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Related Content: MGT604 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Management of Financial Institutions

Mutual Funds

Cost of Ownership

1. Management Fee

All mutual funds, including no-load funds, have certain fixed expenses that are built into their per share net asset value. These expenses are the actual costs of doing business.

They are deducted from the assets of the fund. It is advisable to check the prospectus to determine the percentage of the fund's total net assets that is paid out for expenses.

Additionally, shareholder services provided by the fund, investment adviser's fees, bank custodian fees, and fund underwriter costs also come out of the fund's assets. These charges vary from fund to fund; however, they are clearly spelled out in the prospectus.

On a per-share basis, however, management expenses are usually quite small, because they are spread over the tens of thousands, or the millions, of shareholders in the fund.

The formula for determining the cost of a fund's management expenses is simple: From the current value of the fund's total assets subtract liabilities and expenses, and divide the result by the number of outstanding shares. The fund's prospectus and /or annual reports often provide this data. Management fees and expenses are usually expressed as a ratio of expenses paid out to total assets. Generally, the prospectus will show these expense ratios.

Read more: MGT604 - Management of Financial Institutions - Lecture Handout 25

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Related Content: MGT604 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Management of Financial Institutions

STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.)

Banking Surveillance Department

Health of an economy depends on the degree of safety and stability of its banking and financial system. A sound, stable, and robust banking and financial system is a pre-requisite for economic well being of a country and its populace. In Pakistan, ensuring the stability and soundness of the banking system is a statutory responsibility of State Bank of Pakistan. The banking supervision departments viz. Banking Policy and Regulations Department (BP&RD), Banking Surveillance Department (BSD), Off-Site Supervision and Enforcement Department (OSSED) and Banking Inspection Department have been assigned this important function to work jointly and severally to ensure the soundness of individual banks and of overall banking industry. The Department is responsible to supervise financial institutions in the country. The department ensures effective adherence to regulatory & supervisory policies, monitors risk profiles, evaluate operating performance of individual banks/DFIs & the industry as a whole while issuing guidelines for managing various types of risks. It also ensures that banks are adequately capitalized & have policies & systems in place to assess various risks. The department is also responsible for the implementation of the Basel II Accord in Pakistan. The function & activities of Credit Information Bureau also falls within the domain of Banking Surveillance Department. The CIB collect credit data,
under section 25A of the Banking Companies Ordinance 1962, maintain its database & disseminate credit information to financial institutions online to facilitate their credit appraisal process.

Read more: MGT604 - Management of Financial Institutions - Lecture Handout 09