Analysis and Comparison of Aviva FundPortfolio with its competitors                         Saurav Mandhotra              ...
About AVIVA• Aviva is a British multinational insurance  company• Sixth-largest insurance company in the world  measured b...
Objectives of the study
Comprises of 3 Parts• Analysis and Comparison of fund portfolio of Aviva  with competitors• Creating a portfolio for Aviva...
Analysis and Comparison of fund      portfolio of Aviva withcompetitors(SBI Life Insurance and  ICICI Prudential Life Insu...
Funds under Study• Bond Fund (0%-40%:Cash and Money Market,60%-100% in Government and other Debt   securities)• Growth Fun...
Bond Fund• Investment objective :Progressive capital growth  with relatively lower investment risks.• %age of fund Investe...
Investment Pattern
Growth Fund• Investment objective: long-term cumulative  capital growth while managing the risk of a  relatively high expo...
Comparison           Tracking Sharpe   Treynor   Jensen   Informat M^2    Beta    Returns           Error    Ratio    Rati...
Balanced Fund• Investment objective: Long-term cumulative  capital growth while controlling risk, by availing  opportuniti...
Returns Tracking Sharpe   Treynor Jensen   Informa M^2    Beta                   Error    Ratio    Ratio   Alpha    tion  ...
Index Fund• Investment objective :Generate returns in line  with the Stock market index - NIFTY. Subject  to exposure norm...
Top 5 EquitiesEquities                  % amount of invested   Return Given by the EquityInfosys Ltd               8.33%  ...
Returns Tracking Sharpe   Treynor Jensen   Informati M^2   Beta                   Error    Ratio    Ratio   Alpha    on ra...
Enhancer Fund• Investment objective: Long-term cumulative  capital growth while managing the risk of  exposure to equity m...
Returns Tracking Sharpe     Treynor Jensen   Informati M^2    Beta                Error    Ratio      Ratio   Alpha    on ...
Creating an Efficient Frontier for    Aviva Fund Investment
Theory and Model used• Markowitz portfolio theory also know as  Modern portfolio theory• Black and Litterman’s Solution to...
Markowitz Portfolio Theory• Inputs:  – The expected return for each asset  – The standard deviation of each asset (a measu...
E®            Variance Volatility                                               Experime             Nifty Commodity Bulli...
Black Litterman Model
Anticipated Return           2%  Risk Free Rate              1%                                         RelianceHdfc     i...
VaR(Value at Risk) of Funds
VaR(Historical Method)
`                 Index Fund   Growth Fund   Balance Fund   Protector Fund   Enhancer Fund   Bond Fund                 ret...
VaR(Using Monte-Carlo                           Simulation)                                             Monte Carlo Simula...
Thank You
Analysis of Fund, Portfolio Creation and Var Analysis.
Analysis of Fund, Portfolio Creation and Var Analysis.
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Analysis of Fund, Portfolio Creation and Var Analysis.

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Analysis of Fund, Portfolio Creation and Var Analysis.

  1. 1. Analysis and Comparison of Aviva FundPortfolio with its competitors Saurav Mandhotra Section C 62/2011
  2. 2. About AVIVA• Aviva is a British multinational insurance company• Sixth-largest insurance company in the world measured by net premium income and has 53 million customers across 28 countries• Formed by a merger of two British insurance firms, Norwich Union and CGU plc.• Aviva name was adopted in July 2002
  3. 3. Objectives of the study
  4. 4. Comprises of 3 Parts• Analysis and Comparison of fund portfolio of Aviva with competitors• Creating a portfolio for Aviva• Calculating Value at Risk(VaR)
  5. 5. Analysis and Comparison of fund portfolio of Aviva withcompetitors(SBI Life Insurance and ICICI Prudential Life Insurance)
  6. 6. Funds under Study• Bond Fund (0%-40%:Cash and Money Market,60%-100% in Government and other Debt securities)• Growth Fund(Cash and Money Market 0%-40%,Equity:30%-85% Government and other Debt Securities:0%-50%)• Balanced Fund (Cash and Money Market 0%-40%,Equity: 0%-45% Government and other Debt Securities: 50%-90%)• Index Fund(Debt Securities Incl. Money Market 0%-20%,Equity:80%-100%)• Enhancer Fund( Debt and Money Market:0%-40%,Equity:60%-100%)• Dynamic P/E(Debt and Money Market :0%-100% ,Equity:0%-100% )
  7. 7. Bond Fund• Investment objective :Progressive capital growth with relatively lower investment risks.• %age of fund Invested• Money Market:37%• Government Securities:19%• Corporate Bonds:44% Aviva ICICI SBI Returns 4.62% 10.27% 9.64%
  8. 8. Investment Pattern
  9. 9. Growth Fund• Investment objective: long-term cumulative capital growth while managing the risk of a relatively high exposure to equity markets.• %age of Fund Allocated:• EQUITIES 67.12 % GOVERNMENT 3.65% CORPORATE Bond 16.15% MONEY MARKET 13.08%• Returns: -8.57%
  10. 10. Comparison Tracking Sharpe Treynor Jensen Informat M^2 Beta Returns Error Ratio Ratio Alpha ion ratioAVIVA 6.00% -3.02 -0.27 -0.21 -0.16 -0.14 0.61 -8.57%SBI LIFE 7.93% -1.14 -0.39 -0.06 0.91 -0.01 0.47 -10.09%ICICI 10.48% -1.13 -0.22 0.24 -0.03 -0.03 -13.61%PRUDE
  11. 11. Balanced Fund• Investment objective: Long-term cumulative capital growth while controlling risk, by availing opportunities in debt and equity markets• %age of Fund Allocated• Equity:32%• Government Securities: 10%• Money Market:13%• Corporate Bonds:45%• Returns: -2.40%
  12. 12. Returns Tracking Sharpe Treynor Jensen Informa M^2 Beta Error Ratio Ratio Alpha tion ratioAVIVA -2.40% 8.20% -3.36 -0.30 -0.13 0.64 -0.18 0.34SBI LIFE -3.77% 12.64% -1.07 -0.38 -0.04 1.07 0.01 0.31ICICI -5.35% 15.12% -1.11 -0.14 0.71 -0.03 -0.03PRUDE
  13. 13. Index Fund• Investment objective :Generate returns in line with the Stock market index - NIFTY. Subject to exposure norms applicable under the IRDA (Investment)Regulations.• %age of Fund Allocated• Equities: 99%• Money Market:1%• Returns: -3.92%
  14. 14. Top 5 EquitiesEquities % amount of invested Return Given by the EquityInfosys Ltd 8.33% -13.24%Reliance Industries Ltd 7.90% -30.08%ITC Ltd 7.33% 23.04%ICICI Bank Ltd 6.34 -22.41%HDFC BANK LTD 5.73% -5.85%
  15. 15. Returns Tracking Sharpe Treynor Jensen Informati M^2 Beta Error Ratio Ratio Alpha on ratioAVIVA -3.92% 2.75% -1.20 -0.12 -0.19 1.35 0.04 0.99SBI LIFE -14.99% 1.89% -1.03 -0.36 -0.07 1.23 0.02 0.64ICICI -10.87% 13.15% -0.86 -0.20 0.40 0.03 -0.06PRUDE
  16. 16. Enhancer Fund• Investment objective: Long-term cumulative capital growth while managing the risk of exposure to equity markets.• %age of Fund Allocated• Equities: 96%• Money Market: 4%• Return : -5.24%
  17. 17. Returns Tracking Sharpe Treynor Jensen Informati M^2 Beta Error Ratio Ratio Alpha on ratioAVIVA -5.24% 3.42% -1.24 -0.14 -0.20 0.70 0.03 0.96SBI LIFE -11.52% 3.74% --0.95 -0.33 -0.05 1.55 0.03 0.59ICICI -12.18% 11.90% -1.04 -0.21 0.33 -0.01 -0.04PRUDE
  18. 18. Creating an Efficient Frontier for Aviva Fund Investment
  19. 19. Theory and Model used• Markowitz portfolio theory also know as Modern portfolio theory• Black and Litterman’s Solution to the Optimization Problem• Global Minimum Variance Portfolio
  20. 20. Markowitz Portfolio Theory• Inputs: – The expected return for each asset – The standard deviation of each asset (a measure of risk) – The correlation matrix between these assets• Output: – The efficient frontier, i.e. the set of portfolios with expected return greater than any other with the same or lesser risk, and lesser risk than any other with the same or greater return.
  21. 21. E® Variance Volatility Experime Nifty Commodity Bullion CurrencyFixed income Port 1 PoNifty 0.0077 0.0035 -0.0003 -0.2% 0.000498 7.630% 0.0077 8.78% 15% 20% 17%Commodity 0.0035 0.01075 0.0031 0.0% 0.000241 12.841% 0.01075 10.37% 20% 22% 0%Bullion -0.00029 0.00112 0.0031 0.1% 5.17E-05 24.916% 0.00307 5.54% 12% Volatility 20% 29%Currency -0.00158 -0.0011 4E-05 0.1% 5.17E-05 4.070% 0.00081 2.84% 17% 20% 53%Fixed income 0.0005 0.00032 0.0002 0.0% 0.002994 1.193% 0.00299 5.47% 36% 18% 0% 100% 100%Risk Free rate 8% Expected ReturnMean 7.82% Mean 10.70% 24.92% 5.54% 3.05Variance 0.01506 Variance 0.000528 Var- 4.07% 2.84% (1.38)Volatility 12.27% Volatility 2.30%Covar 1.19% 5.47% (1.24) Matrix 7.63% 8.78% (0.04) Sigma Mean Sharpe Combination of portfolio ratio 12.84% 10.37% 0.47% of portfolio12.27% 7.82% Mean Sigma sharpe ratio 0% 14.17% 6.86% 0.90 4.9% 1.76% -1.8 28.0% 25.00% 10% 12.66% 7.50% 0.62 4.9% 1.76% -1.8 20% 12.16% 8.15% 0.51 5.8% 1.77% -1.2 Optimum Capital Allocation 30% 12.81% 8.79% 0.55 6.2% 1.79% -1.0 23.0% 20.00% which is 17% Nifty,0% commodity,29% in Bullion,53% in currency and 0% in fixed 40% 14.43% 9.43% 0.68 6.8% 1.82% -0.7 income 50% 16.76% 10.08% 0.87 7.2% 1.85% -0.4 18.0% Efficient Frontier 60% 19.54% 10.72% 1.08 7.7% 1.90% -0.2 15.00% Nifty 70% 22.61% 11.36% 1.29 8.7% 2.01% 0.314.00% Commodity 80% 25.86% 12.01% 1.49 9.7% 2.14% 0.8 13.0% Bullion Series112.00% 90% 29.23% 12.65% 1.68 10.7% 2.30% 1.2 10.00% Currency10.00% 100% 32.69% 13.30% 1.86 11.5% 2.43% 1.4 Fixed income 8.0% 12.5% 2.62% 1.7 8.00% 13.5% Series1 2.81% 2.0 5.00% 6.00% 14.5% 3.02% 2.2 3.0% 4.00% 15.5% 3.23% 2.3 16.5% 3.45% 2.5 0.00%
  22. 22. Black Litterman Model
  23. 23. Anticipated Return 2% Risk Free Rate 1% RelianceHdfc icici sbi itc Infosys inds 119,945 93,722 124,291 182,795 132,753 265,776 919,282 13.05% 10.20% 13.52% 19.88% 14.44% 28.91% Return portfolio Wtihout n- Wtih n- adjusted Optimized benchmarVariance Co-variance Matrix factor factor with benchmark k with no opinions portfolio opinion Hdfc icici sbi itc Infosys Reliance indsHdfc 0.0006 0.0005 0.0004 0.0002 0.0000 0.0004 0.00% 0.034% 1.9% 1.878% 13.05% 13.05%icici 0.0005 0.0011 0.0011 0.0006 0.0002 0.0000 0.00% 0.050% 2.4% 2.445% 10.20% 10.20%sbi 0.0004 0.0006 0.0007 0.0002 0.0000 0.0004 0.00% 0.039% 2.1% 2.059% 13.52% 13.52%itc 0.0002 0.0002 0.0002 0.0008 0.0000 0.0002 0.00% 0.031% 1.8% 1.763% 19.88% 19.88%Infosys 0.0000 0.0000 0.0000 0.0000 0.0005 0.0000 0.00% 0.008% 1.0% 0.958% 14.44% 14.44%Reliance inds 0.0004 0.0006 0.0004 0.0002 0.0000 0.0011 0.00% 0.053% 2.6% 2.554% 28.91% 28.91%Expexted b-return 0.037%Expexted b-return .0% 2 Hdfc icici sbi itc Infosys Reliance indsHdfc 1.00 0.51 0.54 0.26 0.05 0.33icici 0.96 1.00 1.45 0.77 0.53 0.01sbi 0.70 0.56 1.00 0.27 0.03 0.39itc 0.35 0.23 0.29 1.00 0.03 0.20Infosys 0.04 0.01 0.02 0.02 1.00 0.01
  24. 24. VaR(Value at Risk) of Funds
  25. 25. VaR(Historical Method)
  26. 26. ` Index Fund Growth Fund Balance Fund Protector Fund Enhancer Fund Bond Fund return Return Return return Return ReturnMean 19.30% 11.27% 7.90% 6.39% 14.64% 7.23%(Yearly)Volatility 23.45% 14.24% 6.64% 1.79% 19.14% 1.97%Initial 100 100 100 100 100 100Investment(Assumption)Cut-off 80 80 80 80 80 80Probability 4.68% 1.40% 0.00% 0.00% 3.52% 0.00%that theportfolio willbe less thancut off
  27. 27. VaR(Using Monte-Carlo Simulation) Monte Carlo Simulation25.0020.0015.0010.00 5.00 0.00 Mar-09 Jun-09 Oct-09 Jan-10 Apr-10 Jul-10 Nov-10 Feb-11 May-11 Sep-11 Dec-11 Mar-12 Jun-12 Index Fund return Growth Fund Return Balance Fund Return Protector Fund return Enhancer Fund Return Bond Fund Return
  28. 28. Thank You

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