won the 1st prize for Innovation at the Qimpro Awards, 2014.
 Ranked as one of the best brands in BFSI sector as per 'BrandZ Top 50 Most Valuable Indian
Brands 2014', a study conducted by Millward Brown and published by WPP.
 Ranked as one of the best brands in BFSI sector twice in a row as per 'BrandZ Top 50 Most
Valuable Brands 2015', a study conducted by Millward Brown and published by WPP
 Ranked as one of the best brands in BFSI sector three times in a row as per 'BrandZ Top 50
Most Valuable Brands 2016', a study conducted by Millward Brown and published by WPP.
 Ranked four times as one of the most valuable Life Insurance brands in India as per “BrandZ
Top 50 Most Valuable Indian Brands 2014, 2015, 2016 and 2017.” Ranked as the no. 1 brand
in the “Top Riser” category, i.e. the brand with the highest increase in Brand Value, as per
“BrandZ Top 50 Most Valuable Indian Brands 2017.”

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2.11 MISSION& VISION

Mission

“To help our customers achieve financial prosperity and peace of mind”.

Vision

“To distinguish Prudential as an admired multinational financial services leader, trusted partner,
and provider of innovative solutions for growing and protecting wealth”.

2.12 OBJECTIVES OF THE ICICI

The major objective of the ICICI was to meet the needs of the industry for permanent and long
term funds in the private sector. In general, the major objectives of the Corporation are:

 To assist in creation, growth and modernization of business enterprises in the non-public

sector.
 To encourage and promote the involvement of internal and external capital sources, in such
enterprises.
 To motivate pvt ownership of industrial investment and to promote and assist in the
expansion of markets.
 To provide equipment finance.
 To provide finance for rehabilitation of industrial units.

2.13 SWOT ANALYSIS OF ICICI

Strengths in the SWOT analysis of ICICI prudential.

 ICICI prudential is in terms of total assets and market share

 ICICI prudential is one of the largest financial institution of India
 Money power which make than ignorant about the gestation period
 Motivation factors provide by company.
 Service quality which is the crux of their mission.

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 A huge data haze of corporate clients retail customer, and bank customers of ICICI.
 Highest paid up capital digital in IRDA in comparison to all players.
 Training provided to all people associating with ICICI prudential.

Weaknesses in the SWOT analysis of ICICI Bank

 High targets for financial advisors and for the sales department.
 Many companies in the market offer same product by the title difference in the premium
and offerings.
 Very huge premium of policies.
 Problematic to advisors also.
 Sustainable risk associated with investment in money market.

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