167© Th e Author(s) 2017G.V.S. Sekhar, Th e Management of Mutual Funds, DOI 10.1007/978-3-319-34000-5

Year Challenge Details Country

1987 Fall in DJIA Dow Jones Industrial Average (DJIA) falls 508 points or 22.6 % in the steepest decline since 1929. Hence, portfolio insurance and computerized trading takes some of the blame for what ranks as the fi fth largest point drop in DJIA

USA

1988 Deregulated markets

Deregulated S&Ls get in over their heads, and more than 1,000 institutions fail, in many cases as the result of malfeasance and fraud. The ensuring bailout costs the US government an estimated $125 billion in direct subsidies

USA

1990 Trouble in Japanese market

After the bank of Japan raises rates to cool its overheated economy, the Nikkei stock index plunges more than 30,000 points. It continues to struggle for more than a decade until its post-bubble low of 7,608 in 2003, down 80 % from its high

Japan

1992 UK exits ERM Britain is forced to leave European Exchange Rate Mechanism following a wave of speculative attacks on its currency

UK

Appendix: Challenges Faced by Global Financial Markets, 1987–2007

(continued)

168 Appendix: Challenges Faced by Global Financial Markets, 1987–2007

Year Challenge Details Country

1995 Cause of problem of Barings Bank

Leeson, a 28-year-old trader based in Singapore, loses more than $1 billion on futures pegged to the Nifty 225 stock index in Japan and single-handedly brings down Barings Bank, the UK’s oldest investment bank

Singapore

1997 Asian fi nancial crisis

Thailand runs out of foreign exchange reserves to support its currency and fl oats the baht, which falls 20 % to a record low. The prices spread through much of Asia with the Philippines, Indonesia, South Korea and Thailand the most affected. The IMF establishes a $40 billion program to support these currencies

Thailand

1998 Russian fi nancial crisis

The Russian economy is hit by declining oil prices in the global recession of 1998 that follows the Asian fi nancial crisis. The Russian central bank widens the trading band for the ruble, which drops 12 % on the day of the announcement. The government also imposes a 90-day moratorium on foreign debt payments

Russia

1999 Recession in Argentina

As its exports are hurt by a devaluation of the Brazilian real, Argentina’s GDP falls 4 %, marking the beginning of a recession that would last for three years. The crisis boils over into riots in December 2001, when the government devalues the peso and freezes bank assets

Argentina

2001 Financial crisis in Turkey

Prime Minister Bullent Ecevit clashes openly with President Ahmed Necdet Sezer over reforms, triggering a crisis. Interest rates shoot up to 7,000 % and stock prices fall. The Turkish lira loses more than 40 % of its value as the government abandons exchange controls

Turkey

(continued)

Appendix: Challenges Faced by Global Financial Markets, 1987–2007 169

Year Challenge Details Country

2002 Uruguay banking crisis

Uruguay suffers a massive run on its banks, causing the government to freeze banking operations. Uruguay’s real GDP falls by 12 % in 2002 as a result of its heavy dependence on neighboring Argentina. The US treasury provides a $1.5 billion bridge loan to the Uruguayan government to tide it over to a bank-rescue fund fi nanced by multinational organizations including the IMF

Uruguay

2007 US sub-prime mortgage crisis

Losses in the sub-prime market trigger a credit crunch. The risks are distributed widely through securitization, and worries that the crisis would spread to the broader economy disrupt global fi nancial markets for months. The Federal Reserve cuts interest rates and fl oods the market with liquidity

USA

Source : Prepared by Gordon Plant, Global Finance, December 2007

(continued)

171© Th e Author(s) 2017G.V.S. Sekhar, Th e Management of Mutual Funds, DOI 10.1007/978-3-319-34000-5

Agarwal, J.D. (2006) Financial Institutions and Markets , Prentice Hall of India, IIP, Delhi.

Avadhani, V.A. (2008) Marketing of Financial services , Himalaya Publishing House, Mumbai.

Advisory Group on Corporate Governance (AGCG) (2001) Report on Corporate Governance and International Standards, Reserve Bank of India.

Allen, F. and Gale, D. (2000) “Corporate Governance and Competition”, in Xavier Vives (ed.) Corporate Governance: Th eoretical and Empirical Perspectives , Cambridge University Press, Cambridge.

Arun, T.G and Turner, J.D. (2002b) “Financial Sector Reform in Developing Countries: Th e Indian Experience”, Th e World Economy, Vol. 25, No. 3, pp. 429–445.

Arun, T.G and Turner, J.D. (2002c) “Financial Liberalisation in India”, Journal of International Banking Regulation (Forthcoming).

Arun, T.G and Turner, J.D. (2002d) “Corporate Governance of Banking Institutions in Developing Economies: Th e Indian Experience”, Paper pre-sented in the conference on ‘Finance and Development’ organised by IDPM, Th e University of Manchester.

Basel Committee on Banking Supervision (BCBS) (1999) “Enhancing Corporate Governance for Banking Organisations”, Bank for International Settlements, Switzerland.

Bibliography

172 Bibliography

Bhattacharya, S., Boot, A.W.A. and Th akor, A.V. (1998) “Th e Economics of Bank Regulation”, Journal of Money, Credit and Banking, Vol. 30, pp. 745–770.

Bhole, L.M. (2007) Financial Institutions and Markets , Prentice Hall of India, New Delhi.

Capiro, G, Jr. and Levine, R. (2002) “Corporate Governance of Banks: Concepts and International Observations”, Paper presented in the Global Corporate Governance Forum research Network Meeting, April 5.

Claessens, S., Demirguc-Kunt, A. and Huizanga, H. (2000) “Th e Role of Foreign Banks in Domestic Banking Systems”, in S. Claessens and M. Jansen (eds.) Th e Internationalization of Financial Services: Issues and Lessons for Developing Countries , Kluwer Academic Press, Boston, MA.

Goswami, O. (2001) “Th e Tide Rises, Gradually: Corporate Governance in India”, OECD Development Centre discussion paper.

Gilson, Stuart, John, K. and Lang, L. (1990) Troubled Debt Restructurings: An Empirical Study of Private Reorganization of Firms in Default”, Journal of Financial Economics , Vol. 27, pp. 315–353.

Goyal, Madan (1990) ‘Off -Shore Country Funds: Th e Indian Experience’, State Bank of India Monthly Review, May 1990.

Gupta, L.C. (1993) Mutual Funds and Assets Preference , Society for Capital Market Research and Development, New Delhi.

Hickson, C.R. and Turner, J.D. (2003) “Free Banking and the Stability of Early Joint-Stock Banking”, Cambridge Journal of Economics (Forthcoming).

Hina shah (2004) ‘Where the Buck Must Stop’, Business India, April 26–May 9.

International Monetary Fund (IMF) (2001) “India: Recent Economic Developments and Selected Issues”, IMF Country Report No. 01/181.

Khan, M.Y. (2001) ‘Indian Financial System’, Tata Mc-Graw Hill Publishing co, New Delhi, First reprint.

Lavington, Frederick (1921) Th e English Capital Market , London, Methuen. Levine, R. (1999) “Foreign Bank Entry and Capital Control Liberalization:

Eff ects on Growth and Stability”, University of Minnesota, Mimeo. Macey, J.R. and O’Hara, M. (2001) “Th e Corporate Governance of Banks”,

Federal Reserve Bank of New York Economic Policy Review. Madan Goyal (1993) ‘Mutual Funds: India, Here We Come’, Paper Published

in Financial Institutions and Economic Development (Trends in Indian Economy-vol 5), Edited by Devendra Th akur, Deep & Deep publications, New Delhi.

Bibliography 173

Manish Bansal (2003) “Mutual Funds: Eight Steps to Nirvana’, Chartered Financial Analyst, December, 2003.

Manish Khanduri and Surendar (2001) ‘US-64: Pandora’s Box Opens’, Business World 6th August, 2001.

Manish Khanduri and Surendar (2001) “UTI: Investment Process”, Business World, 6th August, 2001.

Manish Khanduri (2001) ‘ICICI- Th e Big Retail Th rust’, Business World, January 29th, 2001.

Mathur, K.B.L (2004) “Regulation of India’s Financial sector- Th e State Role”, Published in Economic and Political Weekly, March 20, 2004.

Mehru, K.D. (2004) “Problems of Mutual Funds in India- Abstract of Doctoral Th esis”, Finance India, Vol. XVIII, No.1, March, pp. 220–224.

Meir Kohn (1997) Financial Institutions and Markets , Tata Mc-Graw Hill Publishing Co, Ltd, New Delhi.

Narang, S.P. (1993) “Financial Innovations and New Instruments: Th eir Role in the Development of Financial Markets”, Chartered Secretary, July.

Narendra Nathan (2004) “Mutual Fund Resources India’s No. 1, Fund House”, Business Today, May 9, 2004

Narendra Nathan, ‘Sell? Hold?’ Intelligent Investor, January 31st, 2002. Narendra Nathan (2004) ‘Size Does Not Matter’: A Detailed Report Published

on Comparison of Diff erent Mutual Funds”, Business Today, June 6, 2004. Neeraj Choksi and Jignesh Desai (2004) “Mutual Funds: Safer Investments”,

CFA- April, 2004. Oman, C.P. (2001) “Corporate Governance and National Development”,

OECD Development Centre Technical Papers, Number 180. Patil, R.H. (2004) ‘Corporate Debt Market- New Beginnings”, EPW, March

20, 2004. Peek, J. and Rosengren, E. (2000) “Implications of the Globalization of the

Banking Sector: Th e Latin American Experience”, New England Economic Review, Sept./Oct., pp. 45–62.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R.W. (2000) “Investor Protection and Corporate Governance”, Journal of Financial Economics , Vol. 58, pp. 3–27.

La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. (1999) “Corporate Ownership Around the World”, Journal of Finance, Vol. 54, pp. 471–517.

Rajan Mehta (2003) “Indian Mutual Fund Industry- Challenging Issues”, CFA, Dec, 2003.

174 Bibliography

Sen Gupta, A.K. (1991) “Mutual Funds- Scenario ad Strategic Issues’, Banking Finance, May 1991.

Shilpa Nayak (2004) “Reshuffl ing Debt”, Business Today, August 15, 2004. Shleifer, A. and Vishny, R. (1997) “A Survey of Corporate Governance”, Journal

of Finance, Vol. 52, pp. 737–783. Srivastava, R.M. (2002) ‘Financial Management’, Pragati Prakasan, Meerut, 7th

Edition, 2002. Stiglitz, J.E. (1994) ‘Th e Role of the State in Financial Markets’, Proceedings of

the World Bank Annual Conference on Development Economics 1993, pp. 19–52.

Subrahmanyam, P.S. (1999) “Th e Changing Dynamic”, Th e Hindu Survey of Indian Industry.

Verma, M.S. (1992) ”Mutual Funds-Agents Play a Role”, Economic Times, February 27th, 1992.

Vikas Dhoot and Vishal Saxena (2001) “Investing in 2001”, Cover Story, Business India, 29th Jan. 2001.

Vives, X. (2000) “Corporate Governance: Does It Matter”, in Xavier Vives (ed.) Corporate Governance: Th eoretical and Empirical Perspectives , Cambridge University Press, Cambridge.

Shleifer, A. and Vishny, R. (1997) “A Survey of Corporate Governance”, Journal of Finance, Vol. 52, pp. 737–783.

Chapter-2

Roll, Richard (1992) “A Mean/Variance Analysis of Tracking Error”, Th e Journal of Portfolio Management, Vol. 18, No. 4, Summer 1992, pp. 13–22. doi: 10.3905/jpm.1992.701922

Ross, Stephen (1976) “Th e Arbitrage Th eory of Capital Asset Pricing”, Journal of Economic Th eory, Vol. 13, No. 3, pp. 341–360. doi: 10.1016/0022-0531(76)90046-6

Smith and Tito (1969) “Risk-Return Measures of Post-Portfolio Performance”, Journal of Financial and Quantitative Analysis, Vol. 4, pp. 449–471.

Chapter-4

Agarwal, G.D. (1992) ‘Mutual Funds and Investors Interest’, Chartered Secretary, Jan, 1992.

Bibliography 175

Bhatt, Narayana M. (1990) ‘Mutual Funds; Some Regulatory Issues’, Th e Economic Times, January 7th, 1990.

Dave, S.A. (1994) ‘An Open Ended Fund May Be More Prudent’, Th e Economic Times, December 20th, 1994.

Gupta, L.C. (1993) ‘Mutual Funds and Assets Preference’, Society for Capital Market Research and Development, New Delhi, 1993.

Handa Rajiv (1995) ‘Are MF Good Investments?’ Chartered Financial Analyst, Feb, 1995.

Irshad Daftari ( 2003 ) “Fund Trek”, Business World, 24th November, 2003. Madan Goyal (1993) ‘Mutual Funds: India, Here We Come’, A Paper Published

in Financial Institutions and Economic Development (Trends in Indian Economy- Vol. 5), Edited by Devendra Th akur, Deep & Deep Publications, New Delhi.

Jensen, M.C. (1968) ‘Th e Performance of Mutual Funds in the Period 1945–64”, Journal of Finance, Vol. 23.

Jayadev (1996) “Mutual Fund Performance: An Analysis of Monthly Returns”, Finance Indina, Vol X, No. 1, March, 1996

Mutual Fund Industry in India coming of age- CFA, July, 2004 Mutual Funds- FUTURE SHOCK- cover feature Business India- Oct 24–Nov

6, 1994. Survey of Investment options – Cover story- CFA- April, 2004. Treynore, J.L. and Kay, K. Mazny (1966) “Can Mutual Funds Outguess the

Market?” Harvard Business Review, Vol. 44. No. 4, July–August, 1966. Th omas, T.C. (2007) ‘A Study on Service Quality on Investment Attributes of

Equity Oriented Mutual Funds’, Journal of Contemporary Research in Management, Vol. 1, Jan–June, 2007.

Chapter-5

Massimo Massa and Lee Xhang (2008) “Th e Eff ects of Organizational Structure on Asset Management”, http://ssrn.com/abstract=1328189

Ammann, M. and Verhofen, M. (2008) “Th e Impact of Prior Performance on the Risk-Taking of Mutual Fund Manager”, Annals of Finance, No 5, pp. 69–90.

Smith, D.M. (2009) “Th e Economics of Mutual Funds”, Chapter-3 of forth-coming in John A Haslem (ed.) ‘A Companion to Mutual Funds’, John Wiley Sons, USA.

176 Bibliography

Bansal, L.K. (1997) Mutual Fund- Management and Working , Deep & Deep Publishers, New Delhi.

CII Repot on Mutual Fund Summit (2014) Indian Mutual Fund Industry- Challenging the Status Quo, Setting the Growth Path

Chapter-6

Redmand, A.L., Gullett, N.S. and Manakyan, H. (2000) “Th e Performance of Global and International Mutual Funds”, Journal of Financial and Strategic Decisions, Vol.13, No. 1, Spring, pp. 75–85.

Choi, Y.K. (2006) “Relative Portfolio Performance Evaluation and Incentive Structure”, Journal of Business, Vol. 79, No. 2, pp. 903–21.

Th anou, E. (2008) “Mutual Fund Evaluation During Up and Down Market Conditions: Th e Case of Greek Equity Mutual Funds”, International Research Journal of Finance and Economics, No. 13.

Gupta, M. and Aggarwal, N. (2009) “Mutual Fund Portfolio Creation Using Industry Concentration”, Th e ICFAI Journal of Management Research, Vol. Viii, No. 3, pp. 7–20.

Redman, A.L., Gullet, N.S. and Mankyan, H. (2000) “Th e Performance of Global and International Mutual Funds”, Journal of Financial and Strategic Decions, Vol. 13, No. 1, pp. 75–85

Sharpe, William F. (1964) “Capital Asset Prices: A Th eory of Market Equilibrium under Conditions of Risk”, Journal of Finance, 19: Sept, pp. 225–242.

Treynor, J.L (1965) “ How to Rate Management of Investment Funds”, Harvard Business Review, Vol. 43, pp. 63–75.

Treynor, J.L. and Mazuy, K.K. (1966) “Can Mutual Funds Outguess the Makrets”, Harvard Business Review, Vol. 44, pp. 131–136.

Jensen, M.C. (1967) “Th e Performance of Mutual Funds in the Period 1945–64”, Journal of Finance, Vol. 23, No. 2, pp. 389–416.

Fama, E.F. (1972) “Components of Investment Performance”, Journal of Finance, Vol. 27, pp. 551–567.

Modigliani, F. and Modigliani, L. (1997) “Risk Adjusted Performance”, Journal of Portfolio Management, pp. 45–54.

177© Th e Author(s) 2017G.V.S. Sekhar, Th e Management of Mutual Funds, DOI 10.1007/978-3-319-34000-5

A agent , 5, 52, 75, 86, 97, 156 asset management , 1, 15, 19, 34–5,

42n19, 43–4, 54n59, 59, 74, 96n1, 109–31, 109n1, 154

asset management company (AMC) , 2, 4–6, 12, 22, 24, 28–30, 34, 43, 74, 77, 79, 81, 83–92, 95, 107, 109–10, 117–19, 122–4, 128, 131, 159–62, 164

assets under management (AUM) , 11, 17–20, 45, 84, 114–15, 120, 154, 156–7

Association of Mutual Funds in India (AMFI) , 19, 81, 84–93, 156, 158

B balanced funds , 17, 24, 158–9 benchmarking , 1, 6, 34–5, 37, 40–3,

59, 95–107

beta analysis , 53, 59 Bombay Stock Exchange (BSE) , 26,

100–4, 106–7

C capital asset pricing model (CAPM) ,

47, 51n49, 54, 97n7, 136 capital market , 1–2, 7, 12, 25, 38,

49, 72–3, 75, 84, 86, 100, 137, 150, 154

certifi cate of deposits (CDs) , 24 Chang hung and Lee model , 97 Choi model , 53, 133 close ended schemes , 6–7, 21 commercial paper (CPs) , 24 compound annual growth rate , 9 corporate governance , 1, 5–6, 33–5,

37–40, 59, 61–93 custodian , 4–6, 9, 13, 22–3, 28, 79,

86, 156, 159–60

Index

178 Index

D data envelopment analysis (DEA) , 52 debentures , 3, 24 debt fund , 3, 17, 118, 123 distributor , 5, 81, 84 domestic funds , 25, 42, 114, 134–5

E Elango model , 56 equity linked savings scheme (ELSS) ,

26, 47, 83 equity oriented fund , 19, 139–43 equity schemes , 84 exchange trade fund (ETFs) , 27–8,

99–100, 162–4

F Fama model , 50, 138, 138n10 fast moving consumer goods

(FMCG) , 128 Fidelity investments , 30 fi nancial institutions , 5, 8n2, 13, 15,

30–2, 61, 77, 93, 111 fl oating rate income schemes , 17 foreign direct investment (FDI) , 70 foreign partner , 15 fund manager , 1–4, 22, 25, 27, 29,

34, 37, 39, 42, 44, 44n23, 45, 54, 56–9, 62, 65, 77–8, 96, 98–9, 106–7, 109–10, 110n2, 115–16, 119, 127–8, 133, 140–2, 147–65, n60

fund of funds , 117–18, 159 fund sponsor , 4, 6

G General Insurance Corporation of

India (GIC) , 12, 131 gilt funds , 26, 118 gilt short term , 17 global deposit receipt (GDR) , 162–4 global mutual funds trends , 8–9,

30–1, 134–5 gold exchange trade fund , 17 growth fund , 7, 17, 24, 26, 118,

159

H Hongkong Shangahi Banking

Corporation (HSBC) , 103, 106, 157

Housing Development Finance Corporation (HDFC) , 7, 100, 103–4, 106–7, 110, 117–21, 123–5, 127–8, 143–7, 157

I income fund , 24, 121, 158–9 index funds , 9, 26–7, 43, 43n20, 96,

96n2, 98, 103, 106, 124–5, 127, 143, 145, 147, 159

Indian mutual fund industry , 8n1, 10n5, 11, 19, 81n6, 110n5, 111

Industrial Credit Investment Corporation of India (ICICI) , 15–16, 78, 100, 105, 107, 139–40, 142–8, 157

Industrial Development Bank of India (IBDI) , 11

Index 179

Industrial Development Finance Corporation (IDFC) , 157

initial public off ering (IPO) , 7, 17, 73, 78

investible funds , 27 investment behaviour , 41 Investment Company Institute (ICI) ,

9, 37, 37n1 investment mix , 43, 123 investor , 1–3, 6–11, 13, 16–19,

21–2, 25–30, 34, 38–9, 41–2, 44–5, 53, 62–4, 67, 70, 73, 77–9, 81, 83–5, 95, 98–9, 106, 109–13, 116–17, 128, 133–5, 139–40, 142, 148–50, 152–4, 156, 158, 161– 163

J Jensen analysis , 45, 51 Jensen model , 49

L leaders and laggards , 46 Life Insurance Corporation of India

(LIC) , 12, 18, 157 liquid fund , 118, 121, 158

M Massachusetts Investor Trust , 9–10,

152 money market mutual funds , 24,

155 monitoring funds , 3

Mutual Funds (MFs) , 1, 3–6, 8–10, 37, 61, 95, 109, 133, 149

N National Stock Exchange (NSE) , 86,

100 National Stock Exchange 50 Index

(NIFTY) , 26–8, 100, 102–7, 159, 168

net asset value (NAV) , 7, 10, 16, 21, 28–9, 47, 51, 56, 70, 80, 99, 130, 140–2, 151, 156

O off shore funds , 23, 25 open ended schemes , 6–7, 10, 21–2,

29, 83

P pension funds , 23, 27, 44, 44n26, 46 portfolio management , 1, 6, 23, 35,

37, 42, 44–7, 45n27, 51n41–51n42, 52n50, 52n53, 56n69, 59, 65, 78, 110, 133–48

portfolio manager , 2, 6, 38, 45–6, 53, 134

private sector , 1, 15–19, 21, 39, 56, 63, 93

provident funds , 23, 27, 73 public sector , 3, 12–16, 19, 55–6,

61, 77, 83, 93 Punjab National Bank Mutual Fund

(PNBMF) , 12

180 Index

R regression model , 49 Reserve Bank of India (RBI ) , 11,

14–15, 26, 79, 93 resource mobilization , 13–14 retail investors , 3, 17, 78, 153 risk return analysis , 154

S scheduled commercial banks (SCBs) ,

80 schemes wise resources , 13 sector funds , 12–15, 17–18, 56, 124 Securities and Exchange Board of India

(SEBI) , 1 6, 3–6, 13, 18–19, 21–3, 28–30, 62, 77–87, 90–3, 98–9, 110, 117, 158–65

Sharpe analysis , 51 Sharpe model , 51, 133 short-term income schemes , 17 special sales price , 7 stand deviation analysis , 55, 97 State Bank of India (SBI) , 12, 18,

100–2, 106, 124, 127, 143–5, 147, 157

Statman model , 55 stock market , 9–10, 46n29, 48, 52,

96, 99, 134–5, 152, 154–5

T Tax scheme , 25

transfer agent , 5, 156 trends and projections of resources ,

114 Treynor analaysis , 46, 51 Treynor and Mazuy model , 46,

48–9, 136 trustees , 4–6, 12, 23, 79–81, 84–5,

91, 117, 154, 159–62, 164

U underwriter , 23 United States of America (U.S.A.) ,

8–10, 15, 22, 27, 30, 33, 42, 44n24, 51n43, 54n63, 62, 110–11, 121, 152–3, 155, 167, 169

unit holding pattern , 87, 91 unit investment trusts , 9 Unit Scheme 1964 of UTI (US 64) ,

11, 17, 62 Unit Trust of India (UTI) , 11–20,

25–6, 61–2, 86–91, 101, 106, 124, 127, 131, 140–4, 147, 157

Unit Trust of India Mutual Funds (UTIMF) , 86–7

US fi nancial markets , 155 US scheme , 17

V venture capital funds , 23, 26