Unit 9: Mutual Funds and Collective Investment Schemes
9.1 Definition and Types of Mutual Funds
The mutual fund = the investors’ pooled money, professionally managed, the returns shared (the trust-structure’s investment vehicle): the open-ended (the units’ continuous issue-and-redemption at the NAV — the net asset value’s arithmetic) and closed-ended (the fixed corpus, the units listed-and-traded on NEPSE — Nepal’s first-generation funds’ design); by the asset class: the equity, debt, hybrid, money-market, and the index/theme families; by the management: the trust-and-company forms (the SEBON regime’s structures — Unit 9.3’s three-cornered trust).
9.2 Legal Framework Governing Mutual Funds
Nepal’s regime (by name): the Securities Act 2063’s collective-investment faces and the Mutual Funds Regulation 2067 — the fund’s establishment-and-approval (SEBON’s scheme-sanctioning), the three-cornered structure’s mandate (the AMC, the trustee, the custodian — 9.3), the offer-document’s discipline (the fund’s own prospectus — the scheme’s disclosure), the investment’s restrictions-and-diversification rules (the concentration bars), the valuation-and-NAV discipline (the daily pricing’s honesty), the fees-and-expenses’ caps, the reporting-and-audit duties, and the winding-up-and-merger faces. The historical note: the early funds’ era (the NIDC-and-NCM’s first schemes of the 1990s-2010s) to the modern licensed-AMC market.
9.3 Role of Asset Management Companies (AMCs) and Trustees
The AMC — the fund’s manager (the SEBON-licensed company): the scheme’s design-and-launch, the portfolio’s management (the investment decisions within the mandate), the NAV’s computation-and-publication, the investor-servicing, the compliance’s ownership. The trustee (and the custodian) — the investors’ guardian: the fund’s assets’ custody (the segregation from the AMC’s own — the misappropriation’s structural bar), the scheme’s compliance oversight (the trustee’s watch-and-veto faces), the investors’ representation. The exam’s frame: the trust’s triangle — the investors’ money (the beneficiaries), the AMC’s brains, the trustee’s safe-keeping — the structure itself as the first investor-protection (the Unity Life counter-example: no trustee, no segregation, no protection — 9.6’s case).
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