With the current financial crisis in the US, a lot of us has questions about what happens to our investments in mutual funds if the MF files for bankruptcy. To understand the implications, I would like to quote an extract from the Workbook published by Association of Mutual Funds of India.
"A mutual fund in India is constituted in the form of a Public Trust created under the Indian Trusts Act, 1882. It should be understood that a mutual fund is just a pass-through vehicle. Under the Indian Trusts Act, the Trust or the Fund has no independent legal capacity itself, rather it is the Trustee or Trustees who have the legal capacity and therefore all acts in relation to the trust are taken on its behalf by the Trustees. The trustees hold the unit-holders money in fiduciary capacity, i.e., the money belongs to the unit holders and is entrusted to the fund for the purpose of investment. In legal parlance, the investors or the unit-holders are the beneficial owners of the investments held by the Trust, even as these investments are held in the name of the trustees on a day-to-day basis."
The investments being managed by the mutual fund does not belong to them hence no one can claim them except the unit holders who invested in the fund. Investors of mutual funds need not panic about their investments even if the mutual fund files for bankruptcy.
Very nice Interesting Article...
Liked the content of your blog.
Infact, we have a mutual friend in Rama who has talked a lot about you. He was the one to direct me to your blog.
I too have recently started blogging with an objective that is similar to yours. So here's hoping that we are able to add value to each ones quest. :)
Good to know...
I too have a few mutual funds but also have them in US too. Are the ones in the US treated the same as the ones in India?
This is really interesting and a good wiil factor to lower any tension in volatile market.
By the way, was there any bankruptcy filed by any MF? What actions were taken at that time?
Really thanks for this information on mutual funds. This will really help investors to know more about mutual funds.
When you invest in Mutual Fundsthere is a vast array of choice of different investment strategies and types of fund. No matter how much you want to invest, what goals you have, or the amount of risk you can accept there is a mutual fund that is right for you.
Thanks for such a nice piece of information.Would like to read more about types of mutual funds & other investment schemes.
Very nice job, one can learn many things from this...SBI life insurance is the best insurance company providing Unit linked insurance plan in India.
Post a Comment