Investing in mutual funds is a smart and organized approach to managing money. Anyone and everyone interested in Personal Finance needs to know about Mutual Funds. A Mutual Fund essentially collects money from retail & institutional investors to invest in a combination of debt and/or equity paper. The Mutual fund is managed by a fund manager. A Fund manager is professionally qualified who strives to generate the best possible “risk adjusted return “. A fund manager is assisted by a team of experienced & well-qualified research analysts. A fund manager may manage several schemes at a time. The entity employing the Fund manager is called the Asset Management Company (AMC) or the Fund house. In India, the AMC has to be a trust.
Mutual Funds was first Introduced in the year 1963, in the form of UTI, by an act of parliament called the UTI Act. Today, Mutual Funds have come a long way. It was in the year 1994-95 that private sector Mutual Funds, with the same tax benefits, were allowed. SEBI (Securities and Exchange Board of India) was established in the year 1992 and came out with the first set of regulations (for Mutual Funds) in the year 1996. Today we have 41 Asset management companies and combined assets under management of over 20 lac Crore.
The Mutual fund industry has an immense potential for growth. Currently 41 AMC’s manage over 20 lac crore of investors wealth. Assets under management (AUM) as a %age of GDP at 7%, is extremely low in India. In Developed countries, this ratio is very high. It is 91 %( US), 51 %( UK) and 114 %( Australia). Similarly, household penetration of Mutual Funds in India is abysmally low at 5%. Whereas this is over 55% in countries like the US. We at Mutualfundwala expect a high double digit incremental growth of Mutual Funds in India for at least another 15-20 years.