In the Indian context the mutual fund is structured as a limited company (called the fund house). The sponsor of the fund (for example Hdfc Ltd. and Standard life in the case of Hdfc mutual fund) creates a TRUST to OWN (legally) the money and supervise the managers.

This job is specifically handed over to the TRUSTEES of the trust. So as a unit holder (a.k.a investor) YOU should know the duties and responsibilities of a Trustee:

he acts in a fiduciary capacity. He is personally responsible to pay YOU damages from his own funds. The trustee oversees the management and operations of the fund on YOUR behalf . They also have responsibilities under law. They oversee the performance of the fund, approve the rules and regulations under which it performs (internal rules and regulations!), approve the fee paid to the asset management company (AMC) for its services, and oversee the fund’s compliance program. They have to provide supervision and oversight and are not involved in day-to-day management.

it is their primary responsibility to make sure that the conflicts between the unit holder (read YOU) and the shareholder (Hdfc ltd and Standard life) are not compromised favoring the stronger party!

in the Indian context the word ‘independent’ has little meaning. It just means that the trustee should not be holding a place of profit with the promoter / sponsor. For example Mr. Deepak Satwalekar, (ex) Managing Director of Hdfc Standard life, cannot be a trustee of Hdfc mutual fund, but he could be a trustee in say Templeton Mutual Fund or Can Mutual fund.

When people make statements like ‘our fund schemes were handled by amateurs’ (read: Trustee’s should immediately tell the management – that is a pathetic, pathetic statement to be made in public.

Fiduciary duty includes making sure that

a) assets are fairly valued

b) assets are invested only in the specified, marketable securities

c) proxy voting is done fairly

d)  he compliance function! This encompasses approving written policies, internal rules, regulations and procedures, and the hiring and compensation of the fund’s executive team

e) The process by which fund disclosure is made to the unit holders, the regulators, how the offer document (and other documents are made), how the offer document is prepared, revised, and updated.

For doing all this the Trustees have to meet AT LEAST 4-5 times a year, see the fund performance, approve the audited statements of the schemes, etc.

How much of this really happens?

Hey why are you asking me? The Regulator seems to be happy with the role of a Trustee, right? No action against any Trustee so far.

Chuckle, chuckle.

When you get the accounts of a fund house, see the Trustee fees figure. Do not grudge it. Just make sure that it is EARNED and DESERVED. That is all…


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  1. Hi Subra,
    By reading each of your article, you are providing us with the vision of what is happening internally. Now I can sense that I am trying to see the hidden agenda in everything happening around me.

    It looks like the CA and financial guru’s either they become too greed or they become like sanyasi after seeing all this !!

  2. the current structure of trustee & amc linkage MUST be broken.
    here is an alternative option…
    – trusts/trustees should canvas people for depositing money with a custodian, and commit to finding a credible amc to handle the investments, and be compensated fairly to oversee the depositors well being.
    – now the trustees should invite amcs to manage the investment in lines with what they promised to the depositors, pay the amc for the professional services and change the amc if they are not satisfied.
    – this could mean that icicipru trustee decides to fire icicipru amc for not performing well enough on icicipru discovery scheme & invite reliance amc to take over that role.

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