 |
| What are mutual funds? |
Mutual funds are a form of collective investment that allows investors with similar investment objectives to pool their funds to be invested in a portfolio of securities or other assets.
A professional fund manager then invests the pooled funds in a portfolio which may include various kind of the asset classes for instance cash, bonds & deposits, stocks, property, commodities, etc.
Unitholders do not purchase the securities in the portfolio directly. Ownership of the fund is divided into units of entitlement. As the fund increases or decreases in value, the value of each unit increases or decreases accordingly. The number of units held depends on the unit purchase price at the time of investment and the amount of money invested.
The return on investment of unitholders is usually in the form of dividends and capital gain, derived from the portfolio. Each unit earns an equal return, determined by the level of distribution in any one period.
Mutual fund investors are typically those with savings to invest, who neither have the time nor investment expertise. Rather, they prefer to invest in an investment vehicle which suits their purposes and risk appetites. Mutual funds allow investors to have easy access to a wide range of investment exposures not normally available to them.
As investors seek to maximize returns on their financial resources, Mutual funds provide an ideal way to gain exposure to investments that, in the long run, should produce returns superior to cash savings and fixed deposit investments.
|
Who are the parties involved in a mutual fund?
The structure of a mutual fund (“the fund”) is determined in the interests of unitholders. It is composed of the parties designated to perform certain duties and the regulators, in both public and private sectors, as follows:
- An asset management company means any securities company with an investment management license from the Ministry of Finance. It is to determine a mutual fund scheme, and investment policy and objectives for proposal to the Office of the Securities and Exchange Commission (“SEC”) for approval, as well as manage the fund strictly in accordance with the investment objectives and policy.
The asset management company will inform the investors and interested parties of the investment objectives and policy in the fund prospectus to be distributed.
- A custodian is a financial institution with qualifications prescribed by the SEC and not related either directly or indirectly to the asset management company. The trustee will represent unitholders in safeguarding their interests, such as
- Ensuring that the asset management company manages the fund in accordance with the investment objectives and policy approved by the SEC and stated in the prospectus,
- Taking care of the fund settlement process,
- Safekeeping of all the fund assets,
- Verifying the net asset value of the fund, and
- Taking legal action on behalf of unitholders in case of frauds committed by the asset management company.
- A sale person or selling agent must only be the party licensed by the SEC to sell units of the fund to the public. It must meet the qualifications as prescribed by the law, and attended and passed the professional knowledge test by an institution approved by the SEC. The sale person must be in the register list approved by the SEC and perform the selling duty within the framework set by the law to prevent any sale and advertisement that may lead to misunderstanding in material respect.
- A registrar is a financial institution permitted by the SEC to take charge of the preparation of a record of unitholders and keeping track of rights and benefits of unitholders in such respect of dividend payment and other benefits. The asset management company may perform as the registrar of the funds under its management.
- An auditor is a certified public accountant registered with the SEC and not related either directly or indirectly to the asset management company. It is in charge of examining and reviewing all the fund asset books and certifying the financial statements of the fund in accordance with the accounting standards.
- Association of Investment Management Companies (“AIMC”) was established under the Securities and Exchange Act B.E. 2535 (1992). It is an association related to securities business and registered with the SEC. Its members are securities companies licensed to run asset management business in three business groups comprising mutual fund business, private fund business, and provident fund business. AIMC’s duty is to set out common professional standards of practice and code of ethics for the member companies to comply, as well as penal provisions applicable to those who perform in breach thereof.
- Office of the Securities and Exchange Commission (“SEC”) is an independent authority tasked with the supervision and monitoring of securities and investment management businesses by formulating and issuing rules, regulations, notifications or provisions pursuant to the law on securities and securities exchange.
|
|
|
