Portfolio Management Services in Mutual Funds

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A detailed study Portfolio Management services in Mutual Funds which give special emphasis on creation of Portfolio’s as different types of Investors, Portfolio Revision as per various plans, Calculation of returns and Comparison of Mutual Funds with various Performance measure

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Portfolio Management Services in Mutual Funds

  1. 1. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS SUMMER PROJECT REPORT PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS Prepared for the Mumbai University in the partial fulfillment of the requirement for the award of the degree in MASTERS OF MANAGEMENT STUDIES Submitted By: Name: BINU PAUL VILLAN Roll No.: 68 Year: 2012 Under the guidance of DR. S. P. DAS SFIMAR St Francis Institute of Management and Research, Mt. Poinsur, S.V.P Road, Borivali (W) Mumbai. Batch 2011-2013St. Francis Institute of Management and Research Page 1
  2. 2. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS DECLARATIONI hereby declare that the following project report titled "Portfolio ManagementServices in Mutual Funds" is an authentic work done by me.This is to declare that all the work indulged in the completion of this work such asresearch, data collection, analysis is a profound and honest work of mine.Binu Paul Villan Dr. S. P DasStudent Project GuideDate:Place: MumbaiSt. Francis Institute of Management and Research Page 2
  3. 3. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS ACKNOWLEDGEMENT This project bears imprint of all those who have directly or indirectly helped and extended their kind support in completing this project. I would like to express my sincere gratitude to Mr. Sanjay Tari and Ms. Swapnila Shet, Director at Acensure Financial Solutions Pvt. Ltd for giving me this opportunity to undergo this lucrative project and for their encouraging and kind support throughout the project. I am extremely thankful and obliged to Dr. S. P. Das (Project Guide) for practical tips, encouragement to take on challenging assignments and constant guidance since inception, till the completion of the project. I would also thank Acensure Financial Solutions Pvt. Ltd employees and customers, whom I met during the course of this project, for their support and for providing valuable information, which helped me, complete this project successfully. This project report is a collective effort of all and I sincerely remember and acknowledge all of them for their excellent help and assistance throughout the project. BINU PAUL VILLANSt. Francis Institute of Management and Research Page 3
  4. 4. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS EXECUTIVE SUMMARY Investing money where the risk is less has always been risky to decide. The first factor, which an investor would like to see before investing, is risk factor. Diversification of risk gave birth to the phenomenon called Mutual Fund. The Mutual Fund Industry is in the growing stage in India, which is evident from the flood of mutual funds offered by the Banks, Financial Institutes & Private Financial Companies. As a part of my study curriculum it is necessary to conduct a grand project. It provides me an opportunity to understand the particular topic in depth and which leads to that topic. My Project topic is Portfolio Management services in Mutual Funds which give special emphasis on creation of Portfolio’s, Portfolio revision and Comparison of Mutual Funds with various Performance measures. In Portfolio Management it is very important to manage investor’s portfolio efficiently. By efficient we mean which reduces the risk of investor and increases return on the other hand. This project is all about how to manage an Investor’s portfolio in mutual fund. How to diversify the investments into different schemes of funds My First Phases covers mutual fund industry, current economic condition of the economy, brief introduction to portfolio Management services, investor’s behavior and types, their objective, risk appetite. My Second Phase covers creation of Portfolio’s as per different type of Investor, Portfolio revision and Comparison of Mutual Funds with various Performance measures.St. Francis Institute of Management and Research Page 4
  5. 5. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS TABLE OF CONTENTSSR. NO PARTICULARS PAGE NO 1 Introduction to Acensure Financial Solutions Pvt. Ltd 1 1.1 Organization chart 2 1.2 Products & Services 3 2 Need for the study 5 3 Objectives of the study 6 4 Research methodology 7 4.1 Research Design 7 4.2 Data collection method 7 4.3 Sample design 7 4.4 Null Hypothesis 7 5 5.1 Introduction to Mutual Funds 8 5.2 History of Mutual Funds 9 5.3 Organization of mutual funds 11 5.4 Types of Mutual funds 11 5.5 Fund Management 13 6 Introduction to Portfolio Management Services 14 6.1 Phases of Portfolio Management 14 6.2 Types of Portfolio Management 16 6.3 Managing Portfolio 17 6.4 Investor Types 18 6.5 SEBI Guidelines for PMS 20 7 Data Analysis 21 7.1 Interpretation 24 8 Portfolio creation 25 8.1 Aggressive Portfolio 25 8.2 Conservative Portfolio 26 8.3 Balanced Portfolio 27 9 Portfolio revision 28 9.1 Constant Rupee Plan 29 9.2 Constant Ratio Plan 35 9.3 Variable Plan 40 9.4 Calculation of returns 46 10 Mutual fund comparison & Rankings 47 11 Limitations & Future Scope 56 12 Findings & Suggestions 57 13 My Learning 58 14 Conclusion 59 15 References 60St. Francis Institute of Management and Research Page 5
  6. 6. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS LIST OF TABLESSR. NO PARTICULARS PAGE NO 1 Aggressive Investor Portfolio 25 2 Conservative Investor Portfolio 26 3 Balanced Investor Portfolio 27 4 Portfolio Revision As Per Constant Rupee Plan 29 4.1 Portfolio as on May 2nd 2012 29 4.2 Revised Portfolio as on May 15th 2012 30 4.3 Revised Portfolio as on May 31th 2012 31 4.4 Revised Portfolio as on June 15th 2012 32 4.5 Portfolio as on June 29th 2012 34 4.6 Calculation of returns as per Constant rupee plan 34 5 Portfolio revision as per Constant ratio plan 35 5.1 Portfolio as on 2nd May 2012 35 5.2 Revised Portfolio as on may 15th 2012 36 5.3 Revised Portfolio as on May 31st 2012 37 5.4 Revised Portfolio as on June 15th 2012 38 5.5 Portfolio as on June 29th 2012 39 5.6 Calculation of Returns as Per Constant Ratio Plan 39 6 Portfolio Revision as per Variable plan 40 6.1 Portfolio as on 2nd May 2012 40 6.2 Revised Portfolio as on May 15th 2012 41 6.3 Revised Portfolio as on May 31th 2012 42 6.4 Revised Portfolio as on June 15th 2012 43 6.5 Portfolio as on June 29th 2012 45 6. 6.6 Calculation of returns as per Variable plan 45 7 Calculation of Portfolio Returns 46 8 Sharpe ratio 52 9 Treynor ratio 53 10 Standard Deviation 54 11 Rankings as per Sharpe ratio & Treynor Ratio 55 12 Rankings as per Standard deviation 55St. Francis Institute of Management and Research Page 6
  7. 7. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS LIST OF FIGURESSR. NO PARTICULARS PAGE NO 1 Corporate Logo 1 1.1 Information on department 2 1.2 Products &services 3 2 Mutual fund 8 2.1 History of mutual fund 10 2.2 Organization of a Mutual fund 11 2.3 Types of mutual funds 11 2.4 Types of Portfolio Management 16 3 3.1 Aggressive Investor Portfolio 19 3.2 Conservative Investor Portfolio 19 3.3 Balanced Investor Portfolio 19 4 4.1 Demographics 21 4.2 Age group 21 4.3 Monthly income 22 4.4 Expected liquidation period 22 4.5 Expected return 22 4.6 Decrease in Portfolio 23 4.7 Portfolio Allocation 23 4.8 Capital or Return preference 23 5 5.1 HDFC Top 200 return Performance 50 5.2 ICICI Prudential Focused Bluechip Equity Fund Return 50 5.3 DSP Blackrock Small and Midcap Fund Return 50 5.4 Franklin India Bluechip Return 51 5.5 Reliance Banking Fund Return 51St. Francis Institute of Management and Research Page 7
  8. 8. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 1. COMPANY PROFILE Fig 1: Company Logo Acensure is an integrated financial services group offering a wide range of services to a significant clientele that includes Corporate, HNI’s and Retail Investors. We have grown since inception and still growing in the financial field and the minds of our clients. The value of integrity, team work, innovation, performance and partnership shape our vision and drive us to our purpose. We are steadily but surely ascending the finance market. AFFILIATIONS: LIC the No.1 Life Insurer of India. United India one of the topmost in Non-life Insurance Sector iFAST financial Singapore’s No.1 Integrated Wealth Management platform Karvy Stock Broking Ltd. – the No.1 Broking firm in India Disha Direct – The Pioneers in the Second Home Segments Apollo Munich – the topmost in Health Insurance Sector Star health - the topmost in Health Insurance Sector Bajaj Allianz – No.1 In Motor Insurance SectorSt. Francis Institute of Management and Research Page 8
  9. 9. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 1.1 ORGANIZATION CHART ACENSURE FINANCIAL SOLUTIONS PVT. LTD Administration Marketing Backoffice Dept Dept They pass the entry They bring new clients Looks after the regarding collection of for the company and accounts of the clients premium. and also conduct customer and checks the account update the clients Relationship database. Management activity Fig 1.1: information on department Credentials In Different Hues Member Million Dollar Round Table (MDRT)– USA (Since last 5 years) Member Chairman’s Club(CM) of LIC (since last 6 years) Member Chartered Insurance Institute (CII)-UK(Since last 5 years) Member Indian Financial Planners Association(IFPA)—Life MemberSt. Francis Institute of Management and Research Page 9
  10. 10. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 1.2 PRODUCT & SERVICES Life Insurance Solutions Mutual Funds Fig 1.2 Products &services Advisors For All The Below Mentioned Products Investment and Advisory servicesSt. Francis Institute of Management and Research Page 10
  11. 11. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS Non-Life Insurance Products Specialised Services for NRI’s Thorough Market Research Support to clients IPO’s, Bonds, Company FD’s Real Estate (1st Homes, 2nd Homes, Plots etc) Loans (Home, Personal, Project etc….) Holiday homes and Recreation Resorts Share Trading and Broking Projected Goals: Making Acensure into Rs.5000 crores Group by 2020. Setting up of 100+ offices. Acquiring Corporate Broking License. Investing in Real Estate in the form of Second Homes, Resorts And Holiday Homes. And Creating an Earning Platform Contact Details Acensure Financial Solution Pvt Ltd Mr. Sanjay Tari No. 2, Sheetal Apartment, Kulupwadi, Borivali,( East) Telephone +(91)-(22)-65350012 Mobile +(91)9821788989, 9870766657 Fax No +(91)-(22)-28846086 Website www.acensurefinance.comSt. Francis Institute of Management and Research Page 11
  12. 12. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 2. NEED FOR THE STUDY Portfolio management services is becoming a rapidly growing area serving a broad array of investors both individual and institutional-with investment portfolios ranging in asset size from thousands to cores of rupees. Increased market volatility- risk and return parameters of financial assets are continuously changing so your assets in the portfolio should be properly managed. Portfolio’s created by portfolio manager should be as per investor’s behavior and their objective, risk appetite. Portfolio creation is important and it should be as per investor class otherwise it would not fulfill its financial needs Portfolio revision is another vital aspect in an investor’s Portfolio because continuous revision is needed to gain higher returns with manageable risk. Acensure Financial Solutions Pvt. Ltd. is mainly into insurance and has started mutual funds and has a tie up with IFAST Financial for PMS in mutual funds. CRM activity was conducted in order to know the customer perception about Portfolio management Service. Therefore a Detailed study on Portfolio management services in mutual funds specially focusing on portfolio creation of different types of investor on the basis of risk, Portfolio revision and mutual fund comparison.St. Francis Institute of Management and Research Page 12
  13. 13. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 3. OBJECTIVES OF THE STUDY Primary objectives  The main objective of this study is doing an In-depth analysis of Mutual Fund Portfolio by taking sample of funds and comparing it with it others Secondary objectives  To understand the concept of portfolio management and its relation to Mutual funds.  To evaluate and create a portfolio’s consisting the best mutual fund schemes which will earn highest possible returns and will minimize the risk.  To understand the process Portfolio revision using different types of plans  Also to analyze the performance of mutual fund schemes on the basis of various parameters.St. Francis Institute of Management and Research Page 13
  14. 14. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 4. RESEARCH METHODOLOGY 4.1 RESEARCH DESIGN Exploratory Research & Analytical Research Quantitative research 4.2 DATA COLLECTION METHOD Primary data: The study was conducted through a Survey and involved, interviewing different age group of people through the Survey, falling under three distinct Age – Brackets, being: 22- 35 35 – 50 Above 50 The information gives us an overall understanding of the respondent’s investment profile and helps us to understand what investment mix and which mutual fund will be appropriate, or inappropriate, in helping to achieve his financial goals. Secondary data: For data collection purpose the secondary source was used like mutual fund factsheet, books, websites This data was used To Create Portfolio’s as per Investor type, Portfolio revision and comparison of mutual funds schemes 1.3 SAMPLE DESIGN Sample Size: 100 Samples Type of sample: Convenience sampling The sample size consist of clients of Acensure  customers taken Insurance policy and mutual funds  customers having PMS a/c 4.4 NULL HYPOTHESIS  Passive Management gives more return compared to Active Management.  Passive Management has better approach compared to Active ManagementSt. Francis Institute of Management and Research Page 14
  15. 15. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 5.1 INTRODUCTION TO MUTUAL FUND A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. Fig 2 Mutual fundSt. Francis Institute of Management and Research Page 15
  16. 16. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 5.1 HISTORY OF MUTUAL FUNDS The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases First Phase – 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management. Second Phase – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores. Third Phase – 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. TheSt. Francis Institute of Management and Research Page 16
  17. 17. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds. Fourth Phase – since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. The graph indicates the growth of assets over the years. Fig 2.1 History of mutual fundSt. Francis Institute of Management and Research Page 17
  18. 18. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 5.2 ORGANIZATION OF A MUTUAL FUND Fig 2.2 Organization structure 5.3 TYPES OF MUTUAL FUNDS Types of Mutual Fund By Investment By Structure Objective Open ended Close ended Equity Interval Debt Balanced Money MarketSchemes Fig 2.3 TypesSt. Francis Institute of Management and Research Page 18
  19. 19. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS1. Equity fund:These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund manager’s outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows: Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk- return matrix.2. Debt funds:. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as: Gilt Funds Income Funds MIP. Short Term Plans (STP) Liquid Funds: 3. Balanced funds:They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.Further the mutual funds can be broadly classified on the basis of investment parameter viz, By investment objective: Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).St. Francis Institute of Management and Research Page 19
  20. 20. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS  Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Other schemes  Tax Saving Schemes:  Index Schemes:  Sector Specific Schemes 5.4 FUND MANAGEMENT Actively managed funds: Mutual Fund managers are professionals. They are considered professionals because of their knowledge and experience. Managers are hired to actively manage mutual fund portfolios. Instead of seeking to track market performance, active fund management tries to beat it. To do this, fund managers "actively" buy and sell individual securities. For an actively managed fund, the corresponding index can be used as a performance benchmark. Actively managed fund styles: Fund styles usually fall within the following three categories. Fund Styles: Value: The manager invests in stocks believed to be currently undervalued by the market. Growth: The manager selects stocks they believe have a strong potential for beating the market. Blend: The manager looks for a combination of both growth and value stocks. Passively Managed Funds: Passively managed mutual funds are an easily understood, relatively safe approach to investing in broad segments of the market. They are used by less experienced investors as well as sophisticated institutional investors with large portfolios. St. Francis Institute of Management and Research Page 20
  21. 21. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 6 PORTFOLIO MANAGEMENT SERVICES What is Portfolio Management? Portfolio Management Services, called, as PMS are the advisory services provided by corporate financial intermediaries. It enables investors to promote and protect their investments that help them to generate higher returns. It devotes sufficient time in reshuffling the investments on hand in line with the changing dynamics. It provides the skill and expertise to steer through these complex, volatile and dynamic times. It is a choice of selecting and revising spectrum of securities to it with the characteristics of an investor. It prevents holding of stocks of depreciating- value. It acts as a financial intermediary and is subject to regulatory control of SEBI. 6.1 PHASES OF PORTFOLIO MANAGEMENT  Security Analysis  Portfolio Analysis  Portfolio Selection  Portfolio Revision  Portfolio Evaluation  Security Analysis (a) Fundamental analysis: This analysis concentrates on the fundamental factors Affecting the company such as EPS (Earning per share) of the company, the dividend Payout ratio, competition faced by the company, market share, quality of management Etc. (b) Technical analysis: The past movement in the prices of shares is studied to identify trends and patterns and then tries to predict the future price movement. Current market price is compared with the future predicted price to determine the mispricing. Technical analysis concentrates on price movements and ignores the fundamentals of the shares. (c) Efficient market hypothesis: This is comparatively more recent approach. This approach holds that market prices instantaneously and fully reflect all relevant available information. It means that the market prices will always be equal to the Intrinsic value.  Portfolio Analysis A portfolio is a group of securities held together as investment. It is an attempt toSt. Francis Institute of Management and Research Page 21
  22. 22. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS spread the risk all over. The return & risk of each portfolio has to be calculated Mathematically and expressed quantitatively. Portfolio analysis phase of portfolio Management consists of identifying the range of possible portfolios that can be constituted from a given set of securities and calculating their risk for further analysis.  Portfolio Selection The goal of portfolio construction is to generate a portfolio that provides the highest returns at a given level of risk. Harry Markowitzh portfolio theory provides both the conceptual framework and the analytical tools for determining the optimal portfolio in a disciplined and objective way.  Portfolio Revision The investor/portfolio manager has to constantly monitor the portfolio to ensure that it continues to be optimal. As the economy and financial markets are highly volatile dynamic changes take place almost daily. As time passes securities which were once attractive may cease to be so. New securities with anticipation of high returns and low risk may emerge.  Portfolio Evaluation Portfolio evaluation is the process, which is concerned with assessing theperformance of the portfolio over a selected period of time in terms of return & risk. The evaluation provides the necessary feedback for better designing of portfolio the next time around.St. Francis Institute of Management and Research Page 22
  23. 23. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 6.2 TYPES OF PORTFOLIO MANAGEMENT Types of Portfolio Management Discretionary portfolio Non-discretionary management services portfolio management services Fig: 2.4 Types The Discretionary portfolio management services (DPMS): In this type of services, the client parts with his money in favor of manager, who in return, handles all the paper work, makes all the decisions and gives a good return on the investment and for this he charges a certain fees The Non-discretionary portfolio management services: The manager function as a counselor, but the investor is free to accept or reject the manager’s advice; the manager for a services charge also undertakes the paper work. The manager concentrates on stock market instruments with a portfolio tailor made to the risk taking ability of the investorSt. Francis Institute of Management and Research Page 23
  24. 24. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 6.3 MANAGING PORTFOLIO ASSET ALLOCATION The process of dividing a portfolio among major asset categories such as bonds, stocks or cash. The purpose of asset allocation is to reduce risk by diversifying the portfolio. The ideal asset allocation differs based on the risk tolerance of the investor. To help determine which securities, asset classes and subclasses are optimal for your portfolio; lets define some briefly: Large-cap stock -These are shares issued by large companies with a market capitalization generally greater than $10 billion. Mid-cap stock - These are issued by mid-sized companies with a market cap generally between $2 billion and $10 billion. Small-cap stocks – These represent smaller-sized companies with a market cap of less than $2 billion. These types of equities tend to have the highest risk due to lower liquidity. International securities These types of assets are issued by foreign companies and listed on a foreign exchange. International securities allow an investor to diversify outside of his or her country, but they also have exposure to country risk - the risk that a country will not be able to honor its financial commitments. Emerging markets – This category represents securities from the financial markets of a developing country. Although investments in emerging markets offer a higher potential return, there is also higher risk, often due to political instability, country risk and lower liquidity. Money market - Money market securities are debt securities that are extremely liquid investments with maturities of less than one year. Treasury bills make up the majority of these types of securities. Real-estate investment trusts (REITs) REITs trade similarly to equities, except the underlying asset is a share of a pool of mortgages or properties, rather than ownership of a companySt. Francis Institute of Management and Research Page 24
  25. 25. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 6.4 INVESTOR TYPES Low High Risk There are many different types of investors in the stock market, investors can be classified into the following types: Aggressive, Conservative, and Balanced Aggressive Investor Aggressive investors tend to concentrate on equity investments such as individual stocks and mutual funds. They are open to more risk, willing to see large short term swings in market performance on an annualized basis. They aim for large growth in the market. Balanced investors Balanced investors will have a time horizon of 5 to 10 years and choose to diversify across both aggressive growth-oriented investments and more conservative interest-earning investments. They emphasize income over growth. Balanced investors are medium risk investors. Conservative Investor Conservative investors have a 2 to 5 year time horizon, typically because they are nearing retirement or have a short-term need for their investment. They prefer a higher level of income than does the stable investor. Conservative investors are low to medium risk investors.St. Francis Institute of Management and Research Page 25
  26. 26. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS Conservative Portfolio 10% 20% Fixed Income Securities Equities 70% Cash and equivalents Fig 3.1: Conservative Portfolio Aggressive Portfolio 5% 15% Fixed Income Securities Equities 80% Cash and equivalents Fig 3.2 Aggressive portfolio Balanced Portfolio 10% 35% 55% Fixed Income Securities Equities Cash and equivalents Fig3.3: Balanced portfolioSt. Francis Institute of Management and Research Page 26
  27. 27. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 6.6 SEBI GUIDELINE FOR PMS For investment in listed securities, an investor is required to open a Demat account in his/her own name Minimum investment amount of clients for such schemes to Rs 25 lakh from the earlier Rs 5 lakh. Portfolio manager will not be allowed to hold the unlisted securities, besides the listed securities, belonging to the portfolio account, in its own name on behalf of its clients. Portfolio manager cannot offer/ promise indicative or guaranteed returns to clients. The portfolio manager is required to have a minimum net worth of Rs. 2 crore.St. Francis Institute of Management and Research Page 27
  28. 28. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 7 DATA ANALYSIS The data collected through the Profiler provided for an Analysis of an Individual’s Risk – takingcapacity through the Risk – Analyzer. The Questionnaire, after being administered on theRespondents categorizes each of them on the basis of their risk – taking, as Investors of thefollowing classes: Conservative, Balanced, and Aggressive1. Demographic Analysis: The data of 100 respondents included 70 males and 30 females. Demographic Analysis 30% males 70% females Fig 4.1 Demographics2. Age Group 30% 40% Age 18 to 35 36 to 50 30% Above50 Fig 4.2 Age group3. Income level Between 3,00,000 to 30,00,0004. .What percentage of monthly income can be invested?St. Francis Institute of Management and Research Page 28
  29. 29. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 0% 20% 10% 0 to 10% 10% 11% to 20% 21% to 30% 60% More than 30% I currently have no income Fig 4.3: Monthly Income 5. When do you expect to liquidate your investment? 80 60 period 40 20 0 less than 1yr 1 to 2yrs 3 to 5yrs 5 yrs and above Series1 5 10 70 15 Fig 4.4 expected liquidation period5. What is your expected rate of return from your investments 60 40 Series1 20 0 6%p.a 10%-15 % p.a more than 15% p.a Fig 4.5: expected returnSt. Francis Institute of Management and Research Page 29
  30. 30. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 6. I would start to worry about my investments if my portfolio value falls 45 40 35 30 25 20 15 10 5 0 Less than 5% More than 30% 5%-10% p. a 10%-20% p.a 20%-30% p. a p.a p. a Series1 10 30 40 15 5 Fig 4.6: Decrease in Portfolio 7. Maximum allocation in your current portfolio pertains to 5% 10% 25% Savings and fixed deposits 15% Bonds Equities 45% Mutual Funds Fig 4.7: Portfolio Allocation8. I prefer to keep capital safe rather than have high return 60 50 40 30 20 10 0 Strongly Neutral Strongly agree disagree Series1 60 10 30 Fig 4.8: capital or return preference St. Francis Institute of Management and Research Page 30
  31. 31. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 7.1 INTERPRETATION Out of 100 respondents 70 were male and 30 female with Income level between 3 lakhs to 30,00,000 Lakhs 60% of the respondents prefer investing monthly 11% to 20% 70% of the respondents are ready to liquidate their investments with range of 3 to 5years 45% of the investor’s portfolio consist of Equities Age Group of 22 to 35 young working class with limited liability prefers to take higher risk and get higher returns of 15% and more. They belong to Aggressive class of Investors. Equity funds are most preferred by them. Age group of 36 to 50 is those respondents who have dependents on them emphasize income over growth. They are medium risk investors. They prefer to keep capital safe rather than having high return. They belong to balanced class of Investors. Age groups of 50 and above are those respondents nearing retirement or have a short-term need for their investment. They are low to medium risk investors. They prefer a higher level of income than does the stable investor. They belong to Conservative class of investors. Debt Funds are most preferred by them.St. Francis Institute of Management and Research Page 31
  32. 32. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 8 PORTFOLIO CREATION 8.1AGGRESSIVE INVESTOR PORTFOLIO (80%EQUITY AND 20%DEBT) Table 1 SCHEME NAME NATURE RETURNS BETA Rs SBI MAGNUM SECTOR EQUITY 23.09 1.01 400000 FUNDS UMBRELLA - PHARMA – GROWTH SBI MAGNUM SECTOR EQUITY 22.73 1.03 200000 FUNDS UMBRELLA - EMERG BUSS FUND – GROWTH BIRLA SUN LIFE MNC FUND EQUITY 24.28 0.74 600000 – GROWTH RELIANCE PHARMA FUND – EQUITY 29.65 0.91 800000 GROWTH EQUITY 2000000 SUNDARAM BOND SAVER - DEBT 9.41 1.17 125000 INSTITUTIONAL PLAN – GROWTH RELIANCE MONTHLY DEBT 9.40 1.14 125000 INCOME PLAN – GROWTH SAHARA SHORT TERM DEBT 9.24 1.03 125000 BOND FUND – GROWTH HDFC MONTHLY INCOME DEBT 9.14 1.28 125000 PLAN - LONG TERM PLAN – GROWTH DEBT TOTAL PORTFOLIO 25,00,000St. Francis Institute of Management and Research Page 32
  33. 33. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 8.2 CONSERVATIVE INVESTOR PORTFOLIO (80% DEBT 20% EQUITY) Table 1.2 SCHEME NAME NATURE RETURNS BETA Rs ICICI PRUDENTIAL EQUITY 26.03 0.88 200000 TECHNOLOGY FUND – GROWTH FRANKLIN INFOTECH EQUITY 20.18 0.89 50000 FUND – GROWTH HDFC MID-CAP EQUITY 21.10 0.80 100000 OPPORTUNITIES FUND – GROWTH RELIGARE MID N SMALL 150000 CAP FUND – GROWTH EQUITY 21.35 0.80 EQUITY HDFC MULTIPLE YIELD DEBT 10.86 0.45 400000 FUND - PLAN 2005 – GROWTH HDFC MULTIPLE YIELD DEBT 400000 FUND - GROWTH 10.33 0.69 SBI MAGNUM CHILDREN DEBT 9.39 0.76 400000 BENEFIT PLAN TEMPLETON INDIA STIP - DEBT 8.40 0.72 400000 IP – GROWTH UTI CRTS 81 – GROWTH DEBT 11.21 0.86 400000 DEBT 20,00,000 TOTAL PORTFOLIO 25,00,000St. Francis Institute of Management and Research Page 33
  34. 34. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 8.3 BALANCED INVESTOR PORTFOLIO (50% DEBT 50% EQUITY) Table 3 SCHEME NAME NATURE RETURNS BETA HDFC MID-CAP OPPORTUNITIES FUND – 200000 GROWTH EQUITY 21.10 0.80 RELIANCE EQUITY 100000 OPPORTUNITIES FUND – GROWTH EQUITY 20.97 0.86 UTI MNC FUND - GROWTH 400000 EQUITY 22.46 0.71 300000 RELIGARE MID N SMALL CAP EQUITY 21.35 0.80 FUND - GROWTH EQUITY 1000000 250000 UTI CRTS 81 – GROWTH DEBT 11.21 0.86 HDFC MONTHLY INCOME 250000 PLAN - LONG TERM PLAN - DEBT 9.14 1.28 GROWTH UTI SHORT TERM INCOME 250000 FUND - IP – GROWTH DEBT 8.62 0.83 250000 SBI MAGNUM CHILDREN DEBT 9.39 0.76 BENEFIT PLAN DEBT 10,00,000 TOTAL PORTFOLIO 25,00,000St. Francis Institute of Management and Research Page 34
  35. 35. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 9 PORTFOLIO REVISION Portfolio revision is done in this Project is done in 3 following ways in order to find out which ofgive them higher returns in the span of 2months from May 2nd 2012 to June 30th 2012 Portfolios are revised every 15 days in span of two months1. Constant Rupee Plan The objective of this plan is to balance the division between the conservative and aggressive components of the portfolio in terms of the target value. The target value could be fixed initially by the investor in a desirable proportion2. Constant Ratio Plan In this plan, we maintain a ratio between the aggressive and conservative components of aportfolio. The initial ratio is FIXED by the investor and could be, say, 1:1 or any other desirableratio.3. Variable Plan This plan gives more flexibility to the investors to revise the portfolio components. When share price falls, the investor may shift major component of the conservative and aggressivecomponents The desired ratio of investment holding between aggressive and conservative components of aportfolio, hence, may vary according to the flexibility that an investor wishes to incorporate in theportfolio revision decisionSt. Francis Institute of Management and Research Page 35
  36. 36. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 9.1 PORTFOLIO REVISION AS PER CONSTANT RUPEE PLAN In Constant Rupee Plan, as it is an Aggressive Investor its Equity is kept Rs 20, 00,000 and Debt isRs 5, 00,000. Every 15th day it’s revised as per constant rupee plan PORTFOLIO AS ON MAY 1st 2012 Table 4.1 SCHEME NAME NAV as Returns Market Excess Rank % Rs Units on 2nd return return MaySBI MAGNUM SECTOR 49.57 23.09 19 4.09 2 0.2 400000 8069FUNDS UMBRELLA –PHARMA – GROWTHSBI MAGNUM SECTOR 46.89 22.73 19 3.73 1 0.1 200000 4265FUNDS UMBRELLA –EMERG BUSS FUND –GROWTHBIRLA SUN LIFE MNC 230.02 24.28 19 5.28 3 0.3 600000 2608FUND – GROWTHRELIANCE PHARMA 58.386 29.65 19 10.65 4 0.4 800000 13702FUND – GROWTHEQUITY 10 2000000SCHEME NAME NAV as Returns Market Excess Rank % Rs Units on 2nd return return MaySUNDARAM BOND 34.752 9.41 - - - - 125000 3597SAVER –INSTITUTIONAL PLAN– GROWTHRELIANCE MONTHLY 23.43 9.40 - - - - 125000 5336INCOME PLAN –GROWTHSAHARA SHORT TERM 13.06 9.24 - - - - 125000 9572BOND FUND –GROWTHSt. Francis Institute of Management and Research Page 36
  37. 37. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDSHDFC MONTHLY 24.35 9.14 - - - - 125000 5132INCOME PLAN – LONGTERM PLAN – GROWTHDEBT 500000TOTAL PORTFOLIO 2500000 REVISED PORTFOLIO AS ON MAY 15TH 2012 Table 4.2SCHEME NAME NAV as Rs Increase Revised New units on on 15th Decrease on May May 15th May 15thSBI MAGNUM SECTOR 49.02 395561.83 -1.11% 395561.83 8069.40FUNDS UMBRELLA -PHARMA – GROWTHSBI MAGNUM SECTOR 45.21 192834.29 -3.58% 191274.17 4230.79FUNDS UMBRELLA -EMERG BUSS FUND –GROWTH BIRLA SUN LIFE MNC 223.79 583749.24 -2.71% 583749.24 2608.47FUND – GROWTHRELIANCE PHARMA 56.392 772678.38 -3.42% 772678.38 13701.9FUND – GROWTHEQUITY 1944823 1943263SUNDARAM BOND 34.98 125820.10 125000 3573.47SAVER - INSTITUTIONALPLAN – GROWTHRELIANCE MONTHLY 23.22 123879.64 125000 5383.29INCOME PLAN –GROWTHSt. Francis Institute of Management and Research Page 37
  38. 38. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDSSAHARA SHORT TERM 13.1 125382.85 125000 9541.98BOND FUND – GROWTH HDFC MONTHLY 24.03 123357.29 125000 5201.83INCOME PLAN - LONGTERM PLAN – GROWTHDEBT 498439.88 500000TOTAL PORTFOLIO 2500000In constant Rupee Plan the equity and Debt is to be kept constant throughout. Here both equity andDebt value has fallen so we have sold some of the equity from Scheme giving higher loss of 3.58%SBI MAGNUM SECTOR FUNDS UMBRELLA – EMERG BUSS FUND – GROWTH and havemaintained the total Debt value 5,00,000. REVISED PORTFOLIO AS ON MAY 31TH 2012 Table 4.3 New units NAV as on Increase/ Revised on on May SCHEME NAME Rs 31h May Decrease May 31th 31th 48.38 -1.31 390397.42 390397.42 8069.40SBI MAGNUMSECTOR FUNDSUMBRELLA -PHARMA – GROWTHSBI MAGNUM 44.81 189581.85 189581.85 4230.79SECTOR FUNDS -0.88UMBRELLA - EMERGBUSS FUND –GROWTH BIRLA SUN LIFE 221.8 578558.39 578558.39 2608.47MNC FUND –GROWTH -0.89RELIANCE PHARMA 56.33 771828.86 -0.11 774167.84 13743.44FUND – GROWTHEQUITY 1930366.5 1932705.5St. Francis Institute of Management and Research Page 38
  39. 39. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 125000 3558.21 125533.732 3558.21SUNDARAM BONDSAVER -INSTITUTIONALPLAN – GROWTHRELIANCE MONTHLYINCOME PLAN – 125000 5351.03 125588.613 5351.03GROWTHSAHARA SHORT 125000 9505.70 125570.342 9505.70TERM BOND FUND –GROWTH HDFC MONTHLY 125000 5178.13 126190.969 5178.13INCOME PLAN -LONG TERM PLAN –GROWTHDEBT 500000 502883.656 2432705.5 2432705.5TOTAL PORTFOLIO On May31st 2012 even though the portfolio has fallen both equity and Debt have increased ascompared to revised portfolio as May 15th. Some of the Debt scheme have been sold, and is invested inEquity giving least loss RELIANCE PHARMA FUND – GROWTH REVISED PORTFOLIO AS ON June 15th 2012 Table 4.4 SCHEME NAME NAV as Rs Increase Revised on New on 15th (Decrease) June 15th units on June June 15th SBI MAGNUM 47.65 384506.75 -1.51 384506.75 8069.40 SECTOR FUNDS UMBRELLA - PHARMA – GROWTH SBI MAGNUM SECTOR 45.49 192458.791 1.52 195342.44 4294.18 FUNDS UMBRELLA - EMERG BUSS FUND – GROWTH BIRLA SUN LIFE MNC 223.8 583775.324 0.90 583775.32 2608.47 FUND – GROWTHSt. Francis Institute of Management and Research Page 39
  40. 40. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS RELIANCE PHARMA 56.698 779225.43 0.65 779225.43 13743.44 FUND – GROWTH EQUITY 1939966.3 1942849.96 SUNDARAM BOND 35.28 125533.732 125000 3543.08 SAVER - INSTITUTIONAL PLAN – GROWTH RELIANCE MONTHLY 23.47 125588.61 125000 5325.95 INCOME PLAN – GROWTH SAHARA SHORT TERM 13.21 125570.34 125000 9462.52 BOND FUND – GROWTH HDFC MONTHLY 24.37 126190.96 125000 5129.25 INCOME PLAN - LONG TERM PLAN – GROWTH DEBT 502883.65 500000 TOTAL PORTFOLIO 2432705.50 2442849.96 On June 15th 2012 even though the portfolio has fallen both equity and Debt have increased as compared to revised portfolio as May 31th. Some of the Debt scheme have been sold and is invested in Equity giving least loss SBI MAGNUM SECTOR FUNDS UMBRELLA - EMERG BUSS FUND – GROWTHSt. Francis Institute of Management and Research Page 40
  41. 41. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS PORTFOLIO AS ON JUNE 29TH 2012 Table 4.5 SCHEME NAME NAV as on 15th Rs June SBI MAGNUM SECTOR FUNDS UMBRELLA - 50.13 404518.862 PHARMA – GROWTH SBI MAGNUM SECTOR FUNDS UMBRELLA - 46.86 201225.48 EMERG BUSS FUND – GROWTH BIRLA SUN LIFE MNC FUND – GROWTH 232.85 607381.967 RELIANCE PHARMA FUND – GROWTH 58.478 803688.749 EQUITY 2016815.06 SUNDARAM BOND SAVER - INSTITUTIONAL 35.38 125354.308 PLAN – GROWTH RELIANCE MONTHLY INCOME PLAN – 23.58 125585.854 GROWTH SAHARA SHORT TERM BOND FUND – GROWTH 13.26 125473.126 HDFC MONTHLY INCOME PLAN - LONG TERM 24.55 125923.26 PLAN – GROWTH DEBT 502336.55 TOTAL PORTFOLIO as May 29th 2012 2519152 CALCULATION OF RETURNS AS PER CONSTANT RUPEE PLAN Table 4.6 PORTFOLIO PORTFOLIO AS Excess Returns % ND AS ON JUNE ON MAY 2 2012 TH Returns 29 2012 25,00,000 2519152 19,152 0.73% Opting for Constant Rupee Plan would give return of 0.73% in the span of 2monthsSt. Francis Institute of Management and Research Page 41
  42. 42. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 9.2 PORTFOLIO REVISION AS PER CONSTANT RATIO PLAN In Constant ratio Plan a fixed ratio is kept between Debt and Equity 60% and 40% Portfolio as on 2nd May 2012 Table 5.1 SCHEME NAME NAV as Return Market Excess Rank % Rs Units on 2nd return return May SBI MAGNUM 49.57 23.09 19 4.09 2 0.2 300000 6052.05 SECTOR FUNDS UMBRELLA - PHARMA – GROWTH SBI MAGNUM 46.89 22.73 19 3.73 1 0.1 150000 3198.98 SECTOR FUNDS UMBRELLA - EMERG BUSS FUND – GROWTH BIRLA SUN LIFE 230.02 24.28 19 5.28 3 0.3 450000 1956.35 MNC FUND – GROWTH RELIANCE 58.386 29.65 19 10.65 4 0.4 600000 10276.4 PHARMA FUND – GROWTH EQUITY 10 1500000 SUNDARAM BOND 34.752 250000 7193.83 SAVER - INSTITUTIONAL PLAN – GROWTH RELIANCE 23.43 250000 10670.0 MONTHLY INCOME PLAN – GROWTH SAHARA SHORT 13.06 250000 19142.4 TERM BOND FUND – GROWTHSt. Francis Institute of Management and Research Page 42
  43. 43. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS HDFC MONTHLY 24.35 250000 10266.9 INCOME PLAN - LONG TERM PLAN – GROWTH DEBT 1000000 1000000 TOTAL 2500000 PORTFOLIO REVISED PORTFOLIO AS ON MAY 15TH 2012 Table 5.2 SCHEME NAME NAV as on Rs Increase/ Revised on New units on 15th May decrease May 15th May 15th SBI MAGNUM SECTOR 49.02 296671.37 -1.11 589319.41 12022.02 FUNDS UMBRELLA - PHARMA – GROWTH SBI MAGNUM SECTOR 45.21 144625.72 -3.58 147329.85 3258.79 FUNDS UMBRELLA - EMERG BUSS FUND – GROWTH BIRLA SUN LIFE MNC 223.79 437811.93 -2.71 441989.56 1975.02 FUND – GROWTH RELIANCE PHARMA 56.392 579508.79 -3.42 294659.71 5225.20 FUND – GROWTH EQUITY 1458617.8 1473298.5 22481.03 SUNDARAM BOND 34.98 251640.19 245549.76 7019.72 SAVER - INSTITUTIONAL PLAN – GROWTH RELIANCE MONTHLY 23.22 247759.28 245549.76 10574.92 INCOME PLAN – GROWTH SAHARA SHORT TERM 13.1 250765.70 245549.76 18744.26 BOND FUND – GROWTH HDFC MONTHLY 24.03 246714.58 245549.76 10218.47 INCOME PLAN - LONG TERM PLAN – GROWTH DEBT 996879.75 982199.02St. Francis Institute of Management and Research Page 43
  44. 44. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS TOTAL PORTFOLIO 2455497.5 2455497.5 As on May 15th 2012 Portfolio has fallen, Debt and equity has fallen. Overall Portfolio has been revised as Constant ratio Plan, fixed ratio of 60% equity and 40% debt. There Total portfolio as on May 15th 2012 ie, Rs 24, 55,497.56 is allocated to equity 60% and Debt 40% REVISED PORTFOLIO AS ON MAY 31st 2012 Table 5.3 SCHEME NAME NAV as RS Increase Revised on New on 31st decrease May 31st units on May May 31st SBI MAGNUM SECTOR 581625.32 -1.31 146810.42 3034.53 FUNDS UMBRELLA - 48.38 PHARMA – GROWTH SBI MAGNUM SECTOR 44.81 146026.34 -0.88 440431.27 9828.86 FUNDS UMBRELLA - EMERG BUSS FUND – GROWTH BIRLA SUN LIFE MNC 221.8 438059.27 -0.89 293620.85 1323.81 FUND – GROWTH RELIANCE PHARMA FUND 56.33 294335.74 -0.11 587241.69 10425.03 – GROWTH EQUITY 1460046 1468104.2 SUNDARAM BOND SAVER 35.13 246602.71 244684.04 6965.10 - INSTITUTIONAL PLAN – GROWTH RELIANCE MONTHLY 23.36 247030.25 244684.04 10474.49 INCOME PLAN – GROWTH SAHARA SHORT TERM 13.15 246486.97 244684.04 18607.15 BOND FUND – GROWTH HDFC MONTHLY INCOME 24.14 246673.79 244684.04 10136.04 PLAN - LONG TERM PLAN – GROWTH DEBT 986793.72 978736.16 TOTAL PORTFOLIO 2446840.3 2446840.3 As on May 31st 2012 Portfolio has fallen, Debt has increased and equity has fallen. OverallSt. Francis Institute of Management and Research Page 44
  45. 45. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS Portfolio has been revised as Constant ratio Plan, fixed ratio of 60% equity and 40% debt. There Total portfolio as on May 31st2012 ie, Rs 2446840.39 is allocated to equity 60% and Debt 40% REVISED PORTFOLIO AS ON June 15th 2012 Table 5.4 SCHEME NAME NAV as Rs Increase/ Revised on New on June decrease June 15th units on 15th June 15th SBI MAGNUM SECTOR 47.65 144595.22 -1.51 147806.2 3101.92 FUNDS UMBRELLA - PHARMA – GROWTH SBI MAGNUM SECTOR 45.49 447114.90 1.52 591225 12996.81 FUNDS UMBRELLA - EMERG BUSS FUND – GROWTH BIRLA SUN LIFE MNC 223.8 296268.47 0.90 443418.7 1981.32 FUND – GROWTH RELIANCE PHARMA 56.698 591078.10 0.65 295612.50 5213.81 FUND – GROWTH EQUITY 1479056.6 1478062 SUNDARAM BOND 35.28 245728.80 246343.75 6982.53 SAVER - INSTITUTIONAL PLAN – GROWTH RELIANCE MONTHLY 23.47 245836.23 246343.75 10496.11 INCOME PLAN – GROWTH SAHARA SHORT TERM 13.21 245800.47 246343.75 18648.28 BOND FUND – GROWTH HDFC MONTHLY 24.37 247015.33 246343.75 10108.48 INCOME PLAN - LONG TERM PLAN – GROWTH DEBT 984380.84 985375.01 TOTAL PORTFOLIO 2463437.52 2463437.52 As on June 15th 2012 Portfolio has increased, Debt equity has increased. Overall Portfolio has been revised as Constant ratio Plan, fixed ratio of 60% equity and 40% debt. There Total portfolio as on June 15th 2012 ie, Rs 2463437.52is allocated to equity 60% and Debt 40%St. Francis Institute of Management and Research Page 45
  46. 46. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS PORTFOLIO AS ON JUNE 29TH 2012 Table 5.5 NAV as on Rs SCHEME NAME 29th June SBI MAGNUM SECTOR FUNDS UMBRELLA - PHARMA – GROWTH 50.13 155499.00 SBI MAGNUM SECTOR FUNDS UMBRELLA - EMERG BUSS FUND – GROWTH 46.86 609030.64 BIRLA SUN LIFE MNC FUND – GROWTH 232.85 461349.67 RELIANCE PHARMA FUND – GROWTH 58.478 304893.08 EQUITY 1530772.39 SUNDARAM BOND SAVER - INSTITUTIONAL PLAN – GROWTH 35.38 247042.01 RELIANCE MONTHLY INCOME PLAN – GROWTH 23.58 247498.32 SAHARA SHORT TERM BOND FUND – GROWTH 13.26 247276.17 HDFC MONTHLY INCOME PLAN - LONG TERM PLAN – GROWTH 24.55 248163.28 DEBT 989979.77 TOTAL PORTFOLIO as May 29th 2012 2520752.17 CALCULATION OF RETURNS AS PER CONSTANT RATIO PLAN Table 5.6 PORTFOLIO PORTFOLIO AS Excess Returns % ND AS ON JUNE ON MAY 2 2012 TH Returns 29 2012 20752.17 25,00,000 2520752.17 0.83% Opting for Constant Ratio Plan would give return of 0.83% in the span of 2monthSt. Francis Institute of Management and Research Page 46
  47. 47. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 9.3 PORTFOLIO REVISION AS PER VARIABLE PLAN A s p e r V a r i a b l e P l a n , t h e r a t i o s a r e v a r i e d w h e n e v e r t h e r e is a change in the economic or market index. As on May 2nd, Portfolio is divided into 60% equity 40% debt. In Equity, Schemes are allocated on basis of comparing its returns with market returns. Scheme giving higher returns are given more weightage PORTFOLIO AS ON 2ND MAY 2012SCHEME NAME NAV as Return Market Excess Rank % Rs Units on 2nd return return MaySBI MAGNUM SECTOR 49.57 23.09 19 4.09 2 0.2 300000 6052.05FUNDS UMBRELLA -PHARMA – GROWTHSBI MAGNUM SECTOR 46.89 22.73 19 3.73 1 0.1 150000 3198.98 FUNDS UMBRELLA - EMERG BUSS FUND – GROWTHBIRLA SUN LIFE MNC 230.02 24.28 19 5.28 3 0.3 450000 1956.35FUND – GROWTHRELIANCE PHARMA FUND 58.386 29.65 19 10.65 4 0.4 600000 10276.4 – GROWTHEQUITY 10 1500000SUNDARAM BOND SAVER 34.752 250000 7193.83 - INSTITUTIONAL PLAN – GROWTHRELIANCE MONTHLY 23.43 250000 10670 INCOME PLAN – GROWTHSAHARA SHORT TERM 13.06 250000 19142 BOND FUND – GROWTHHDFC MONTHLY INCOME 24.35 250000 10266PLAN - LONG TERM PLAN– GROWTHDEBT 10,00,000TOTAL PORTFOLIO 25,00,000 Table 6.1St. Francis Institute of Management and Research Page 47
  48. 48. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS REVISED PORTFOLIO AS ON MAY 15TH 2012 Table 6.2 SCHEME NAME NAV as RS Increase/ Revised New on 15th decrease on May units May 15th on May 15th SBI MAGNUM SECTOR 49.02 296671.4 -1.11 40% 491099.51 10018.35 FUNDS UMBRELLA - PHARMA – GROWTH SBI MAGNUM SECTOR 45.21 144625.7 -3.58 10% 122774.88 2715.658 FUNDS UMBRELLA - EMERG BUSS FUND – GROWTH BIRLA SUN LIFE MNC 223.79 437811.9 -2.71 30% 368324.63 1645.849 FUND – GROWTH RELIANCE PHARMA 56.392 579508.8 -3.42 20% 245549.76 4354.337 FUND – GROWTH EQUITY 1458618 1227749 SUNDARAM BOND 34.98 251640.2 306937.2 8774.648 SAVER - INSTITUTIONAL PLAN – GROWTH RELIANCE MONTHLY 23.22 247759.3 306937.2 13218.66 INCOME PLAN – GROWTH SAHARA SHORT TERM 13.1 250765.7 306937.2 23430.32 BOND FUND – GROWTH HDFC MONTHLY 306937.2 12773.08 INCOME PLAN - LONG 246714.6 TERM PLAN – GROWTH 24.03 DEBT 996879.8 1227749 TOTAL PORTFOLIO 2455498 2455498 As on May 15th 2012 Portfolio has fallen, Debt has fallen by 0.31% and equity has fallen bySt. Francis Institute of Management and Research Page 48
  49. 49. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 2.75%. Therefore Overall Portfolio has been revised given equal allocation of Portfolio to Debt and equity. There Total portfolio as on May 15th 2012 ie, 50% Debt Rs 1227749 and 40% equity Rs 12, 27,749 REVISED PORTFOLIO AS ON MAY 31st 2012 Table 6.3 SCHEME NAME NAV as RS Increase rank Revised New units on 31st decrease on May on May May 31st 31st SBI MAGNUM SECTOR FUNDS UMBRELLA - PHARMA – GROWTH 48.38 484687.8 -0.01 0.1 98007.91 2025.79 SBI MAGNUM SECTOR FUNDS UMBRELLA - EMERG BUSS FUND – GROWTH 44.81 121688.6 -0.01 0.2 196015.82 4374.38 BIRLA SUN LIFE MNC FUND – GROWTH 221.8 365049.4 -0.01 0.3 294023.73 1325.63 RELIANCE PHARMA FUND – GROWTH 56.33 245279.8 0.00 0.4 392031.63 6959.55 EQUITY 1216706 980079.08 SUNDARAM BOND SAVER - INSTITUTIONAL PLAN – GROWTH 35.13 308253.4 367529.66 10462 RELIANCE MONTHLY INCOME PLAN – GROWTH 23.36 308787.8 367529.66 15733.3 SAHARA SHORT TERM BOND FUND – GROWTH 13.15 308108.7 367529.66 27949 HDFC MONTHLY INCOME PLAN - 24.14 308342.2 367529.66 15224.9St. Francis Institute of Management and Research Page 49
  50. 50. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS LONG TERM PLAN – GROWTH DEBT 1233492 1470118 TOTAL PORTFOLIO 2450198 2450198 As on May 31st 2012 overall Portfolio has fallen, Debt has increased by 0.004% and equity has fallen by 0.89%. Therefore Overall Portfolio has been revised given more allocation of Portfolio to Debt 70% and equity 30%. There Total portfolio as on May 31st 2012 ie, 70% Debt Rs 1470118.63 and 40% equity Rs 980079.08. REVISED PORTFOLIO AS ON JUNE 15th 2012 Table 6.4 SCHEME NAME NAV as Rs Increase Revised on New units on15th decrease May 31st on 15th June June SBI MAGNUM SECTOR 47.65 96529.08 -1.51 0.1 147923.1 3104.37 FUNDS UMBRELLA - PHARMA – GROWTH SBI MAGNUM SECTOR 45.49 198990.4 1.52 0.4 591692.3 13007.1 FUNDS UMBRELLA - EMERG BUSS FUND – GROWTH BIRLA SUN LIFE MNC 223.8 296675 0.90 0.3 443769.2 1982.88 FUND – GROWTH RELIANCE PHARMA FUND 56.698 394592.7 0.65 0.2 295846.1 5217.93 – GROWTH EQUITY 986787.2 1479231 SUNDARAM BOND SAVER 35.28 369099 246538.4 6988.05 - INSTITUTIONAL PLAN – GROWTH RELIANCE MONTHLY 23.47 369260.3 246538.4 10504.4 INCOME PLAN – GROWTH SAHARA SHORT TERM 13.21 369206.6 246538.4 18663 BOND FUND – GROWTH HDFC MONTHLY 24.37 371031.4 246538.4 10116.5 INCOME PLAN - LONGSt. Francis Institute of Management and Research Page 50
  51. 51. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS TERM PLAN – GROWTH DEBT 1478597 986153.8 TOTAL PORTFOLIO 2465384 2465384 As on June 15th 2012 overall Portfolio has increased, Debt has increased by 0.68% and equity has increased by 0.57%. Therefore Overall Portfolio has been revised given more allocation of Portfolio to equity 60% and Debt40% because equity is giving more returns than Debt.. There Total portfolio as on May 31st 2012 ie Rs 24, 65,384, 40% Debt Rs 986153.8 and 60% equity Rs 1479230.67 St. Francis Institute of Management and Research Page 51
  52. 52. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS PORTFOLIO AS ON JUNE 29TH 2012 Table 6.5 SCHEME NAME NAV as on 15th Rs June SBI MAGNUM SECTOR FUNDS UMBRELLA – 50.13 155621.90 PHARMA – GROWTH SBI MAGNUM SECTOR FUNDS UMBRELLA – 46.86 609511.98 EMERG BUSS FUND – GROWTH BIRLA SUN LIFE MNC FUND – GROWTH 232.85 461714.29 RELIANCE PHARMA FUND – GROWTH 58.478 305134.05 EQUITY 1531982.21 SUNDARAM BOND SAVER – INSTITUTIONAL 35.38 247237.25 PLAN – GROWTH RELIANCE MONTHLY INCOME PLAN – 23.58 247693.93 GROWTH SAHARA SHORT TERM BOND FUND – GROWTH 13.26 247471.60 HDFC MONTHLY INCOME PLAN – LONG TERM 24.55 248359.41 PLAN – GROWTH DEBT 990762.19 th TOTAL PORTFOLIO as May 29 2012 2522744.40 CALCULATION OF RETURNS AS PER VARIABLE PLAN Table 6.6 PORTFOLIO PORTFOLIO AS Excess Returns % AS ON JUNE ON MAY 2ND 2012 Returns 29TH 2012 2522744.40 22744.40 25,00,000 0.90% Opting for Variable would give return of 0.90% in the span of 2monthsSt. Francis Institute of Management and Research Page 52
  53. 53. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 9.4 CALCULATION OF PORTFOLIO RETURNS Table 7 PLAN NAME RETURNS RANKINGS CONSTANT RUPEE 0.73% 3 CONSTANT RATIO 0.83% 2 VARIABLE PLAN 0.90% 1 Variable Plan gives highest returns of 0.90% compared to other two plans in span of 2months 2nd May 2012 to 29th June2012 because in variable plan continous revision is done according to market Fluctuation. Therefore Null hypothesis of the project has been proved wrong through analysis done above. Here in variable plan active management style is adopted where continous revision is required to get higher returns. of 0.90%.St. Francis Institute of Management and Research Page 53
  54. 54. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS 10 MUTUAL FUND COMPARISON The Five mutual funds taken for comparison are open ended funds and equity in nature. HDFC TOP 200 – GROWTH Objective: To generate long term capital appreciation by investing in a portfolio of equities and equity linked instruments drawn from the BSE 200 Index. Type of Scheme Open Ended Nature Equity Option Growth Inception Date Sep 11, 1996 Face Value (Rs/Unit) 10 STANDARD MEAN SHARPE TREYNOR BETA DEVIATION 0.38 3.64 0.08 0.31 0.87ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND - INSTITUTIONAL - GROWTH Objective: Seeks to generate long-term capital appreciation and income distribution to unit holders from a portfolio that is invested in equity and equity related securities of about 20 companies belonging to the large cap Type of Scheme Open Ended Nature Equity Option Growth Inception Date May 23, 2008 Face Value (Rs/Unit) 10 Minimum Investment (Rs) 10000000 Exit Load If redeemed bet. 0 Year to 1 Year; Exit load is 1%. MEAN STANDARD SHARPE TREYNOR BETA DEVIATION 0.44 3.62 0.09 0.38 0.87St. Francis Institute of Management and Research Page 54
  55. 55. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS DSP BLACKROCK SMALL AND MIDCAP FUND - GROWTH Objective: The primary investment objective is to seek to generate long term capital appreciation from a portfolio that is substantially constituted of equity related securities Type of Scheme Open Ended Nature Equity Option Growth Inception Date Nov 14, 2006 Face Value (Rs/Unit) 10 Minimum Investment (Rs) 5000 Exit Load If redeemed bet. 0 Months to 12 Months; Exit load is 1% Fund Manager Anup Maheshwari, Apoorva Shah . StandardMean SHARPE TREYNOR BETA Deviation0.49 3.74 0.10 0.44 0.87 FRANKLIN INDIA BLUECHIP - GROWTH Objective: Aims to achieve a high degree of capital appreciation through investments is well- established, large size blue chip companies Type of Scheme Open Ended Nature Equity Option Growth Inception Date May 26, 2003 Face Value (Rs/Unit) 10 Minimum Investment (Rs) 5000 Exit Load If redeemed bet. 0 Months to 12 Months; Exit load is 1% Fund Manager Sanjay Parekh , Shrey Loonkar, Sunil Singhania . STANDARD MEAN SHARPE TREYNOR BETA DEVIATION 0.36 3.40 0.07 0.31 0.81St. Francis Institute of Management and Research Page 55
  56. 56. PORTFOLIO MANAGEMENT SERVICES IN MUTUAL FUNDS RELIANCE BANKING FUND – GROWTH Objective: The primary investment objective of the Scheme is to seek to generate continuous returns by actively investing in equity and equity related or fixed income securities of companies in the banking sector. Type of Scheme Open Ended Nature Equity Option Growth Inception Date May 26, 2003 Face Value (Rs/Unit) 10 Minimum Investment (Rs) 5000 If redeemed bet. 0 Months to 12 Months; Exit load is Exit Load 1% Fund Manager Sanjay Parekh , Shrey Loonkar, Sunil Singhania . Standard Mean SHARPE TREYNOR BETA Deviation 0.52 4.63 0.09 0.49 0.84St. Francis Institute of Management and Research Page 56

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