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What is a mutual fund trustee?

Mutual funds enable individuals to invest in a diversified portfolio of securities managed by professionals. However, behind the scenes of these investment schemes is a crucial entity known as the mutual fund trustee.

This article explores the role, powers, functions, structure, and appointment process of mutual fund trustees.

Powers and functions of mutual fund trustee

The primary function of a mutual fund trustee is to ensure compliance with regulatory requirements and protect investors’ interests. Trustees function independently and act as custodians of the fund’s assets and ensure that the asset management company (AMC) adheres to fund objectives and investment strategies.

One of the key powers of mutual fund trustees is to oversee the fund's operations. They review the fund’s investment policies, monitor performance, and ensure that investment decisions align with the stated objectives and risk profiles.

Moreover, trustees play a crucial role in approving significant changes, such as amendments to the fund’s offering documents or mergers with other schemes. This ensures transparency and investor protection throughout the process.

Along with this, mutual fund trustees are responsible for appointing various service providers critical to the fund’s operations, including the custodian. Trustees assess the qualifications and capabilities of these entities to ensure efficient and reliable services that benefit investors.

Trustees are also responsible for monitoring conflicts of interest within the fund’s structure. They must act impartially, prioritising the interests of investors over any conflicting interests that may arise among the stakeholders involved in the fund’s management.

Structure of mutual fund trustee

The trustee typically comprises a board of Directors of Trustee Company, which is tasked with overseeing the fund’s operations and governance. The board consists of independent trustees, representing the interests of investors, as well as representatives from the sponsor.

Independent trustees play a crucial role in ensuring impartial oversight and securing investors' interests. They bring diverse expertise and experience to the table, facilitating informed decision-making within the fund.

Who appoints a mutual fund trustee?

The appointment of mutual fund trustees is typically governed by regulatory requirements stipulated in Mutual Funds Regulations.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.