Mutual Funding: Impact on the Ghanaian Economy” (a Case Study of Selected Mutual Fund Companies in Ghana)

In: Business and Management

Submitted By needmundson
Words 9310
Pages 38
MUTUAL FUNDING: IMPACT ON THE GHANAIAN ECONOMY

A comparative study of two mutual funds companies in Kumasi



DEPARTMENT OF BUSINESS STUDIES




EDMUNDSON LAWRENCE KOBINA



1.0 INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Over the years in Ghana, the private sector has had it difficult raising capital and adequate funds for investment and other business activities, this led to the undertaking of a number of financial sector reforms by the government. The emergence of mutual funds into the Ghanaian financial sector has been as a result of these reforms. This is to facilitate capital generation and savings mobilization for the private sector to help them accomplish their organizational objectives.

It has become evidently clear that, to achieve development in the economy in terms of high gross domestic product (GDP), a better per capita income, less unemployment and reduction in inflation, the private sector of the economy should be encouraged to lead in the generation of wealth.

Capital for investment in this country (Ghana) is either sought for internally or externally but the Ghanaian government like its’ counterparts in other African countries have been relying heavily on external funds from developed economies and donor communities to be able to implement public sector development policies. This has not been so easy in recent years due to the diversification of these funds to countries such as China and other Asian countries that are now better investment destinations. Due to the shortfalls in the inflows of expected capital from external sources, government has been competing with the private sector over the limited funds generated internally and this tends to virtually crowd out the private sector. The former governor of the Bank of Ghana in his address titled; Liberation of Ghana’s Financial Service Sector: The role of overseas…...

Similar Documents

Mutual Fund

..., to pick the best benefit from the investment market. Mutual fund provides returns, liquidity, safety and tax benefit. Tax benefit is available to the investor who can earn capital gains on mutual fund investment. THE HISTORY OF MUTUAL FUNDS IN INDIA The mutual fund industry in India began with the setting up of the Unit Trust in India (UTI) in 1964 by the government of India. During the last 36 years, UTI has grown to be a dominant player in industry with asset of over Rs. 45,899 crores as of December 31, 2002. The UTI is governed by a special legislation, the Unit Trust of India Act, 1963. In 1987 public sector banks and insurance companies were permitted to set up mutual funds and accordingly since 1987, 6 public sector banks have set up mutual funds. Also the two insurance companies LIC and GIC established mutual funds. Securities exchange board of India (SEBI) formulated the mutual fund (regulation) 1993, which for the first time established a comprehensive regulatory framework for mutual fund industry. Since then several mutual funds have been set up by the private and joint sectors. 1987 marked the entry of other public sector mutual funds. With the opening up of the Economy, many public sector banks and financial institutions were allowed to establish mutual funds. SBI established the first non-UTI mutual fund-SBI Mutual fund-in November 1987. This was followed by Canbank Mutual fund, LIC Mutual fund, Indian Bank mutual Fund, and PNB Mutual Fund. These funds...

Words: 5504 - Pages: 23

Mutual Fund

... index fund can never "beat the index". On the other hand, it can also never do worse than the index. This type of fund management leaves no decisions open, about what companies to hold and how much to invest in each company. This is contrary to active management, where a good fund manager is considered to be one who can invests a lot of resources into researching which are the companies to hold so that the returns on the managed portfolio is more than what the "market" offers. Thus, index funds explicitly give up the biggest objective of every active fund manager, which is that of "beating the market". This sounds completely unlike the efforts of all fund managers in the country. Why would it be a good idea? 1. The simplest fact is that beating the market is hard. Two decades of study of evaluation of mutual funds suggest that most funds fail to beat the market, on a risk-adjusted basis. That is, when funds offer high returns, typically they are more risky than those which offer lower returns. Results of this nature have been observed in a wide variety of markets, all over the world. In India also, the track record of funds at outperforming the market is dismal. 2. The behaviour of an actively managed fund fluctuates more than passively managed index funds. When funds do beat the market, on a risk-adjusted basis, it is often the case that this owes to good fortune, and the excess returns are not repeated in following years. The problem of identifying a good fund...

Words: 24333 - Pages: 98

Mutual Funding: Impact on the Ghanaian Economy” (a Case Study of Selected Mutual Fund Companies in Ghana)

...MUTUAL FUNDING: IMPACT ON THE GHANAIAN ECONOMY A comparative study of two mutual funds companies in Kumasi DEPARTMENT OF BUSINESS STUDIES EDMUNDSON LAWRENCE KOBINA 1.0 INTRODUCTION 1.1 BACKGROUND TO THE STUDY Over the years in Ghana, the private sector has had it difficult raising capital and adequate funds for investment and other business activities, this led to the undertaking of a number of financial sector reforms by the government. The emergence of mutual funds into the Ghanaian financial sector has been as a result of these reforms. This is to facilitate capital generation and savings mobilization for the private sector to help them accomplish their organizational objectives. It has become evidently clear that, to achieve development in the economy in terms of high gross domestic product (GDP), a better per capita income, less unemployment and reduction in inflation, the private sector of the economy should be encouraged to lead in the generation of wealth. Capital for investment in this country (Ghana) is either sought for internally or externally but the Ghanaian government like its’ counterparts in other African countries have been relying heavily on external funds from developed economies and donor communities to be able to implement public sector development policies. This has not been so easy in recent years due to the diversification of these funds to countries such as China and other Asian countries that are now...

Words: 9310 - Pages: 38

Mutual Fund

... job of the MF trustees to see that schemes floated and managed by the AMC appointed by the trustees are in accordance with the trust deed and SEBI guidelines. THE ASSET MANAGEMENT COMPANY (AMC): The company that manages a mutual fund is called an AMC. For all practical purposes, it is an organized form of a "money portfolio manager". An AMC may have several mutual fund schemes with similar or varied investment objectives. The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated objective. All Asset Management Companies (AMCs) are regulated by SEBI and/or the RBI (in case the AMC is promoted by a bank). In addition, every mutual fund has a board of directors that represents the unit holders' interests in the mutual fund. This entity that undertakes the designing and marketing of schemes, raises money from the public under the schemes and manages the money on behalf of its owners. To segregate the collected funds from this entity's own funds, the corpus is placed in a legal vehicle. It is the character of this legal vehicle that determines the character of the Fund itself. Irrespective of the nature of the structure, what is more fundamental is that in view of the fiduciary role of the AMC or the fund manager towards the For your personalize project report emails us at: info@mbahotspot.com or mbahotspot@gmail.com 10 Visit www.mbahotspot.com for more public, there is a need for supervision of the activities of the AMC or fund...

Words: 13286 - Pages: 54

Mutual Fund

... lack of focus. Too many products, products based on temporary phenomenon and on purely marketing imperatives are acting as a detriment to the industry. Some of these products have limited regard to investor needs, risk exposures and cost economics. The lackluster performance of most funds is yet another important factor. The majority of funds have not been able to deliver up to investor expectations, thereby eroding investor confidence in the capabilities of the industry. ❖ For those who are not adept at understanding the stock market. The task of generating superior returns at similar levels of risks is arduous to say the least. This is where Mutual Funds come into picture. ❖ Lastly, most fund houses have failed to communicate clear value propositions based on performances and service. In spite of market reforms, inducements to competition, increased operational transparency, and well – framed regulatory norms and an expanding savings market, Indian mutual funds, alter an initial euphoria, have shown sluggish growth. The overall macro economic uncertainties, particularly the fluctuating stock markets, have had an adverse impact on mutual funds mobilization. NEED FOR THE STUDY: Every work is done with a purpose. This research study was no exception to it. This research study had provided a lot of insight into the present financial market of India. It was important for the following reasons: ✓ An in –depth study of the investment...

Words: 6628 - Pages: 27

Investment in Mutual Fund

... crisis during Sep-07 and consequent volatility witnessed in the domestic stock markets led to decline in resource mobilization. The net resource mobilization of mutual funds turned negative as there was a net outflow of Rs 282.97 bn during FY09 as against a net inflow of Rs 1,538.01 bn during FY08. The uncertain conditions in stock markets coupled with redemption pressures from banks and corporates amidst tight liquidity conditions resulted in significant outflows during the months of Jun-08 (Rs 392.3 bn), Sep-08 (Rs 456.5 bn) and Oct-08 (458 bn). This led the RBI to announce various liquidity augmentation measures to provide liquidity support to mutual funds through banks. With the easing of overall liquidity conditions, net resource mobilization by mutual funds again turned positive between the periods Dec-08 to Feb-09. Further, with liquidity conditions remaining comfortable and stock markets registering strong gains, the net resource mobilization by mutual funds grew considerably during the first quarter of FY10. Figure 5 The data reveals that the increase in revenue and profitability of the Mutual fund industry has not been commensurate with the AUM growth in past few years. The increased expenditure on marketing, distribution and administration exerted upward pressure on the operating expenses, thereby impacting AMC’s margins. The operating expenses as a percentage of AUM rose from 41 basis points in FY04 to 113 basis points in FY08. V. IMPACT OF THE GLOBAL...

Words: 5548 - Pages: 23

Mutual Fund

... investment strategy that combines the usual four: cash and equivalents, Government-backed bonds, debt, and equity. Presently, more and more funds are entering the industry and their survival depends on strategic marketing choices of mutual fund companies, to survive and thrive in this highly promising industry, in the face of such cutthroat competition. In addition, the availability of more savings instruments with varied risk-return combination would make the investors more alert and choosy. Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investor. Under such a situation, the present exploratory study is an attempt to understand the financial behaviour of Mutual Fund investors in connection with scheme preference and selection. Studies similar to this, if conducted on a large scale at regular intervals by organizations like AMFI/SEBI, will help capture the changing perceptions and responses of these groups, and thus provide early warning signals to enable implementation of timely corrective measures. It is hoped that the survey findings of the study will have some useful managerial implications for the organization in their product designing and marketing of the fund. RECOMMENDATIONS * Since the investors need for liquidity is found to be high, we suggest that more of the new schemes opening for subscription be Open-ended. * AMCs should continuously design...

Words: 9973 - Pages: 40

Rocky Mountain Mutual Case Study

...According to a study performed by researchers at Stockholm University and Karolinska Institute that was published in Journal of Occupational and Environmental Medicine and many other scientific studies we all read about in the newspapers, devoting a part of the work time to physical activity can lead to higher productivity and it improves people’s health. Our company records of the past two years, when the fitness center was operational, indicate that there has been an overall decrease in employee absenteeism, reduction in employee medical costs, and an increase in productivity. The decrease in the medical cost can be seen as follows: No./Percent of employees Users of Fitness Centre (in a week) Medical cost per person Total medical cost 25/10% >3 $100 $2500 62/25% 1-2 $300 $18,600 163/65% 0 $500 $81,500 Also, the users of fitness center missed on average only 6 days per year, which is half as many workdays as non-users missed. It didn’t miss my notice that not many people were using the facility. Hence I decided to institute a Wellness Program for my department. It has been eight months since the Program began and I can see a rise in productivity by 18 percent and sick days have come down by 5 percent. I am in talks with my colleagues in different departments and I believe that I can make them understand the importance of the Wellness Program and the fitness center. As and when the Wellness Program spreads to other departments there will be a major increase in...

Words: 672 - Pages: 3

Mutual Fund Analysis

.... iii. To go through all departments of the corporation and observe how the works are going on. iv. To investigate the different functions performed by different departments of ICB. v. To know how ICB floats and manage the mutual funds. vi. To explore the problems of ICB’s mutual fund operation. vii. To help the potential investors for assessing invest decision. viii. To evaluate the mutual funds for taking investment decision. 1.3 COVERAGE OF THE REPORT: The main focus of the study is "The Performance Evaluation of the ICB Mutual Fund". But the report has tried to cover overview of ICB objectives, functions, management, business policy and other things. This report has also mentioned some problems of ICB’s mutual fund and its solutions. The empirical part include only the published information and current practices of the Investment Corporation of Bangladesh 1.4 SOURCE AND METHODOLOGY OF DATA COLLECTION: The scope of the report was basically the operation and practice of Investment Corporation of Bangladesh and the performance of their Mutual funds. On the other hand, methodology can be termed as underlying principles and rules of organization or the philosophical systems that work at the backdrop of any study. It clarifies the problems involving the research in a very ordered and systematic fashion. Strategic are determined at this stage for future implementation. In this report decisions and calculations have been made basing on past experiences and......

Words: 12274 - Pages: 50

Mutual Fund Formation

... the time of offer in case of closed-end Fund. 2. Individuals as well as the institutional investors are eligible for investment in the Fund. 3. The Asset Management Company shall pay all registration and other fees as payable to the Commission or any other agencies under the wewagvjv and to the legal advisor(s) for establishing the mutual fund and its various schemes and for registration of this Deed from the Fund. 4. The party of the first part shall provide at least ten percent of the minimum size of a scheme to the mutual fund as prescribed in the wewagvjv and upon registration of the Fund. 3.1.5 In case of over-subscription or under-subscription of the public offer of any scheme of the Fund, the final size of such schemes can be raised or reduced, as the case may be, by the Asset Management Company to the extent consented by the Trustee and the Commission. 3.1.6 The schemes of closed end mutual fund will be redeemed on its pre-determined maturity. 7. The unit holders of the Fund shall have beneficial interest in the trust property to the extent of individual holding only in respective schemes of the Fund. 3.1.8 Sale and repurchase of unit certificates by the Asset Management Company shall remain closed for maximum one month just after completion of the financial year unless the Commission decides otherwise. 2. Investment Parameters 1. The Fund shall invest subject to the wewagvjv and...

Words: 9927 - Pages: 40

“to Study the Dynamic Relationship Among Fiis, Mutual Fund Equity Investment and Other Selected Variables with Nifty”

... findings indicate a negative feedback trading for Korean mutual fund industry. In addition, they also find that return volatility is positively related with disaggregated fund flows i.e. stock purchases and sales flow, but aggregate flow do not show a significant association with volatility or risk. Alexakis et al. (2005) find a bi-directional causality between mutual fund flow and stock returns for Greece. This study also finds inflows and outflows of cash in equity funds have a direct impact on ups and downs of stock returns in the Greek market. Overall the literature provides a mixed result regarding stock market returns and institutional investment flows. CHAPTER:-5 RESEARCH METHODOLOGY A) Problem Statement: * Is there dynamic relationship among FIIs, Mutual funds and selected variables with NIFTY? B) Research Objective: * To study the impact of foreign institutional cash flows and domestic cash flows on national stock exchange of India. * To examine relationship among the selected variables and NIFTY stock indices. * To study the causal relationship between selected variables and NIFTY stock indices. C) Research design: i. Type of Research Design * Descriptive research design to describe characteristics of a phenomenon being studied and Causal research design to reveal a cause and effect relationship among stock indices ii. Type of Data * Secondary data has been used in this study. iii. Source of......

Words: 14155 - Pages: 57

Mutual Fund

...Mutual Funds What is a mutual Fund? This is a pool of money that is managed on behalf of investors by financial professionals such as a money manager. Funds invested could be used to buy stocks, bonds or other securities according to specific investment objectives (consider the IPS) that have been established for the fund. Investors received either unit of shares that represent a proportionate share of the pool of fund assets. Mutual funds are open-ended investment funds, that is, investors can contribute money to the fund at any time, and existing investors can return their units or shares to the fund for redemption at any time. Different types of mutual funds Mutual funds are typically categorized according to their investment objectives. Some focus on stocks, others on bonds, money market instruments or other securities. Some focus on Jamaican instruments while others focus on international, some on low risk etc. Common types of mutual funds include: Money Market Funds, Fixed Income Funds, Growth or Equity Funds, Balanced Funds, Global and Foreign Funds, Index Funds, etc. As a mutual fund investor, you may earn return on your investment from any distributions to you of the interest, dividends or capital gains earned by the funds; and any increase in the value of your fund shares or units. Please note that your fund could decrease in value causing you to lose money. Sources of Return Some mutual funds allow investors to determine whether they...

Words: 434 - Pages: 2

Mutual Fund Performance

...Case a) US Mutual Fund Performance Maastricht University | | | | School of Business & Economics | | | | Place & date: | Maastricht, 5th December 2013 | | | | Name, initials: | Müller-Wilmes, VEMCroughs, ZWFWang, WCGerdsen, BHARack, MD | | For assessor only | | ID number: | I6076025I6075042I6117368I6075829I6064576 | | 1. Content | | Study: | International Business Economics | | 2. Language structure | | Course code: | EBC | | 3. Language accuracy | | Group number: | 1 | | 4. Language: Format & citing/referencing | | Writing tutor name: | Mike Langen | | Overall: | | Writing assignment: | | | Advisory grade | | | | | Assessor’s initials | | Your UM email address: v.muller-wilmes@student.maastrichtuniversity.nl, m.rack@student.maastrichtuniversity.nl, wwc.wang@student.maastrichtuniversity.nl, z.croughs@student.maastrichtuniversity.nl, b.gerdsen@student.maastrichtuniversity.nl Table of Contents Everyone has to include at his part how we did it in excel and what the conclusion of his subpart implies for the problem statement Bas (introduction, and question 1) Introduction Descriptive Data, net of cost etc Are the returns percentage? What do we expect from momentum? Do we need a table of contents? Do we need to copy the excel sheets into the paper ? or just copying the numbers as we did so far? 1. Best suitable model to measure Performance and Investigation of the different investment...

Words: 707 - Pages: 3

Recommendations to Mutual Fund

... debt. Return on Equity: Metro has a high return on equity compared to Loblaw when taxes are excluded from the income statement. Investor value high ROE as it demonstrates that further investments can produce strong yields, being effectively utilized for optimal returns. Debt Interest Coverage: Metro’s high debt interest coverage is above both the industry average and Loblaw’s. This demonstrates a strong ability to service debt financing while demonstrating to investors that management has done an excellent job in managing their debt obligations. Acid Test/ Current Ratio: Although Loblaw’s has a higher current ratio than Metro this number is reflective of a high inventory. The acid test ratio of Metro is higher than Loblaw’s Acid Test proving Metro to be more liquid and less dependent on inventories to meet current liabilities. Working Capital Gap: The nature of Grocery industry allows a strong cash conversion cycle, minimizing reliance on operating credit facilities. Despite this industry trend Loblaw used 99% of its operating credit facility in 2008. Recommendations to Mutual Fund Metro Inc. represents a unique opportunity to invest, one that has both growth potential and yet minimizes risk exposure. Sale growth for Metro Inc. has increased 5% between 2008-2009 and 2009-2010. Poor growth figures for 2007 were largely a result of a shift on how tobacco was sold across Ontario. These figures compared to major competition; Loblaws’ reflects a promising...

Words: 2273 - Pages: 10

Mutual Fund

...CHAPTER-1 INTRODUCTION OF THE STUDY Background of the study: Mutual fund industry in India attaining maturity Even though the capital market attracts people there are several problems associated with it. While investing directly in to capital market one to be careful to judge the valuation of the stock and understand the complexities involved in the stock price fluctuations. So, a person with moderate knowledge of capital market generally prefers to invest in mutual funds. In recent times mutual fund industry in India is growing rapidly and is undergoing tremendous changes. The Indian mutual fund industry has witnessed several structural and regulatory reforms. Different Investment Avenue are available to investors. Mutual fund also offers good investment opportunities to the investors. Like all investment, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while investment decisions. An objective to make the investors aware of functioning of mutual funds, an attempt has been made to provide information in question-answers format which may help the investors in taking investment decisions. Meaning of mutual fund: Mutual fund is a mechanism for pooling the resources by issuing units to the...

Words: 4625 - Pages: 19