Mutual Fund Structure and Constituents

Although we have previously touched upon the structure of a mutual fund, in this chapter, we will be studying them in more detail and discussing their different constituents. 


How is a Mutual Fund formed?

The creation of a mutual fund involves the following authorities-


The Sponsor

The sponsors are the persons or  the groups of  persons who come up with  the idea  of  the mutual fund.They are the ones who will establish the fund and ask SEBI for its approval.


The Trustees

After SEBI’s approval, the sponsors form the public trust.The trustees of the scheme are placed to ensure that the funds of the investors are being managed properly, in line with the objectives of the scheme.


The Asset Management Company (AMC)

The trustees appoint the AMC for  their mutual fund. This AMC ensures that all the processes  related to investment are carried out  smoothly.


Key Personnel of an AMC

The key personnel of an entity are those people who have the authority to plan and direct the activities of the entity.


Apart from knowing your  fund manager, it is important to  understand these designations of the AMC as well -

  • Chief Executive Officer (CEO) 
  • Chief Operating Officer (COO) 
  • Chief Executive Officer (CEO) Head- Sales
  • Head- Fixed Income 
  • Fund Manager- Equity 
  • Fund Manager- Debt 
  • Head- Compliance
  • Investor Relations Officer

The divisions  within  an AMC are made on  the basis  of  which  segment of  the market the fund market handles.Under  each  fund manager,  there  are  analysts and  other professionals  who assist  the fund manager with the smooth functioning of the mutual fund schemes.


Which authorities regulate the Mutual Fund industry?

There are two  regulatory bodies which oversee the functioning of the mutual fund industry- 

  • SEBI 
  • AMFI

Securities Exchange Board  of India (SEBI)

SEBI  regulates  the mutual funds as a separate  segment  of  the stock market.  It  builds  the rules and regulations for all AMCs and the basic functioning of all mutual funds in the country


Association of Mutual  Funds in India (AMFI)

AMFI  is  an industry-standard  organization  for  all mutual  funds of  the country.  It  is  a not-for-profit organization that aims to spread investor awareness about the mutual funds industry.


What are the objectives of AMFI?

Given below are some of the objectives that AMFI has been set up for with the following objectives -

  1. To   outline the ethical and uniform professional standards for every mutual fund operating under the association;
  2. To   encourage  its   members  and  investors   to   maintain   ethical business practices and regulations;
  3. To   get   AMCs, agents,   distributors,   advisories   and  other  bodies involved in the capital market to comply with their guidelines;
  4. To  help  investors  to  air  their  grievances  and register  complaints against a fund manager or the fund house;
  5. To   distribute   information   on   Mutual Fund  Sector  and  conduct research and workshops on various funds; and
  6. To  spread awareness about the regulations  regarding  safe  mutual fund investments throughout the country.

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