The concept of mutual funds was invented in Europe in early 1770s. During a bleak economic situation, Adriaan Van Ketwich, a Dutch merchant created the world’s first mutual fund in 1774. He pooled money from several individuals and created a diversified fund of bonds. He named it “Eendragt Maakt Magt,” which translates to “Unity Creates Strength.” The issue was successful and Van Ketwich introduced his second fund, “Concordia Res Parvae Crescunt” in 1779 with more freedom in investment policy.
Van Ketwich’s fund survived until 1824. But the vehicle he created is still considered to be a hallmark of personal investing more than two centuries later. The early mutual fund bouquet was close-ended in nature. It spread from the Netherlands to England and France before heading to the U.S. in the 1890s.
The Indian mutual fund industry started in 1963 with the formation of the Unit Trust of India (UTI). It was a joint initiative by the Government of India (GOI) and the Reserve Bank of India (RBI). The history of mutual funds in India can be segregated into four distinct phases
Phase I (July 1964 - November 1987): UTI All The Way
Phase II (November 1987 - October 1993): Entry Of Public Sector Mutual Funds
Phase III (October 1993 - February 2003): Private Players Enter The Scene
Phase IV – (Since February 2003): UTI’s Restructuring And Beyond
Currently, the industry has crossed a landmark of Rs 27 lakh crores AUM and stands at Rs 27,04,699 crore as on 30th November, 2019 while still having high-growth prospects. The recent regulations by SEBI namely on the re-categorization alongside changes in expense ratios and commission structure have helped the industry to grow by allowing fair competition while continuing to protect investors’ interests.
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