Money Market Mutual Funds ORIGINAL

8/13/2019 Money Market Mutual Funds ORIGINAL

1/32

Money Market Mutual Funds


2/32

GROUP MEMBERS

Sidrat Zahra Syed F10BA148

Rabia Rana F10BA153

Mufarrah Ejaz F10BA158

Saleha Ehsan F10BA150

Zarish Zulfiar F10BA131


3/32

INTRODUCTION

Mutual Funds

! An in"est#ent "ehi$le that is #ade u% &f a %&&l &ffunds $&lle$ted fr #any in"est&rs f&r the

%ur%&se &f in"estin' in se$urities su$h as st&$(s)

b&nds) #&ney #ar(et instru#ents and si#ilar

assets*


4/32

TYPES OF MUTUAL FUNDS:

! Close Ended Mutual Fund:A $l&sed+end fund is a %ubli$ally

traded in"est#ent $%any that raises a fi,ed a#&unt &f $a%ital

thr&u'h an initial %ubli$ &fferin' -./* 2he fund is then stru$tured)

listed and traded li(e a st&$( &n a st&$( e,$han'e*

! Open Ended Mutual Fund:A ty%e &f #utual fund that d&es n&t

ha"e restri$ti&ns &n the a#&unt &f shares the fund ill issue* .f

de#and is hi'h en&u'h) the fund ill $&ntinue t& issue shares n&

#atter h& #any in"est&rs there are* %en+end funds als& buyba$( shares hen in"est&rs ish t& sell*


5/32

MONEY MARKET MUTUAL FUNDS

! A money market fund-als& (n&n as money market

mutual fund is an &%en+ended #utual fundthat in"ests

in sh&rt+ter# debt se$uritiessu$h as S 2reasury bills

and $#er$ial %a%er*
http://en.wikipedia.org/wiki/Mutual_fundhttp://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Mutual_fund


6/32

MONEY MARKET MUTUAL FUNDS

! M&ney #ar(et funds are i#%&rtant %r&"iders &f liuidity t& finan$ial

inter#ediaries

! .n"est&rs interested in the #&ney #ar(et $an a$$ess it #&st easily

thr&u'h #&ney #ar(et #utual funds

.ts i#%&rtant t& re#e#ber t& %&ints) th&u'h6

! M&ney #ar(et funds are n&t $ash and $an suffer l&sses) alth&u'h

they rarely ha"e*

! nli(e a ban( de%&sit) #&ney #ar(et funds are n&t insured by the

federal '&"ern#ent*


7/32

Purpose of Money Mare! Mu!ua"Fun#s for In$es!ors

2here are three instan$es hen #&ney #ar(et #utual funds) be$ause

&f their liuidity) are %arti$ularly suitable in"est#ents*

1* M&ney #ar(et #utual funds &ffer a $&n"enient %ar(in' %la$e f&r

$ash reser"es hen an in"est&r is n&t uite ready t& #a(e an

in"est#ent &r is anti$i%atin' a near+ter# $ash &utlay f&r a n&n+

in"est#ent %ur%&se*


8/32

R%s s%!ua!%ons %n "e!!er&of&'re#%!!ransa'!%ons

Fraud Risks The payment will be obtained for nonexistent or worthless merchandise against

presentation by the

beneficiary of forged or falsified documents.

Credit itself may be fake.

Sovereign and Regulatory Risks

! /erf&r#an$e &f the 7&$u#entary redit #ay be %re"ented by '&"ern#ent a$ti&n &utside

the $&ntr&l &f the %arties*


9* An in"est&r h&ldin' a bas(et &f #utual funds fr a sin'le fund

$%any #ay &$$asi&nally ant t& transfer assets fr &ne fund t&

an&ther* .f) h&e"er) the in"est&r ants t& sell a fund bef&re de$idin'&n an&ther fund t& %ur$hase) a #&ney #ar(et #utual fund &ffered by

the sa#e fund $%any #ay be a '&&d %la$e t& %ar( the %r&$eeds &f

sale*


9/32

3* 2& benefit their $lients) br&(era'e fir#s re'ularly use #&ney

#ar(et #utual funds t& %r&"ide $ash #ana'e#ent ser"i$es*/uttin' a $lients d&r#ant $ash int& #&ney #ar(et #utual funds ill

earn the $lient an e,tra %er$enta'e %&int -&r t& in annual returns

ab&"e th&se earned by &ther %&ssible in"est#ents*



10/32



presentation by the






Opera!%ona" De!a%"s of MoneyMare! Mu!ua"

Fun#sMoney market mutual funds are designed tooffer features that are particularly suited to the

needs of small investors

:&u $an %ur$hase #&ney #ar(et #utual funds dire$tly fr

br&(era'e $%anies &r #utual fund fir#s) just as y&u &uld

%ur$hase a st&$( &r euity #utual*

M&ney #ar(et #utual funds als& &ffer se si#%lified

ithdraal features that are #&re ty%i$ally ass&$iated ith ban( &r

trust a$$&unts*

f


11/32



presentation by the






Ca!e(or%es of Money Mare!Mu!ua"

Fun#sMoney market mutual funds may contain a specific type of moneymarket security or a combination of securities across a wide spectrum:

ne %arti$ular ty%e &f fund li#its its asset %ur$hases t& *S* 2reasury

se$urities*

An&ther $lass &f #&ney #ar(et funds %ur$hases b&th *S* '&"ern#ent

se$urities and in"est#ents in "ari&us '&"ern#ent+s%&ns&red enter%rises

-;SEs*

2he third and lar'est $lass &f #&ney #ar(et #utual funds in"ests in a

"ariety &f #&ney #ar(et se$urities that &ffer the hi'hest de'ree &f se$urity*

" f #


12/32



presentation by the






2a,able funds in"est in se$urities su$h as 2reasury bills and $#er$ial

%a%er) h&se interest in$e is subje$t t& federal ta,ati&n*

2a,+e,e#%t funds in"est e,$lusi"ely in se$urities that are issued by stateand l&$al '&"ern#ents and are e,e#%t fr federal ta,ati&n* 2a,+e,e#%t

funds 'enerally a%%eal t& in"est&rs in hi'her federal ta, bra$(ets h& are

see(in' ta, sa"in's &n the &"erall interest in$e 'enerated by their

%&rtf&li&s*

Ca!e(or%es of Money Mare!Mu!ua"

Fun#s

% % % % " f #%


13/32



presentation by the






Types of Money Mare!Mu!ua"

Fun#sTypes of Mutual FundsEach mutual fund has specific investment objectives that mould the funds assets, investment

options and strategy. At the most basic level, there are three types of mutual funds:

(i) Equity funds, ii) i!ed income funds, and iii) "oney "ar#et funds

Growth FundA mutual fund $hose focal aim is to achieve capital appreciation primarily by investing in

gro$th stoc#s..

Asset Allocation Fund%his type of mutual fund invests in a variety of securities in multiple asset classes $ith the

objective of carrying out asset allocation typically by itself.

% % % % " f #%


14/32



presentation by the






Money Market Funds

A mutual fund $hich invests in lo$ ris# securities, for the most part in government

securities, &o's, commercial paper of companies and other highly liquid and lo$ ris#

securities

Tracker Fund%his type of fund, as its name suggests, follo$s the performance of a particular inde!.

%heoretically, these types of funds are as volatile as the mar#et $ith a correlation of unity.

Fund of FundsA type of mutual fund $hich invests in other mutual funds, also #no$n as multimanagement funds. %hese types of funds enable investors to achieve a broad

diversification and an appropriate asset allocation $ith investments in a variety of fund

categories that all are $rapped up into one fund


Fun#s

% % % % " f #%


15/32



presentation by the






ncome FundA ty%e &f #utual fund that e#%hasizes $urrent in$e) either &n a #&nthly &r

uarterly basis) as di"er'ent fr tar'etin' $a%ital a%%re$iati&n*

!alanced FundMutual funds that $bine in"est#ents in shares) sh&rt ter# and l&n' ter# b&nds

in %ursuit &f in$e 'ains and $a%ital a%%re$iati&n hile a"&idin' e,$essi"e ris(*

E"uity FundA #utual fund that in"ests %rin$i%ally in st&$(s is $alled euity fund* .t is als& (n&n

as a


16/32



presentation by the







Fun#s*Sector FundA mutual fund that invests entirely or predominantly in a specified (single) sector is a sector

specific fund. %hese funds usually e!ist in energy, gold, and other precious metals sectors.

%he ris# associated $ith these funds depends on the specified sector. %hese types of funds areless diversified. %he volatility and correlation $ith mar#et also depends on the specified

sector.

*IslamicFundsA type of fund $hich entirely invests in +hariah compliant instruments. slamic funds e!ist in

almost all the forms discussed earlier. Each fund invests in its respective areas of interest

#eeping in vie$ the rules of shariah compliance. %he volatility of each #ind of slamic funddepends on its category and also the relationship $ith the mar#et in $hich it operates.


17/32

Re(u"a!%ons for )u!ua" fun#s

2he in"est#ent $%any a$t &f 1>406 ocus on

disclosures and information about investment objectives,

investment company structure and operations.

2he se$urities a$t &f 1>336 f investors receiving certain

significant information about securities being offered forsale in public mar#ets.

2he se$urities a$t &f 1>346 %his act created +E& and

empo$ers it $ith securities of mutual funds.


18/32

Ru"es (o$ern )u!ua" fun#s %nPa%s!an#

.n"est#ent %anies and in"est#ent

Ad"is&r?s Rules) 1>@1* - '&"ern $l&se+end #utual

funds

Asset #ana'e#ent $%anies rules 1>>5

-'&"erns &%en+end #utual funds*


19/32

Re(u"a!%ons pro$%#e# safe!y !o!*e %n$es!ors %n !er)s of :

%ransparency: %he holdings of mutual funds are publically available.

-iquidity: +hares of mutual funds are redeemed by the fund company $hich

insures its daily liquidity.

Audited trac# ecords: "utual funds must #eep their performance trac#

records and have to follo$ auditing.

+afety: n case of liquidity shareholders can receive portion equal to their

shares. $ithout any loss.

%


20/32

In$es!ors 'an earn )oney %n!*ree +ays

7i"idend %ay#ents

a%ital 'ain distributi&n

.n$reased A


21/32

Mu!ua" fun#s %n Pa%s!an are:

! Arif Cabib .n"est#ent D /a(istan St&$( Mar(et Fund -AR.F/SM

! As(ari Asset All&$ati&n Fund -ASAAFB

! Faysal .n$e ;r&th Fund -FA:.;R

! CBG .sla#i$ M&ney Mar(et Fund -CBG.MM! ASB .n$e %%&rtunity Fund -ASG.H

! Meezan Balan$ed Fund -MBF

! /a( #an .sla#i$ Asset All&$ati&n Fund -/AA.S

! /.. ;r&th Fund -/;F! BG Sa"in's .n$e Fund -BGSA.


22/32

R%ss

Its not true that money market mutual funds are100% safe. -Federal Reserve Chairman Ben Bernanke, March

2, 2012 Congressional testimony.


23/32

R%ss,Con!- .

! Se #&ney #ar(et funds in"est &nly in sh&rt+ter#

2reasury se$urities) hile &thers in$lude $#er$ial

%a%er D hi$h is the sh&rt+ter# debt issued by

$&r%&rati&ns* 2he sh&rt+ter# nature &f the in"est#ents

euates t& l&er ris() f&r the si#%le reas&n that there isless ti#e f&r the issuer t& e,%erien$e finan$ial diffi$ulty

that &uld $ause the# t& default &n their debt* Ihile the

$han$e that sh&rt+ter# debt &n?t be re%aid is s#all) it

e,ists n&netheless*


24/32

R%ss,Con!- .

! nflation: $he %nseen Risk/erha%s the lar'est ris( ith #&ney #ar(et funds is n&t

the safety &f y&ur %rin$i%al) but the funds? inability t&

(ee% u% ith the rate &f inflati&n* .f a #&ney #ar(et fundis %ayin' y&u 0*95J hen inflati&n is at 3J) f&r e,a#%le)

y&u?re a$tually l&sin' #&ney in the sense that y&ur

%ur$hasin' %&er is de$linin'* As a result) in"est&rs

need t& ta(e $are that they d&n?t ha"e #&re $ash

all&$ated t& #&ney #ar(et funds than is a%%r&%riate f&rtheir situati&n*


25/32

A#$an!a(es

! A Great Place to Park MoneyIhen the st&$( #ar(et is e,tre#ely "&latile and

in"est&rs arent sure here t& in"est their #&ney) the

#&ney #ar(et $an be a terrifi$ san$tuary* M&ney #ar(eta$$&unts and funds are &ften $&nsidered t& ha"e less

ris( than their st&$( and b&nd $&unter%arts* .n additi&n)

the #&ney #ar(et &ften 'enerates a l& sin'le+di'it

return f&r in"est&rs) hi$h in a d&n #ar(et $an still be

uite attra$ti"e*


26/32

A#$an!a(es,Con!-.

! L!udty Isn"t #sually an Issue

M&ney #ar(et funds d&nt 'enerally in"est in se$urities

that trade #inus$ule "&lu#es &r that tend t& ha"e little

f&ll&in'* Rather) they 'enerally trade in entities andK&r

se$urities that are in fairly hi'h de#and -su$h as 2+bills*

2his #eans that they tend t& be #&re liuid) and that

in"est&rs $an buy int& the# and sell the# ith

$%arati"e ease*


27/32

A#$an!a(es,Con!-.

! &ield:M&ney #ar(et funds %ay a yield based &n theh&ldin's &f the underlyin' fund* 2he yield is 'enerally

autati$ally rein"ested int& the fund "ia %ur$hase &fadditi&nal shares in the fund* 2his yield #a(es #&ney

#ar(et funds an attra$ti"e alternati"e t& the #attress*


28/32

D%sa#$an!a(es

! $I& Insurance

M&ney funds %ur$hased at a ban( are ty%i$ally insured

by the Federal 7e%&sit .nsuran$e &r%&rati&n -F7.

C&e"er) #&ney #ar(et #utual funds are n&t usually

'&"ern#ent insured* 2his #eans that alth&u'h #&ney#ar(et #utual funds #ay still be $&nsidered a

$%arati"ely safe %la$e t& in"est #&ney) there is still an

ele#ent &f ris( that all in"est&rs sh&uld be aare &f*


29/32

D%sa#$an!a(es,Con!-.

! 'eturns May (ary Re#e#ber) the return a fund has %&sted in a %re"i&us

year is n&t ne$essarily an indi$ati&n &f hat it #ay

'enerate in a future year* F&r e,a#%le) ha"in' di"idends&r %r&$eeds fr a st&$( sale sent dire$tly t& y&u -the

in"est&r #ay n&t all& y&u t& $a%ture the sa#e rate &f

return* .n additi&n) rein"estin' di"idends in euities #ay

&nly a''re'ate return %r&ble#s in a d&n #ar(et*


30/32


! )**ortunty Lost"er ti#e) $#&n st&$(s ha"e returned ab&ut 8+10J

&n a"era'e + $&untin' re$essi&nary %eri&ds* By in"estin'

in a #&ney #ar(et #utual fund) hi$h #ay &ften yieldjust 9J &r 3J) the in"est&r #ay be #issin' &ut &n an

&%%&rtunity f&r a better rate &f return* 2his $an ha"e a

tre#end&us i#%a$t &n an indi"iduals ability t& build

ealth*


31/32


! Maturity of 'oldings:M&ney #ar(et funds$ann&t h&ld in"est#ents ith a #aturity &f 'reater than

3>@ days* 2he ei'hted a"era'e #aturity &f the %&rtf&li&

$ann&t e,$eed >0 days*


32/32

Money Market Mutual Funds ORIGINAL

Documents

Transcript of Money Market Mutual Funds ORIGINAL