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Part - VI

Bond Funds are those Funds that invest primarily in debt securities to provide current income with preservation of Principal. The common bond prevalent in the country are ANZ Grindlays bond fund etc. Other types of bond funds are government bond funds, Zero coupon Bond funds, International bond funds and corporate bond funds. Bond Funds are likely to pay higher returns than certificates of deposit but they are not risk free. Index Funds keep pace in line with the market index like the S&P 500.These Funds are made up of securities that comprise major market indices. The main advantage of index funds is that they are in tandem with the market indices. Their downside is that they can outperform the market. Exchange Traded funds are basket of securities that are traded, like individual stocks, on an exchange. ETF’S can be brought and sold thought the trading day like any stock. Hedge funds are aggressively managed portfolio taking positions on safe and speculative opportunities. These funds pursue absolute returns rather than relative returns.

Recent Innovations in the Mutual Fund Industry

The Indian mutual fund industry is finally getting proactive and is trying to improve its customer relationship management by introducing new and innovative products. The aim is to attract a larger audience through better marketing strategies and wider penetration. Some of them have tied up with the postal department to foray into the rural segment, which have remained untouched during the years. The industries have introduced some new products such as Commodity Linked Funds, Floating Rate Funds, Fund of Funds and finally the Equity arbitrage fund.

The Commodity Linked Funds are new to Indian Mutual Fund Industry. Benchmark is the first Indian AMC to start with this concept. Benchmark has applied for an Open-Ended gold fund called Gold Bees. The face value of 1unit of the Gold fund will be equivalent to 1 gm of gold. Benchmark will hold the investor’s money in bank deposits and track short term changes in the price of gold, buying and selling wherever necessary. An investor can now have gold and earn interest by way of bank deposits. The Gold fund is likely to be listed and traded on the National Stock Exchange.

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* Contributed by -
Sarthak Kumar Rath,
PGDBA (Finance), ICFAI Business School,
Currently working as Associate Consultant at ICIT Software Center Pvt. Ltd.