Role of Trustee in Mutual Fund

A Mutual Fund is considered an investment tool consisting of a variety of financial instruments such as stocks, bonds, and other securities. To ensure the protection of the investor’s interest, the sponsor or the trust appointed trustees.

These trustees have the administrative power to manage money, property, or any asset or security. The trustee may be an individual, or a member of the board of directors, a company, or a bank appointed under the regulations of SECP.

4 Role of Trustee in Mutual Fund

The Four most crucial parts played by a Trustee in mutual funds are as follows:

1. Safeguarding Assets:

The primary duty of the trustee is to safeguard the assets of an individual’s interest. For the benefit of investors, the trustees oversee the activities of AMC ensuring the safety of stocks, bonds, or other securities. They also work jointly with global custodian banks to protect investor’s property or any assets from potential risks or mismanagement.

The trustees are required to have a track record of all the transactions and asset distribution. They must communicate with the beneficiaries through mail or contact to ensure the grantor’s wish for trust and questions to be answered.

2. Monitoring Investment Management:

A trustee needs to manage and monitor the fund’s investment. Because it shows how they are performing as well as giving them the right direction to move on from time to time to achieve the financial goals of a trust. The investment committee acts as a tool for monitoring the process for the trustee.

Even though asset management is done by investment managers, the trustee must understand the portfolio. They must know the asset value and geographic region from where the trust is exposed and also the liquidity of the asset should be analysed.

Trustees must review the asset quarterly. If there is any specific reason for frequent review due to market shifts, they must do so without fail. If the trustee is not satisfied with the review of the investment manager which does not align with the objectives and rules of trust then they go for an alternative investment manager. 

3. Protecting Investor Interests:

The trustees play a vital role in preserving the interests of investors. As a protector, the trustee is responsible for ensuring that the terms and regulations are followed rightly for the benefit of the investors. 

Understanding call provisions is pivotal because it explains the contractual agreement by which the issuer of the security reclaims it before the maturity date. This must be advantageous to the issuer because they reinvest the funds at a lower rate.

The important key factor to protect the best interest of the investors lies in the independence of the trustee. This allows the trustee to act solely without affecting their decision making which must not be influenced by the issuer or other parties.

Asset management companies are said to provide the necessary reports and analytical information that help trustees carry out their core responsibilities. Currently, SEBI said that it may increase the required number of trustees from the current number of four to provide valuable services for investors. 

4. Compliance and Governance:

The trustees are provided with the supervision power and direction over AMCs. They must monitor the process and procedures to comply with the law by SEBI in the mutual funds. SEBI oversees all mutual funds in India. This market regulator strictly followed rules and regulations to safeguard the interest of an investor.

SEBI has established the roles and responsibilities for the trustees and the board of directors of asset management companies. These include there should be transparency in fees and expenses charged by AMC. Frequent review of AMC’s performance to avoid mis-selling poor asset management.

These responsibilities empower trustees to act wisely to safeguard beneficiaries interests and ensure ethical practices within the mutual fund industry. 


A trustee is someone who was granted the power to administrate AMCs in mutual funds to protect the investor’s interest. Their part is more important for the effective functioning of mutual funds. They are also trusted to make decisions according to the beneficiary’s best interest.

The trustee must obey the instructions of the grantor. The three main duties of the trustees are to administer the trust based on the instructions given by the grantor, be loyal to the beneficiaries, and deal with investors impartially. 

There is no space for the influence of others while dealing with beneficiaries’ interests. The ultimate aim of the trust is obtained only by the loyal trustee.


  • Who are the beneficiaries of the trust in mutual funds?

    The investors who invest in mutual funds are considered the beneficiaries of the trust in mutual funds.

  • What is the role of the trustees in mutual funds?

    The Board of Trustees or a trustee company that holds the property of the mutual fund in trust for the benefit of the Investors. The trustees appoint AMC’s – Asset Management Company to process the various schemes and manage investments.

  • How do trustees in mutual funds protect investor’s investments?

    The trustees ensure that the funds are managed in the interests of the shareholders. While they are not getting the day-to-day movement of the investment management, then they provide checkpoints and guidelines to confirm that the small investor’s interests are protected.

  • How do mutual funds provide safety to investors?

    The ideal aim of mutual funds is to transparently disclose the portfolio holdings and performance of investments. They are also cost effective due to their low investment and maintenance charge. Its high liquidity nature enables every individual to buy or sell units without any inconvenience.

  • Which is more safe stocks or mutual funds?

    While compared to stocks, mutual funds are considered low-risk and more safe to invest.