A

REPORT

ON

Exploring the Intricacies of Fund Accounting in Mutual Fund.

Submitted by: ANSHUL KUMAR SONI

(23BSP0280)
Bank of New York Mellon
 REPORT

ON

Exploring the Intricacies of Fund Accounting in Mutual Fund.

By:
ANSHUL KUMAR SONI
(23BSP0280)

Submitted to:

COMPANY GUIDE FACULTY GUIDE

Mr. Bhaskar Ramlu Chavan CA Ratti Rani
(Reporting Manager) (Faculty Member)
BNY Mellon IBS Mumbai

DATE OF SUBMISSION
May 24, 2024
 AUTHORIZATION

This is to certify that this report, titled “Exploring the Intricacies of Fund Accounting on
Mutual Fund” is submitted by Mr. Anshul Kumar Soni as a partial fulfilment of the
requirement of the PGPM Program of ICFAI Business School, Mumbai. It is an original work
done by Mr. Anshul Kumar Soni carried out at BNY Mellon.

This report is formally submitted to the company guide Mr. Bhaskar Ramlu Chavan, , BNY
Mellon and CA Rati Rani, Faculty Member, IBS-Mumbai.

The report is submitted as partial fulfilment of the requirement of the PGPM Program of
ICFAI Business School, Mumbai.

1
 ACKNOWLEDGEMENT

Firstly, I would like to thank Mr. Bhaskar Ramlu Chavan, Vice President at BNY Mellon. for
giving me the opportunity to do an internship under Fund Accounting Internship program.

Moreover, I'd like to extend my heartfelt gratitude to Mrs Aprajita Dutta, an Associate and my
company guide and Mr. Bishnu Agrawal, an Associate within the same company. Their valuable
insights and perspectives have breathed new life into my journey, adding dimensions to my learning
experience. Their willingness to share their knowledge has been a precious gift, and I am genuinely
thankful for their unwavering support.

Furthermore, my gratitude extends deeply to the Faculty of ICFAI Business School and my faculty
guide CA Rati Rani, whose guidance paved the way for my Summer Internship Program journey.
Their support and encouragement have acted as a driving force, propelling me toward the halfway
completion of the project.

Lastly, my heartfelt gratitude reaches out to the countless individuals who have played a role in
shaping my journey through their diverse contributions. Every piece of advice, each encouraging
word, and every act of assistance has not only enriched my experience but has also made the learning
process more enjoyable and insightful.

Anshul Kumar Soni

(23BSP0280)
PGPM FINANCE
 ABSTRACT

The Fund Accounting Enhancement Project is a strategic initiative aimed at improving fund
accounting processes within the mutual fund industry. It begins by deepening our
understanding of fund accounting principles and operational dynamics. As part of this effort,
we analyze the business models used in fund accounting across various client profiles, seeking
commonalities to optimize efficiency.

To enhance clarity and streamline processes, we explore the practical application of workflow
diagrams. These visual representations help us identify bottlenecks and areas for improvement.
Additionally, we emphasize the importance of implementing Standard Operating Procedures
(SOPs) to maintain consistency and compliance in fund accounting operations.

Collaboration with Points of Contact (POCs) is crucial. By gathering requirements, we create a

comprehensive governance tracker tailored for audit purposes. This framework promotes
transparency and regulatory compliance. Our goal is to drive efficiency, transparency, and
confidence throughout the mutual fund industry by documenting our knowledge of fund
accounting principles and Net Asset Value (NAV) intricacies.
 TABLE OF CONTENTS

 INTRODUCTION................................................................................................... 1

 FINANCIAL ASPECTS ............................................................................... 7

 SERVICES PORTFOLIO ........................................................................... 11

 SWOT ANALYSIS: ....................................................................................122

 MUTUAL FUND: BUILDING WEALTH TOGETHER .........................144

 THE PROJECT: .........................................................................................166

 Exploring the intricacies of Fund Accounting in Mutual Fund. ..............169

 OBJECTIVES .............................................................................................. 18

 SCOPE.......................................................................................................... 19

 METHODOLOGY ...................................................................................... 20

 FUND ACCOUNTING IN MUTUAL FUNDS ........................................... 21

 FUNDS REGULATIONS ............................................................................ 26

 SLD (SERVICE LEVEL DESCRIPTION) ................................................ 27

 BUSINESS CONTINUITY PROCESS (BCP) ........................................... 29

 FINANCIAL REPORTING ........................................................................ 31

 GOVERNANCE TRACKER ...................................................................... 32

 SWING PRICING: ................................................................................... 34

  UI PATH – ROBOTIC PROCESS AUTOMATION................................. 35

 LEARNINGS ............................................................................................... 37

 FINDINGS & CONCLUSION .................................................................... 38

CERTIFICATIONS ........................................................................................... 39
 COMPANY BACKGROUND
BNY Mellon, founded by Alexander Hamilton in 1784, is the oldest bank in the United States
and the longest continuously operating company in New York City. It was formed from the
merger of The Bank of New York and Mellon Financial Corporation in 2007. BNY Mellon offers
investment management, investment services, and wealth management services. As of 2023, it
is the world’s largest custodian bank and securities Services Company, managing $1.8 trillion in
assets and holding $45.7 trillion in assets under custody.

STRATEGIC PILLARS

● Be More for our clients

● Run our company better

● Power our culture

Be more Run our

for our Company
client better

Power our
Culture
 FINANCIAL ASPECTS

Revenue: Revenue refers to the total income generated by a company from its various business
activities over a specific period, typically a fiscal quarter or year. For BNY Mellon, revenue comes
from multiple sources including asset servicing fees, investment management fees, performance fees,
trading gains, and other charges related to serving its clients.

Assets under Custody (AUC): AUC represents the aggregate value of assets, including
securities and cash that BNY Mellon holds and administers on behalf of its clients. These assets are
entrusted to BNY Mellon for safekeeping, and the company earns revenue through fees charged for
custody services. A higher AUC/A ratio indicates greater revenue potential from the fees associated
with managing and safeguarding these assets.

Assets under Management (AUM): AUM refers to the total market value of assets that BNY
Mellon actively manages on behalf of its clients. These assets may include various types of
investments such as stocks, bonds, and mutual funds. BNY Mellon earns revenue from management
fees, performance fees, and other charges based on the value of assets under its management.

Capital Adequacy and Liquidity: Capital adequacy refers to the sufficiency of a company's
capital reserves to absorb potential losses and meet regulatory requirements. It is crucial for financial
institutions like BNY Mellon to maintain adequate capital levels to ensure stability and solvency.
Liquidity management involves maintaining sufficient cash and liquid assets to meet short-term
financial obligations as they come due.

Net Interest Income: Net interest income is the difference between the interest earned from
loans, investments, and other interest-earning assets, and the interest paid on deposits and other
interest-bearing liabilities. For BNY Mellon, net interest income primarily arises from its banking
operations, where it earns interest on loans and other financial instruments while paying interest on
deposits.

Operating Expenses: Operating expenses encompass the various costs incurred by a company
in its day-to-day operations. This includes expenses such as employee salaries and benefits,
technology infrastructure, marketing and advertising, rent, utilities, and administrative costs. Efficient
management of operating expenses is essential for maintaining profitability and financial health.

Regulatory Environment:
The regulatory environment refers to the framework of laws, regulations, guidelines, and standards
set by governmental bodies and regulatory authorities that govern the operations and conduct of
businesses within a particular industry. For BNY Mellon, as a financial institution, the regulatory
environment encompasses a wide range of regulations related to banking, securities, investments, and
financial services.
Key Aspects:

Compliance Costs: Financial institutions like BNY Mellon must allocate resources to ensure
compliance with regulatory requirements. This includes investing in systems, processes, and
personnel to monitor, report, and adhere to regulations.

Regulatory Fines and Penalties: Non-compliance with regulations can result in fines,
penalties, and legal repercussions, which can significantly impact the financial performance and
reputation of the institution.

Regulatory Changes: The regulatory landscape is dynamic, with laws and regulations evolving
over time in response to market conditions, technological advancements, and geopolitical factors.
BNY Mellon must stay abreast of regulatory changes and adapt its policies and practices accordingly.

Profit margin is a financial metric that measures the profitability of a company by assessing its
ability to generate profit from its revenue. It indicates the percentage of revenue that translates into
profit after accounting for all expenses and costs associated with producing goods or delivering
services.

Key Types:

Gross Profit Margin: This measures the percentage of revenue remaining after deducting the
cost of goods sold (COGS). It reflects the efficiency of production or service delivery.

Operating Profit Margin: Also known as EBIT (Earnings Before Interest and Taxes) margin,
this measures the percentage of revenue remaining after deducting operating expenses but before
interest and taxes. It assesses the profitability of core business operations.

Net Profit Margin: This is the most comprehensive measure of profitability, as it reflects the
percentage of revenue remaining after deducting all expenses, including taxes and interest. It provides
a holistic view of the company's overall profitability.
KEY INDICATORS:
1) NET INCOME (Dollars in Millions)

NET INCOME

FY 23 3288

FY 22 2560

FY21 3771

FY 20 3626

0 500 1000 1500 2000 2500 3000 3500 4000

Let's take a look at BNY Mellon's net income over the past four fiscal years, as shown on this
graph. Net income represents a company's profit after accounting for all expenses.

As you can see, BNY Mellon's net income has fluctuated somewhat, but the overall trend is
positive. Here's a year-by-year breakdown:

 In fiscal year 2023, BNY Mellon achieved their highest net income on record at $3,288
billion. This demonstrates strong financial performance.
 Net income in 2022 came in at $2,560 billion.
 Moving back to 2021, we see a higher net income of $3,771 billion.
 And in 2020, the net income was $3,626 billion.

While there are some variations year-to-year, it's encouraging to see a generally upward trend in
BNY Mellon's net income. This indicates the company's ability to generate consistent profits.
This positions them well for continued growth and success in the financial services industry.
2.) Asset Under Custody ($ in Trillion)

AUC
50
48
46
44
42 46.7 47.8
40 44.3
38 41.1
36
FY 20 FY21 FY 22 FY 23

The above-mentioned graph represents BNY Mellon’s Asset under custody for 4 fiscal years and it
shows a positive growth in terms of handling client’s assets and safe keeping them for clients.
BNY Mellon is #1 Custodian bank with $47.8 trillion in FY 2023.
In Q1 of 2024 BNY Mellon made a record of $48.8 trillion and is still #1 Custodian Bank.
The services which BNY Mellon gives to its clients and the products which they offer makes them
stand out from the competitors and give them a challenge to compete in the market.
 SERVICES PORTFOLIO

BNY Mellon provides an extensive array of financial solutions catering to its clientele. Below are the
primary services offered:

• Securities Services: BNY Mellon's Securities Services division extends securities-related

solutions on a global scale to institutional clients. It encompasses custody, clearing, settlement, and
fund administration services, serving as a reliable custodian for client assets. Moreover, it offers
middle-office solutions, inclusive of performance measurement and compliance reporting.

• Market and Wealth Services: This division attends to both institutional and retail clients
across wealth management, broker-dealer services, and capital markets. It furnishes investment
services like securities lending and trade execution to institutional clients and delivers brokerage,
investment advisory, and wealth planning services to retail clients. Furthermore, it facilitates access
to global capital markets.

• Investment and Wealth Management: BNY Mellon's Investment and Wealth

Management division provides investment management and wealth advisory services on a global
scale. It comprises BNY Mellon Investment Management, which offers a range of investment
strategies and products such as mutual funds and ETFs, and BNY Mellon Wealth Management,
delivering personalized wealth planning and investment management services tailored to affluent
individuals and families.
 SWOT ANALYSIS:

Strengths:
Market Leader: The Bank of New York Mellon (BNY Mellon) is one of the largest global
custodian banks, providing a wide range of services including asset servicing, wealth
management, and investment management.

Diverse Service Portfolio: BNY Mellon offers a comprehensive suite of financial services
catering to various client segments, including institutional investors, corporations, and high-
net-worth individuals. This diversification reduces dependence on any single market or
service, enhancing resilience.

Global Presence: BNY Mellon operates in multiple countries across the globe, giving it
access to diverse markets and opportunities. This global footprint allows the bank to serve
clients internationally and benefit from economies of scale.

Technology Integration: The bank has invested significantly in technology to improve

operational efficiency, enhance client experience, and stay ahead in the rapidly evolving
fintech landscape. This includes innovations in blockchain, AI, and data analytics.

Weaknesses:
Regulatory Challenges: Being a large financial institution, BNY Mellon is subject to
stringent regulatory requirements across multiple jurisdictions. Compliance with these
regulations adds complexity and costs to its operations, and non-compliance can lead to fines
and reputational damage.

Dependence on Economic Conditions: BNY Mellon's performance is closely tied to the

overall health of the economy and financial markets. Economic downturns, market volatility,
or interest rate fluctuations can impact its revenue streams and asset valuations.

Cybersecurity Risks: As a custodian of vast amounts of financial assets and sensitive

information, BNY Mellon faces cybersecurity threats such as data breaches, cyberattacks, and
insider threats. A successful breach could lead to financial losses and damage to its reputation.

Opportunities:
Expansion in Emerging Markets: With the increasing globalization of financial markets,
there are opportunities for BNY Mellon to expand its presence in emerging markets where
demand for financial services is growing rapidly. This includes regions such as Asia-Pacific,
Latin America, and Africa.

Strategic Partnerships and Acquisitions: BNY Mellon can pursue strategic partnerships or
acquisitions to enhance its capabilities, enter new markets, or diversify its service offerings.
Collaborating with fintech startups or acquiring niche service providers could strengthen its
competitive position.

Growing Demand for ESG Investments: There is a rising demand for Environmental,
Social, and Governance (ESG) investments globally. BNY Mellon can capitalize on this trend
by offering ESG-focused products and integrating sustainability considerations into its
investment strategies.

Threats:
Competition: BNY Mellon faces intense competition from other global custodian banks,
traditional financial institutions, and disruptive fintech companies. Competitors may offer
similar services at lower costs or with innovative features, posing a threat to BNY Mellon's
market share.

Low Interest Rate Environment: Persistently low interest rates can compress the bank's net
interest margin, reducing its profitability, especially in interest-sensitive businesses like asset
management and lending.

Geopolitical Risks: Geopolitical tensions, trade disputes, or regulatory changes in key

markets can disrupt BNY Mellon's operations, affect client confidence, and increase market
volatility. Uncertainty related to Brexit, trade tensions between major economies, or political
instability in certain regions poses risks to its global business.

By assessing these factors, BNY Mellon can develop strategies to leverage its strengths,
address weaknesses, capitalize on opportunities, and mitigate threats to maintain its
competitive edge in the financial services industry.
 MUTUAL FUND: BUILDING WEALTH TOGETHER
A mutual fund is a type of investment vehicle that pools money from multiple investors to
invest in a diversified portfolio of securities such as stocks, bonds, money market instruments,
or other assets. Here's a detailed description of mutual funds and their features:

Professional Management: One of the key features of mutual funds is professional

management. Mutual funds are managed by professional portfolio managers or investment
teams who make investment decisions on behalf of investors. These managers conduct
research, analyze market trends, and actively manage the fund's portfolio to achieve its
investment objectives.

Diversification: Mutual funds offer investors access to a diversified portfolio of securities. By

pooling money from multiple investors, mutual funds can spread investment risk across a
wide range of assets, sectors, and geographic regions. Diversification helps reduce the impact
of individual security or market fluctuations on the overall performance of the fund.

Liquidity: Mutual funds provide liquidity to investors, allowing them to buy or sell shares on
any business day at the fund's net asset value (NAV). This liquidity feature makes mutual
funds a convenient investment option for investors who may need to access their funds
quickly or frequently.

Variety of Investment Options: Mutual funds come in various types and categories, catering
to different investment objectives, risk profiles, and time horizons. Common types of mutual
funds include equity funds, bond funds, money market funds, balanced funds, index funds,
sector funds, and more. Investors can choose funds that align with their financial goals, risk
tolerance, and investment preferences.

Transparency: Mutual funds are required to disclose key information to investors, including
their investment objectives, strategies, portfolio holdings, performance, fees, and expenses.
This transparency allows investors to make informed decisions and monitor the performance
and composition of their investments.

Accessibility: Mutual funds are accessible to a wide range of investors, including individual
investors, retirement plans, institutions, and financial intermediaries. Many mutual funds have
low minimum investment requirements, making them accessible to investors with varying
levels of financial resources.
Regulation and Oversight: Mutual funds are regulated by government authorities such as the
Securities and Exchange Commission (SEC) in the United States or the Financial Conduct
Authority (FCA) in the United Kingdom. These regulatory bodies impose rules and
regulations to protect investors' interests, ensure transparency, and maintain the integrity of
the mutual fund industry.

Costs and Fees: Mutual funds charge fees and expenses to cover the costs of managing the
fund, including management fees, administrative expenses, and other operating costs.
Common fees associated with mutual funds include expense ratios, sales loads, redemption
fees, and transaction fees. It's essential for investors to understand these costs and consider
their impact on investment returns.

Overall, mutual funds offer investors a convenient, diversified, and professionally managed
investment option that can help them achieve their financial goals while managing risk and
maintaining liquidity. However, investors should carefully evaluate mutual funds based on
their investment objectives, risk tolerance, costs, and other factors before investing.
 THE PROJECT:
Exploring the intricacies of Fund Accounting in Mutual Fund.

Exploring the Fundamentals of Fund Accounting Principles and Processes: This encompasses
delving into the core concepts that underpin fund accounting, such as accrual accounting
methodologies and the classification of funds. It involves gaining a deep understanding of the
multifaceted processes involved in overseeing funds, including the intricate tasks of budgeting,
allocation of resources, and generating comprehensive reports to facilitate informed decision-making.

Examining and Understanding Various Fund Accounting Business Models: This involves
conducting a thorough analysis of diverse business models prevalent in fund accounting, ranging from
endowment funds to mutual funds and hedge funds. The aim is to gain comprehensive insights into
the distinct structures, objectives, and operational frameworks characterizing each model within the
context of our organization's financial landscape.

Breaking Down Fund Accounting Processes into Key Steps and Components: Our objective here
is to meticulously analyze the intricacies of fund accounting processes, dissecting them into their
fundamental steps and components. This entails identifying critical tasks such as the establishment of
funds, management of investments, distribution of income, and preparation of financial statements.
By isolating these essential touch points, we aim to pinpoint areas for optimization and efficiency
enhancement within our operations.

Visual Representation of Fund Accounting Processes Using Workflow Diagrams: To enhance

comprehension and analysis of fund accounting activities, we plan to employ visual aids such as
flowcharts and process diagrams. These diagrams will serve to visually depict the sequential
progression of fund accounting processes, illustrating how funds traverse through various stages. By
providing a clear visual roadmap, we aim to facilitate better understanding and evaluation of the
overall process.

Establishing Standard Operating Procedures (SOP) for Streamlined Operations: Our strategy
involves the development and implementation of standardized protocols and guidelines for fund
accounting tasks. These SOPs will serve as comprehensive blueprints, delineating step-by-step
procedures for key activities ranging from transaction recording to financial reporting. By enforcing
consistency, accuracy, and efficiency in our operations, we aim to streamline workflows and mitigate
the risk of errors.
Creating an In-depth Governance Tracker for Audit Oversight: Our initiative involves the
establishment of a thorough governance tracker designed to meticulously monitor and oversee all
facets of fund accounting activities. This tracker will serve as a comprehensive tool for tracking
compliance with regulatory mandates and internal guidelines, ensuring adherence to established
protocols and mitigating potential risks.

Recording Acquired Expertise on Fund Accounting Principles and Methodologies: As we

embark on this endeavor, we commit to diligently documenting our accumulated knowledge and
insights pertaining to fund accounting principles and practices. This documentation will encompass
a detailed account of the lessons learned, including noteworthy best practices, encountered
challenges, and innovative solutions implemented to optimize fund accounting processes.

.
 OBJECTIVES
 Grasping the foundational principles and methodologies of fund accounting as applied within the mutual fund
industry.
 Assessing the efficacy of detailed workflow diagrams in illustrating the intricate workflows of fund accounting.
 Understanding the operational structure and processes of fund accounting across a diverse range of client
portfolios.
 Analyzing and comprehending the key stages, components, and outcomes associated with fund accounting
procedures.
 Appreciating the importance of implementing Standard Operating Procedures (SOPs) to streamline fund
accounting operations.
 Collaborating with designated Points of Contact (POCs) to gather requirements for an exhaustive audit
governance tracker.
 Gaining proficiency in developing a governance tracker, encompassing document specifications, update
frequencies, platform utilization, and approval protocols overseen by Senior Vice Presidents (SVPs).
 Documenting acquired insights pertaining to fund accounting principles, the nuances of Net Asset Value (NAV),
and the pivotal role assumed by fund accountants in mutual fund administration.
 SCOPE

Attainment of Proficiency in Fund Accounting Principles and Practices: Our objective is to

attain an in-depth mastery of the fundamental principles governing fund accounting, coupled with a
comprehensive understanding of the operational methodologies involved in administering funds
within a specific organizational framework.

Examination and Understanding of Various Fund Accounting Business Models: This

undertaking entails a meticulous examination of the diverse business models utilized in fund
accounting, with a focus on discerning their underlying structures and analyzing their operational
effectiveness across different organizational contexts.

Identification of Key Processes and Components within Fund Accounting Operations: Our
aim is to dissect the intricacies of fund accounting procedures, identifying critical steps and
components that encompass activities such as fund allocation, monitoring expenses, and preparing
financial statements.

Visualization of Fund Accounting Processes through Workflow Diagrams: We plan to create

visual representations, such as workflow diagrams, to illustrate the sequential flow of fund
accounting activities. These visual aids will serve to enhance comprehension of the process
sequence and facilitate the identification of areas ripe for improvement and optimization.

Establishment of Standard Operating Procedures (SOPs) to Enhance Operational Efficiency:

Our objective is to create and implement standardized protocols aimed at optimizing the efficiency
of fund accounting processes. These procedures will ensure consistency, effectiveness, and
compliance with regulatory requirements or internal guidelines.

Creation of a Comprehensive Governance Tracker to Ensure Audit Compliance: We will

develop a robust governance tracker designed to monitor and oversee various aspects of fund
accounting activities. This tracker will serve as a centralized tool for ensuring adherence to
regulatory mandates and facilitating the auditing process by providing comprehensive oversight and
documentation.

Recording and Documenting Acquired Expertise in Fund Accounting Principles and

Practices: Throughout the project, we will systematically capture and document all acquired
knowledge related to fund accounting principles and practices. This documentation will encompass
insights, best practices, and strategies employed to address challenges encountered during the
project, serving as a valuable resource for future reference and continuous improvement.
Refer to economic reports company publications and industry studies to gain insights into fund
accounting principles and practices within the mutual fund industry
 METHODOLOGY

.
● Primary Data Collection:

Engage in direct interviews with team members to obtain firsthand insights into the intricacies of
fund accounting processes, with a particular focus on understanding nuances related to Net Asset
Value (NAV) calculations and the responsibilities of fund accountants.

● Secondary Data Collection:

Utilize a variety of secondary sources, such as economic reports, corporate publications, and
industry analyses, to augment our understanding of fund accounting principles and practices within
the mutual fund sector. These sources will provide additional context and perspectives to enrich our
knowledge base and inform decision-making processes.

.
 FUND ACCOUNTING IN MUTUAL FUNDS

 Fund accounting is a specialized method tailored for monitoring the financial

activities of separate funds or portfolios.
● It necessitates the maintenance of distinct records for each fund to ensure accurate
tracking and reporting.
● Key components include the calculation of Net Asset Value (NAV), which serves as a
benchmark for assessing fund performance.
● Transparency and regulatory compliance are paramount in fund accounting, ensuring
adherence to regulations and providing stakeholders with comprehensive insights.
● Expense allocation is integral, involving the equitable distribution of costs across
funds based on their contributions and usage.
● Accrual accounting methods are commonly utilized to accurately reflect income and
expenses.
● Fund accounting provides accurate financial information, supports compliance efforts,
and facilitates effective fund management practices.
 KEY PLAYERS

In fund accounting, several key players are involved in managing and overseeing various
aspects of financial operations. These key players typically include:

● Fund Accountant: Responsible for maintaining the financial records of the fund,
preparing financial statements, calculating Net Asset Value (NAV), and ensuring
compliance with accounting standards and regulations.
● Fund Manager: Oversees the investment decisions and portfolio management of the
fund, including asset allocation, buying and selling securities, and monitoring
performance.
● Custodian: Safeguards the assets of the fund, holds securities in custody, processes
transactions, and ensures compliance with regulatory requirements related to custody
and safekeeping.
● Transfer agency: The transfer agency manages shareholder information, processes
transactions, distributes payments, responds to inquiries, and ensures regulatory
compliance.
● Auditor: Conducts independent audits of the fund's financial statements to verify their
accuracy, assess internal controls, and ensure compliance with accounting standards and
regulations.
● Regulatory Authorities: Government agencies or regulatory bodies responsible for
overseeing and regulating the fund industry, ensuring compliance with securities laws,
and protecting investors' interests.
● Investment Advisor: Provides investment advice and guidance to the fund manager,
assists in portfolio construction and strategy, and may have discretionary authority over
investment decisions.
● Trustees: Provides oversight and governance of the fund's operations, including
reviewing investment policies, monitoring performance, and safeguarding investors'
interests.
 COMPONENTS OF FUND ACCOUNTING

The principles of fund accounting for mutual funds are designed to uphold transparency,
accuracy, and compliance with regulatory standards. Here's a breakdown of these key principles:

● Net Asset Value (NAV) Calculation: Mutual funds calculate their NAV daily, ensuring
accuracy in reflecting the fund's assets minus liabilities. This accuracy isvital for investor
confidence and regulatory compliance.
● Accrual Accounting: Mutual funds use accrual accounting to record income and
expenses as they're earned or incurred, irrespective of cash flow timing. This method
ensures accurate performance tracking over time.
● Fair Value Pricing: Mutual funds value assets at fair market value, particularly for less
actively traded securities. Fair value pricing provides investors with accurate and timely
valuation information.
● Transparency: Regular and comprehensive disclosures about holdings, performance,
fees, and expenses are provided to investors. Transparency enables informed decision-
making and performance assessment.
● Compliance: Mutual funds adhere to regulatory requirements set by agencies like the
SEC. Compliance ensures legal operation and investor protection.
● Dividend Distribution: Accurate recording and distribution of dividends according to
predefined schedules and guidelines are ensured. This process guarantees investors
receive their entitled share of fund-generated income.
● Expense Allocation: Fair and transparent allocation of expenses, such as management
fees and administrative costs, among shareholders is practiced. This principle prevents
investors from bearing undue financial burdens.
 TYPES OF FUNDS

● Unit Trust: A type of investment fund where investors pool their money together to
invest in a diversified portfolio of assets, such as stocks, bonds, or real estate. Unit
trusts are managed by professional fund managers.
● Investment Trust: Similar to unit trusts, investment trusts pool investors' moneyto
invest in a diversified portfolio of assets. However, investment trusts are structured as
closed-end funds and trade on stock exchanges like shares.
● Exchange-traded funds (ETFs): ETFs are investment funds that are traded on stock
exchanges, allowing investors to buy and sell shares throughout the trading day. ETFs
typically track an index, commodity, or a basket of assets.
● Pension Funds: Pension funds are investment pools set up to provide retirement
benefits to employees. They are typically managed by financial institutions or pension
fund managers and invest in a variety of assets to generate returns over the long term.
● Fund of Funds: Fund of funds (FoF) invest in other investment funds rather than
directly investing in individual securities. FoFs offer diversification across multiple
underlying funds and are managed by a fund manager who selects and allocates
capital to different funds.
● Umbrella Fund Structures: Umbrella funds are collective investment schemes that
contain multiple sub-funds, each with its own investment objectives and policies.
Investors can invest in different sub-funds within the same umbrella structure.
● Master Feeder: A structure commonly used in hedge funds where one fund,known
as the master fund, aggregates capital from multiple feeder funds. Feeder funds are
typically organized in different jurisdictions or for different types of investors.
● Real Estate Investment Trusts (REITs): REITs are companies that own, operate,or
finance income-generating real estate across various sectors, including residential,
commercial, and industrial properties. REITs provide investors with exposure to real
estate assets without direct property ownership.
● Money Market Fund: Money market funds invest in short-term, high-quality debt
securities such as Treasury bills, commercial paper, and certificates of deposit. They
aim to provide investors with stable returns and high liquidity.
 LIFECYCLE OF THE FUND

A fund's life cycle starts with inception, fundraising, and investment phases, where capital is raised
and deployed according to its strategy. Operations and management ensure effective administration
and communication with investors. In maturity, the focus shifts to maximizing returns. Finally, the
fund is liquidated, and proceeds are distributed to investors, concluding its life cycle.

Client/Broker

NAV Transfer
Publications Agent
 FUNDS REGULATIONS

● UCITS (Undertakings for Collective Investment in Transferable Securities):

UCITS is a regulatory framework established by the European Union (EU) to govern mutual
lfunds and investment instruments across the EU.
Objective: Unity and streamline financial investments in European markets under a single
regulatory authority.
Features:
Financial Passport: Allows investment firms to operate across all EU countries with
consistent regulations.
Investor Safeguards: Ensures investor protection, investment disclosures, and various
investment types.

Cross-Border Investment: Promotes cross-border investment within the EU.

Investment Scope: UCITS funds invest in liquid assets only.
Comparison with AIF (Alternative Investment Fund): UCITS funds are more restrictive;
AIF can invest in any type of fund.

● Non-UCITS Funds:
Definition: Non-UCITS funds do not comply with UCITS guidelines.
Characteristics:
Not Open-Ended: Non-UCITS funds may not be open-ended (i.e., not continuously
redeemable).
Liquidity: They may lack the liquidity requirements of UCITS funds.
Compliance: Non-UCITS funds adhere to the domestic law of their respective countries
but do not fall under UCITS regulations.
 SLD (SERVICE LEVEL DESCRIPTION)

An SLD, or Service Level Description, is a formal contract between two locations within a
multinational company that outlines how tasks, work processes, and interactions should be conducted
between these locations. The SLD ensures clarity, consistency, and accountability by documenting
all aspects of the inter-location collaboration. Here’s a detailed description:

Key Components of an SLD

Purpose and Scope:

Objective: Define the overall purpose of the SLD, which is to establish clear guidelines and
expectations for the tasks and workflows between the two locations.
Scope: Specify the activities, services, and processes covered under the SLD, ensuring both locations
understand the extent and limitations of the agreement.
Roles and Responsibilities:

Location A Responsibilities: Detailed description of the tasks, deliverables, and services that Location
A is responsible for.

Location B Responsibilities: Detailed description of the tasks, deliverables, and services that Location
B is responsible for.

Shared Responsibilities: Outline any tasks or processes that require collaboration between both
locations.
Communication Protocols:

Communication Channels: Define the primary and secondary communication methods (e.g., email,
video conferencing, instant messaging).
Frequency: Specify the regularity of communication (e.g., weekly meetings, monthly reports).
Escalation Procedures: Outline the steps to follow when issues arise, including who to contact and
the timeline for responses.
Performance Metrics and KPIs:

Key Performance Indicators (KPIs): List the specific KPIs used to measure the performance and
success of the tasks and processes.
Targets and Benchmarks: Define the expected targets for each KPI and any benchmarks that should
be met.
Documentation and Reporting:

Required Documentation: Specify all documents that need to be maintained, shared, and updated
(e.g., project plans, status reports, meeting minutes).
Reporting Frequency: Determine how often reports should be generated and shared between
locations.
Data Storage: Outline where and how the documentation will be stored and accessed.
Quality Assurance and Control:
Quality Standards: Define the quality standards and best practices that must be adhered to.

Review Processes: Establish regular review processes to ensure compliance with quality standards.
Issue Resolution:

Problem-Solving Procedures: Describe the steps for identifying, reporting, and resolving issues.
Responsibility Matrix: Identify who is responsible for resolving specific types of issues and within
what timeframe.

Change Management:
Change Request Process: Detail how changes to the SLD or processes should be requested,
evaluated, and approved.
Documentation of Changes: Ensure all changes are documented and communicated to relevant
parties.

Confidentiality and Security:

Data Protection: Outline the measures in place to protect sensitive information exchanged between
locations.
Access Controls: Define who has access to what information and under what circumstances.

Compliance and Legal Considerations:

Regulatory Requirements: Ensure the SLD adheres to relevant laws and regulations in both
locations.
Legal Obligations: Outline any legal obligations both locations must comply with regarding the tasks
and processes.

Implementation and Review

Initial Implementation: Plan and timeline for rolling out the SLD, including training sessions and
initial meetings.
Ongoing Review: Regular intervals at which the SLD will be reviewed and updated to ensure it
remains relevant and effective.
Feedback Mechanism: Process for collecting feedback from both locations to continuously improve
the SLD.
By documenting all aspects of the inter-location collaboration, an SLD provides a clear framework
that enhances operational efficiency, mitigates risks, and ensures that both locations work
harmoniously towards shared business objectives.
 BUSINESS CONTINUITY PROCESS (BCP)

The Business Continuity Process (BCP) is a comprehensive strategy employed by company

management to ensure the uninterrupted execution of critical tasks and operations during times when
one or more locations are incapacitated due to natural disasters, political instability, or other
disruptive events. The BCP ensures that essential functions can be maintained or quickly resumed,
minimizing the impact on the company’s business operations. Here’s a detailed description of the
BCP considering the given details:

Key Components of the Business Continuity Process

Risk Assessment and Impact Analysis:

Identify Potential Risks: Analyze potential threats that could disrupt business operations, such as
natural calamities (earthquakes, floods), political unrest, cyber-attacks, or pandemics.
Impact Analysis: Assess the potential impact of these threats on critical business functions,
identifying the most vulnerable areas and quantifying the potential losses.
Business Continuity Plan Development:

Critical Functions Identification: Identify and prioritize critical business functions that must be
maintained or quickly resumed during a disruption.
Recovery Strategies: Develop detailed recovery strategies for each critical function, outlining how
these functions will be maintained or restored.
Resource Allocation: Determine the resources (personnel, equipment, technology) required to
implement the recovery strategies and ensure they are readily available.
Alternate Location and Task Allocation:

Alternate Location Identification: Identify and prepare alternate locations that can take over the
critical tasks of the affected location.
Task Reallocation Plan: Develop a plan to reallocate tasks and responsibilities to other locations or
personnel to ensure continuity of operations.
Training and Cross-Training: Train employees at alternate locations or in different departments to
handle the critical tasks of the affected location.
Communication Plan:

Internal Communication: Establish a clear communication plan for informing employees about the
disruption and the activation of the BCP.
External Communication: Develop a strategy for communicating with customers, suppliers, and
stakeholders to keep them informed and manage expectations.
Emergency Contacts: Maintain an up-to-date list of emergency contacts and ensure all employees are
aware of whom to contact in case of a disruption.

Testing and Drills:

Periodically Testing: Conduct periodically tests of the BCP to ensure its effectiveness and identify
any weaknesses. These can include simulation exercises, tabletop exercises, and full-scale drills.

Scenario-Based Drills: Implement scenario-based drills that simulate various types of disruptions to
test the robustness of the plan and the readiness of personnel.
Evaluation and Improvement: After each test, evaluate the results, identify areas for improvement,
and update the BCP accordingly.

Documentation and Reporting:

Comprehensive Documentation: Maintain thorough documentation of the BCP, including all plans,
procedures, roles, and responsibilities.
Reporting Mechanism: Establish a reporting mechanism to document the outcomes of tests and real
incidents, ensuring lessons learned are captured and applied.
Plan Activation and Execution:

Activation Criteria: Define the specific criteria and procedures for activating the BCP, ensuring
clear decision-making processes.
Execution: When a disruption occurs, promptly activate the BCP, reallocate tasks, and deploy
resources according to the pre-defined recovery strategies.
Monitoring and Adjustment: Continuously monitor the situation and make necessary adjustments to
the plan to address evolving conditions.
Post-Incident Review and Recovery:

Post-Incident Analysis: Conduct a thorough review after the incident to evaluate the effectiveness
of the BCP and identify any gaps or issues.
Recovery and Restoration: Focus on restoring normal operations as quickly as possible, ensuring all
critical functions are back to their regular status.

Continuous Improvement: Use the insights gained from the post-incident review to improve the
BCP, enhancing resilience against future disruptions.
Implementation and Maintenance

Ongoing Training: Provide continuous training for employees on their roles and responsibilities
within the BCP, ensuring they are prepared to act when needed.
Plan Review and Update: Regularly review and update the BCP to reflect changes in the business
environment, organizational structure, and emerging threats.
Stakeholder Engagement: Engage with stakeholders regularly to ensure their needs and concerns are
addressed in the BCP, maintaining trust and confidence in the company’s resilience.
The Business Continuity Process is an essential framework that ensures a company can withstand and
quickly recover from disruptions, maintaining critical operations and safeguarding its long-term
viability and reputation.
 FINANCIAL REPORTING

● Financial Statements:
Fund accountants prepare financial statements that provide a snapshot of the fund's
financial position, performance, and cash flows. The main financial statements include
the balance sheet, income statement, and statement of changes in net assets.
● Net Asset Value (NAV) Reporting:
NAV reporting is a key component of financial reporting for funds. Fund accountants
calculate the NAV regularly, typically daily for open-end funds, and provide this
information to investors. NAV reporting reflects the value of the fund's assets minus
liabilities per share.
● Investor Statements:
Fund accountants generate investor statements that detail each investor's holdings,
transactions, income distributions, and other relevant information. These statements are
typically provided on a periodic basis, such as monthly or quarterly.
● Regulatory Reporting:
Funds are subject to regulatory reporting requirements imposed by regulatory authorities
such as the Securities and Exchange Commission (SEC) in the United States or the
Financial Conduct Authority (FCA) in the United Kingdom. Fundaccountants ensure
compliance with these regulations by preparing and submitting required reports and
filings.
● Management Reporting:
Fund accountants also prepare financial reports for internal use by fund management and
other stakeholders. These reports may include performance analysis, variance analysis,
and other management-focused information to support decision-making and strategic
planning.
● Audit Support:
Fund accountants collaborate with auditors during the audit process by providing
documentation, explanations, and support as needed. Audit reports provide independent
assurance on the accuracy and fairness of the fund's financial statements
 GOVERNANCE TRACKER

Key Performance Indicator (KPI):- KPI is a measurable value that demonstrates how
effectively a company or an individual is achieving key business objectives. Organizations use KPIs
at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the
overall performance of the Business.
While low level KPIs focus on processes in departments such as sales, marketing, HR, support, and
others.

KPI Metrics:-
Is based on two factors are:-
 Timeliness
 Accuracy
KPI of department indicates by RAG Rating (RED, AMBER, GREEN)

Timliness

Internal External

It also consider that we completed our It includes that because of other team didn’t
time and signoff to other team before signoff before their SLA you missed your SLA,
at that time also it will affect but it won’t affect
SLA (Deadline) each and every day. your KPI.

Accuracy: - It measures how many times a team complete and signoff the their task without
error. There are threshold limit is set which decide KPI comes under which rating.
RAG rating: - RED refers to team constantly doing errors which is above threshold and affect NAV.
AMBER refers to team
Green refers to that team is not committing errors which is above threshold.
 GOVERNANCE TRACKER

Key Risk Indicator (KRI) :- On the other hand, is a metric used to measure how risky an
activity is, KRIs are used by organizations to provide an early signal of increasing risk exposures in
various areas of the enterprise. Unlike KPIs, which measures a performance, KRIs are indicators of
the possibility of future adverse impact.

KRI Metrics are :-

Attrition: Attrition as a key risk indicator reflects the rate at which employees leave a
company, highlighting potential issues with morale, engagement, or workplace conditions,
which can impact operational continuity, productivity, and long-term organizational stability.
Attrition of our company also measured by RAG matrics.

• Priority System check like system which contains data of companies transaction so to
check either it is running smoothly or there is any chance of risk of error.
• If Business Continuity Process tests fails then it will also come under KRI.
• Any error which is more than threshold limit not resolved before SLA (Deadline) that will
also comes under KRI.
• If KPI is less than KPI limit then it also include in KRI.
 SWING PRICING:

Swing pricing is a mechanism used by mutual funds to adjust their net asset value (NAV) per share
to account for the impact of significant flows of money into or out of the fund. It's designed to
protect existing investors from the dilution effects caused by large redemptions or subscriptions.

Here's how swing pricing typically works:

Threshold: Funds set a threshold that triggers swing pricing. This threshold is often based on a
percentage of the fund's net asset value or a certain amount of inflows or outflows.

Calculation: When the net inflows or outflows exceed the predetermined threshold, the fund
adjusts its NAV per share. For example, if there are significant net outflows, the NAV per share
may be adjusted downward. Conversely, if there are significant net inflows, the NAV per share may
be adjusted upward.

Adjustment Amount: The amount of the adjustment is typically calculated based on the costs
associated with the inflows or outflows. These costs may include transaction costs, market impact
costs, and any other expenses incurred by the fund as a result of the large flows. The amount by
which the NAV is adjusted (Swing co-efficient) will vary depending on the type of fund.

Application: The adjusted NAV per share is then applied to all transactions, including purchases,
redemptions, and transfers, on the day the swing pricing is triggered.

Swing pricing aims to ensure that the costs associated with large flows of money into or out of the
fund are borne by the investors responsible for those flows, rather than by the existing investors
who remain in the fund. This helps to mitigate the risk of dilution for existing investors and
promotes fairness within the fund.

However, it's essential to note that swing pricing may not be employed by all mutual funds, and its
application can vary depending on the fund's strategy, jurisdiction, and regulatory environment.
Additionally, swing pricing mechanisms may have limitations and may not always fully offset the
impact of large flows on the fund's NAV per share. Investors should carefully review a fund's
prospectus and other relevant documents to understand how swing pricing may affect their
investments.
 UI PATH – ROBOTIC PROCESS AUTOMATION

UI Path is a leading Robotic Process Automation (RPA) software platform that enables businesses to
automate repetitive tasks, streamline workflows, and increase operational efficiency. Here's a detailed
description of UI Path:

RPA Technology: UI Path harnesses the power of RPA, a technology that uses software robots or
"bots" to automate rule-based tasks typically performed by humans. These tasks can include data
entry, data extraction, form filling, data migration, and other repetitive processes across multiple
applications, systems, and databases.

Visual Designer: UI Path provides a user-friendly visual designer, often referred to as Studio, where
users can create automation workflows without the need for coding skills. The interface uses drag-
and-drop functionality, allowing users to easily design and configure automation processes by
arranging pre-built activities and components.

Activities: UI Path offers a wide range of pre-built activities or actions that represent specific tasks
or interactions with applications and systems. These activities can be combined and configured to
create complex automation workflows tailored to the specific needs of businesses and organizations.

Robots: UI Path robots execute automation workflows created in Studio. These robots can be
deployed on various environments, including desktops, virtual machines, and servers, to perform
tasks autonomously or under the supervision of human operators.

Orchestrator: UI Path Orchestrator is a web-based platform that provides centralized management,

monitoring, and control of automation processes and robots. Orchestrator allows users to schedule,
deploy, and manage robots, monitor their performance and health, and track the execution of
automation workflows in real-time.

Integration: UI Path integrates seamlessly with a wide range of applications, systems, and
technologies, including desktop applications, web applications, databases, APIs, and more. This
allows organizations to automate end-to-end processes that span multiple systems and departments.

Scalability and Governance: UI Path offers scalability and governance features that enable
organizations to scale their automation initiatives across departments, business units, and geographies
while maintaining control, compliance, and security. These features include role-based access control,
audit trails, version control, and enterprise-grade security.
Community and Ecosystem: UI Path has a vibrant community of developers, partners, and users
who contribute to the ecosystem by sharing knowledge, best practices, and reusable components
through forums, online communities, and marketplaces. This community-driven approach fosters
innovation, collaboration, and continuous improvement in RPA.

Overall, UI Path empowers businesses to accelerate digital transformation, improve productivity,

reduce costs, and enhance the customer and employee experience through intelligent automation
solutions. With its intuitive design, robust features, and extensive ecosystem, UI Path continues to be
a leading choice for organizations seeking to harness the power of RPA
 LEARNINGS

During my internship, I focused on several key areas to enhance my understanding and skills in fund
accounting within the mutual fund industry. Below are the detailed learnings and insights I gained:

Fundamental Principles and Methodologies of Fund Accounting:

Grasped the foundational concepts of fund accounting, which is crucial for accurately recording and
managing the financial activities of mutual funds.
Studied various methodologies used in fund accounting to ensure precise tracking of investments,
expenses, and income.

Operational Structure and Processes:

Learned about the operational structure of fund accounting, including the roles and responsibilities of
different teams.
Explored the processes involved in managing a diverse range of client portfolios, ensuring
compliance with regulatory standards and client requirements.

Key Stages, Components, and Outcomes:

Analyzed the key stages of fund accounting procedures, from initial setup to ongoing management
and reporting.
Identified the critical components involved, such as transaction processing, reconciliation, and
financial statement preparation.
Evaluated the outcomes of fund accounting processes, emphasizing accuracy, transparency, and
timely reporting.

Workflow Diagrams:
Assessed the effectiveness of detailed workflow diagrams in illustrating the complex workflows of
fund accounting.
Recognized how visual aids can simplify understanding and improve the efficiency of accounting
processes.

Standard Operating Procedures (SOPs):

Appreciated the importance of implementing SOPs to streamline fund accounting operations.
Studied how SOPs ensure consistency, reduce errors, and enhance compliance with regulatory
requirements.

Collaboration with Points of Contact (POCs):

Collaborated with designated POCs to gather comprehensive requirements for an exhaustive audit
governance tracker.
Understood the significance of clear communication and collaboration in achieving accurate and
complete audit documentation.

Development of Governance Tracker:

Gained proficiency in developing a governance tracker, which includes specifying documents, update
frequencies, platform utilization, and approval protocols.
Ensured that the tracker is overseen by Senior Vice Presidents (SVPs) to maintain high standards of
governance and accountability.
 FINDINGS & CONCLUSION

My internship has provided me with a deep and comprehensive understanding of fund accounting
within the mutual fund industry. Through this experience, I have acquired essential knowledge and
skills that are crucial for managing the financial activities of mutual funds accurately and efficiently.

I have mastered the foundational principles and methodologies of fund accounting, enabling precise
tracking of investments, expenses, and income. My understanding of the operational structure and
processes involved in managing diverse client portfolios has been significantly enhanced, ensuring
compliance with regulatory standards and client requirements.

By analyzing the key stages, components, and outcomes of fund accounting procedures, I have gained
insight into the critical aspects of transaction processing, reconciliation, and financial statement
preparation. The use of detailed workflow diagrams has proven effective in simplifying complex
processes and improving efficiency.

The importance of Standard Operating Procedures (SOPs) in streamlining operations, ensuring

consistency, and enhancing compliance has been underscored throughout my learning. Additionally,
my collaboration with Points of Contact (POCs) has highlighted the value of clear communication
and teamwork in gathering comprehensive requirements for audit governance.

Developing a governance tracker under the oversight of Senior Vice Presidents (SVPs) has equipped
me with the proficiency to maintain high standards of governance and accountability. Documenting
my insights into fund accounting principles and the nuances of Net Asset Value (NAV) calculations
has further solidified my role in mutual fund administration.

Overall, this internship has equipped me with the practical experience and theoretical knowledge
necessary to contribute effectively to the mutual fund industry, ensuring accuracy, transparency, and
compliance in fund accounting operations.
CERTIFICATIONS
 REFERENCES

https://www.bnymellon.com/apac/en.html
https://en.wikipedia.org/wiki/Fund_accounting
https://www.wallstreetmojo.com/fund-accounting/