How is a mutual fund set up?

how mutual fund setup

A mutual fund is formed as a trust which comprises - sponsor(s), trustees and an asset management company (AMC).

The trust is established by a sponsor(s), who acts as a promoter of a company and is registered with the Securities and Exchange Board of India (SEBI). Trustees hold its property for the benefit of unitholders, while the asset management company (AMC) (also approved by SEBI) manages the mutual fund.

Trustees can superintend and direct the AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund.

The AMC operates as an investment manager of the trust, initiates various schemes and launches them after approval of trustees. Along with the day-to-day management of the fund, the AMC also undertakes operational activities like customer services, accounting, marketing and sales functions for the schemes of the mutual fund.