3. The first mutual fund was established in
A Dutch merchant Adriaan van Ketwich
created the first mutual fund in 1774.
“Eendragt Maakt Magt”, which meant “Unity
First mutual fund outside the Netherlands was
the Foreign & Colonial Government Trust,
which was established in London in 1868.
4. Mutual funds were introduced into the United
States in the 1890s. They became popular
during the 1920s..
In year 1924, the first open-end fund
“Massachusetts Investors’ Trust of Boston” was
ICP offered a series of closed end funds in 1966,
these were later privatized in 2000.
5. Board of Directors
A management investment company (mutual
fund company) has a CEO, a team of officers
and a board of directors.
The principal underwriter of a mutual fund is
called a distributor, or more commonly,
The custodian is responsible for the possession
of the securities purchased by the investment
company for its portfolio.
The board of directors hires an investment
advisor to invest the cash and securities held in
the fund's portfolio, implement the objectives
outlined by the board.
7. Transfer Agent
The mutual fund contracts with a transfer
agent to issue, redeem and cancel fund shares,
handle the distribution of dividend and capital
gains to shareholders, and send out trade
As mentioned before, the sponsor usually
distributes shares of the mutual fund through
8. Selling securities short
Buying securities on margin
Participating in joint investment or trading
Distributing its own securities, except through
9. An affiliated person is someone who controls
an investment company's operations in any
An interested person includes those
individuals who have a relationship with an
affiliated person that the SEC deems influential
in matters of fund operation. These people
would include immediate family members of
affiliated parties, legal counselors, broker-dealers,
and so on.
10. Diversification . Securities from hundreds or
even thousands of issuers it reduces the risk of
Professional Management . Expertise to
manage and reinvest interest or dividend
income, or to investigate thousands of
securities. Access to extensive research, market
information, and skilled securities traders.
11. Liquidity . Mutual fund can be bought and
sold on any business day, so investors have
easy access to their money. Many individual
securities can also be bought and sold readily,
others aren't widely traded. (CE & IC)
Convenience . Mutual funds offer services
that make investing easier. Mail, telephone, or
the Internet. Automatic investments into a fund
or automatic transfers from a fund to your
12. Tax Free Return The stock dividend from
mutual funds are exempt from tax. Cash
No Guarantees. Unlike bank deposits,
principal and returns are not guaranteed.
Diversification “Penalty." Diversification
reduces the risk of loss, it also limits the
potential for making a killing in the market.
13. Open End – continuously offer and redeem
their units to the investors.
Closed End – one time issuance of certificates
and then are traded in the secondary market.
Investment Company – one time issuance of
shares and then are traded in the secondary
14. Open end and closed end funds are established through
a trust deed as a trust under the trust act 1888.
Investment Company is established as a limited
Operated by two parties i.e. fund manager and the
trustee or custodian.
CDC - largest trustee of mutual funds in Pakistan
with almost 90% of the market share.
SECP through NBFC Regulations 2008 regulates the
mutual fund industry.
15. Fund Manager
Manage the assets of the mutual fund.
Maintenance of financial and other records and documents.
Maintenance of the record of unit or certificate holders.
Receipt and processing of investment and redemption
Hold all the property mutual fund for the unit or certificate
Settlement of transaction entered into by the fund manager.
Ensure the methodology and procedures adopted by the fund
manager in calculating the value of units are adequate.
16. Equity Fund
Asset Allocation Fund
Fund of Funds
Capital Protected / Guaranteed Fund
17. Index Fund
Money Market Fund
Aggressive Fixed Income Fund
18. Income Tax Ordinance, 2001
Income of mutual fund is exempt subject to
distribution of ninety percent of accounting
income reduced by capital gains realized or
Mutual funds are also exempt from
withholding tax and capital gains tax.
19. Investor will be taxed on cash dividend @ 10%
stock dividend exempt.
Investors have to pay capital gains tax if units,
certificates or shares are redeemed/sold before
Investors also get rebate on income tax on their
investment in mutual funds.
20. A mutual fund brings together a group of
people and invests their money in stocks,
bonds, and other securities.
The advantages of mutuals are professional
management, diversification, economies of
scale, simplicity and liquidity.
The disadvantages of mutuals are high costs,
over-diversification, possible tax consequences,
and the inability of management to guarantee a
21. There are many, many types of mutual funds. You
can classify funds based on asset class, investing
strategy, region, etc.
Mutual funds have lots of costs.
Costs can be broken down into ongoing fees
(represented by the expense ratio) and transaction
The biggest problems with mutual funds are their
costs and fees.
Mutual funds are easy to buy and sell. You can
either buy them directly from the fund company or
through a third party.