Mutual Funds

A mutual fund is a type of professionally managed investment fund that pools money from many investors to purchase securities. While there is no legal definition of the term mutual fund, it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as “investment companies” or “registered investment”. Hedge funds are not considered a type of mutual fund, primarily because they cannot be sold to the general public.

Mutual Funds in India
The first introduction of a mutual fund in India occurred in 1961, when the government of India launched Unit Trust of India (UTI). Until 1987, UTI enjoyed monopoly in the Indian mutual fund market. Then a host of other government controlled Indian financial companies came up with their own funds. These included state bank of India, Canara Bank and Punjab National Bank. This market was made open to private players in 1993, as a result of the historic constitutional amendments brought forward by the then congress led government under the existing regime of liberalization, privation and globalization (LPG).

Mutual funds are an under tapped market in India
Despite being available in the market less than 10% of Indian of households have invested in mutual funds. A recent report on mutual fund investments in India published by research and analytics firm, Boston analytics, suggests investors are holding back from putting their money into mutual funds due to their perceived high risk and a lack of information on how mutual funds work. There are 46 Mutual Funds as of June 2013.
The primary reason for not investing appears to be correlated with city size. Among respondents with a high savings rate, close to 40% of those who live in metros and Tier I cities considered such investments to be very risky, whereas 33% of those in Tier II cities said they did not now how or where to invest in such assets

Mutual fund distribution in India
Mutual fund investments are sourced both from institutions (companies) and individuals. Since January 2013, institutional investors have moved to investing directly with the mutual funds since doing so saves on the expense ratio incurred. Individual investors are, however, served mostly by Investment advisor and banks. Since 2009, online platforms for investing in Mutual funds have also evolved.

Average Assets under Management
Assets under management (AUM) is a financial term denoting the market value of all the funds being managed by a financial institution (a mutual fund, hedge fund, private equity firm, venture capital firm, or brokerage house) on behalf of its clients, partners, depositer etc.