Mutual Fund Literature Review

INTRODUCTION

Mutual funds are sine qua non for the development of the capital markets and creation of equity cult in the economy. Mutual funds mobilize saving from large number of investors and invest these funds in shares and another securities. The return obtained from the mutual fund investments is shared among the investors, called shareholders or unit holders, in proportion to their investment.

The formation of Unit Trust of India marked the evolution of the mutual fund industry in the year 1963. The primary objective at that time was to attract the small investors and it was made possible through the collective efforts of the Government of India and the Reserve Bank of India.

Mutual fund is an important segment of the financial system.

A number of studies on evaluating the performance of Indian Mutual Fund Schemes have been conducted in India and foreign countries. Review of some of the studies is presented in the following discussion: -

Jayadev (1996) evaluated the performance of two growth-oriented mutual funds namely Mastergain and Magnum express by using monthly returns. Jensen, Sharpe and Treynor measures have been applied in the study and the pointed out that according to Jensen and Treynor measure Mastergain have performed better and the performance of Magnum was poor according to all three measures.

Afza and Rauf (2009) in their study of open-ended Pakistani mutual funds’ performance using the quarterly data for the period of 1996-2006. The study measure the fund performance by using Sharpe ratio with the help of pooled time-series and cross sectional data and also focused on different attributes such as fund size, expenses, age, turnover and liquidity. The results found significant impact on fund

(BSLAMC), the investment managers of Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Service Inc. of Canada.Established in 1994, Birla Sun Life Mutual Fund has emerged as one of India’s leading flagships of Mutual Funds business managing assets of a large investor base.

MEANING OF MUTUAL FUND:

Mutual funds are a type of investment that takes money from many investors and uses it to make investments based on a stated investment objective.Each shareholder in the mutual fund participates proportionally (based upon the number of shares owned) in the gain or loss of the fund.

Mutual fund is one of the most preferred investment alternatives for the small investors as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Over the past decade, mutual funds have increasingly become the investor’s vehicle of choice for long-term investing. The Indian mutual fund industry has a total corpus of over Rs700 billion collected from more than 20 million