International School of Business & Media

Dissertation Topic

“PORTFOLIO MANAGEMENT THROUGH MUTUAL FUNDS”

Submitted by

Nitish Agarwal

In partial fulfillment of the MBA(Finance) Final

Batch: 2008-2010

Name of student : Nitish agarwal

Roll no: : D-9206

Name of supervisor : Mr Avaneesh Jhumde

DECLARARTION

Research Topic

An investigation on the effectiveness of turnaround strategies. The case of Hwange Colliery

Company Limited.

I, the undersigned do or do not acknowledge that the above student has consulted me for

supervision on his research project or dissertation until completion. I therefore, do or do not

advise the student to submit his work for assessment.

Signature …………………………………

Date …………………………………

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ACKNOWLEDGEMENTACKNOWLEDGEMENT

Concentration, dedication, hard work and application are essential but not the only factor to achieve the desired goal. Those must be supplemented by the guidance assistance and cooperation of experts to make it success.

I am extremely grateful to my institute for providing me the

opportunity to undertake this research project in the prestigious field.

With profound pleasure, I extend my extreme sincere sense of

gratitude and indebtedness to my faculty for extensive and valuable

guidance that was always available to me ungrudgingly and instantly,

which help me complete my project without difficulty.

I express my deep and sincere gratitude to Mr Avaneesh Jhumde,

faculty member for providing me first hand knowledge about other

related subjects.

(Nitish Agarwal)

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INDEX

1) INTRODUCTION

2) PROJECT TITLE

3) OBJECTIVES

4) PURPOSE

5) SCOPE

6) LIMITATION

7) METHODOLOGY

8) OVERVIEW OF MUTUAL FUNDS

9) CURRENT SCENARIO

10) ORGANIZATION OF MUTUAL FUNDS

11) TYPES OF MUTUAL FUNDS SCEMES

12) PERFORMANCE MEASURES OF

MUTUAL FUNDS

13) RISK FACTORS

14) DIFFERENT AMC’S IN INDIA

15) REFERNECES

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ABSTRACT

The rise in the level of capital market has manifested the importance Mutual Funds as

investment medium. Mutual Funds are now are becoming a preferred investment

destination for the investors as fund houses offer not only the expertise in managing

funds but also a host of other services.

Over the last five year period from Mar’03 to Mar’08, the money invested by FIIs was

Rs.2,09,213cr into the stock market as compared to Rs.38,964cr by mutual funds, yet

MFs collectively made an annualized return of 34% while it was 30% in case of FIIs.

Total Assets Under Management(AUM) in India as of today is $92b. Volatile markets and

year end accounting considerations have shaved 6% off in March, but much of that

money should flow back in April. The next five years will see the Indian Asset

Management business grow at least 33% annually says a study by McKinsey.

Funds in the diversified equity category which has the largest number of funds(194) as

well as the highest investor interest lost an average of 28.3% in Q4,2007-08 but gained

an average of 21.4% over the four quarters. Equity funds are estimated to have had net

inflows of Rs.7000cr for March 2008.More than 80% of equity funds managed to

outperform Sensex in terms of returns over the last five years.

Investor’s money inflow to mutual funds has sidelined for the time being but the overall

long term fundamental outlook on the economy remains intact. To lower the impact of

volatility one can stay invested in diversified equity funds over a longer period of time

through the route of Systematic Investment Plan.

When it comes to investing, everyone has unique needs based on their own objectives and risk profile. While many investment avenues such as fixed deposits, bonds etc. exist, it is usually seen that equities typically outperform these investments, over a longer period of time. Hence we are of the opinion that, systematic investment in equity allows one to create substantial wealth.

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INTRODUCTION:

Mutual funds have been a significant source of investment in both government and

corporate securities. It has been for decades the monopoly of the state with UTI being

the key player, with invested funds exceeding Rs.300 bn. (US$ 10 bn.). The state-owned

insurance companies also hold a portfolio of stocks. Presently, numerous mutual funds

exist, including private and foreign companies. Banks - mainly state-owned too have

established Mutual Funds (MFs). Foreign participation in mutual funds and asset

management companies is permitted on a case by case basis.

A Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal. The money thus collected is then invested in capital market

instruments such as shares, debentures and other securities. The income earned

through these investments and the capital appreciations realized are shared by its unit

holders in proportion to the number of units owned by them. Thus a Mutual Fund is the

most suitable investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed basket of securities at a relatively low cost. The flow

chart below describes broadly the working of a mutual fund:

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PROJECT TITLE

“PORTFOLIO MANAGEMENT THROUGH MUTUAL FUNDS”

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OBJECTIVE

The objectives of the study on this topic are as follows:

Primary objective:

To study the influence and role of mutual funds in managing a portfolio.

To analyze the various risk-return characteristics of Mutual funds and attempt to

establish a link between the demographics (age, income, employment status

etc), risk tolerance of investors.

To analyze the performance of Top Mutual Funds in India.

Secondary objectives:

Understanding the various characteristics of different Mutual funds.

Understanding the Investment pattern of AMC’s

To get additional clients for the company and making them aware about the

benefits of mutual funds.

To come up with recommendations for investors and mutual fund companies in

India based on the above study.

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PURPOSE Investment in mutual funds gives you exposure to equity and debt markets. These funds

are marketed as a safe haven or as smart investment vehicles for novice investors.

The middle-class Indian investor who plays hot tips for a quick buck at the bourses is the

stuff of legends. The middle-class Indian investor who runs out of luck and loses not only

his money but his peace of mind too is somewhat less famous by choice. Mutual funds,

on the other hand, sell us middling miracles. Consequently proof enough for a research

on Mutual Funds, which has exacting returns.

Every investor requires a healthy return on his/her investments. But since the market is

very volatile and due to lack of expertise they may fail to do so. So a study of these

mutual funds will help one to equip with unwarranted knowledge about the elements

that help trade between risk and return thereby improving effectiveness. A meticulous

study on the scalability at which the mutual funds operate along with diagnosis of the

market conditions would endure managing the investment portfolio efficiently. The

study would also immunize on risks and foresee healthy returns; incidentally in worst of

conditions it has given a return of 18 per cent.

SCOPE The project covers the financial instruments mobilizing in the Indian Capital market in

particular the Mutual Funds.

The mutual funds analysed for their performance are determined over a period of 5

years fluctuations and returns. The elements taken into consideration for choosing some

of the top funds is on the basis of their respective sharpe , beta, ratio, .

The project shelves some of the top asset management companies operating in India ,

segregated on the basis of their performance over a period of time. Scooping further the

project inundates the success ratio of the funds administered by top AMC’s.

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LIMITATIONS A well managed portfolio of various individual scripts which is rare, would not help to

draw a line of difference between portfolio managed through mutual funds and the

former.

The median used to choose the top AMC’s and the mutual funds to be analysed is

relative and personalized and need not be accepted industry wide. Inaccessibility to

certain information and data relating to the project on account of it being confidential.

Market volatility would affect individuals perception which would rather not be likely

the way it is expressed, thus resulting in a very relative data.

METHODOLOGYA thorough study of literature on the mutual fund industry both in India and abroad will

be done. Different measures will be adopted to understand and evaluate the risks and

returns of funds efficiently and effectively.

An extensive study of various articles and publications of SEBI, AMFI and government of

India and other agencies with respect to the demographics of the population of the

country and their investing pattern will be a part of the methodology adopted. The

project will be carried out mainly through two researches:

Primary research:

Field visits

Meeting with the clients

Secondary research:

Internet.

AMFI book.

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Fact sheets of various mutual fund houses.

Overview of Indian Mutual Fund Industry

Assets under management

As of the end on 31 January 2008, the mutual fund industry had a debt and equity

assets of Rs 5,50,157 crore. Its equity corpus of Rs 2,20,263 lakh crore accounts for over

3 per cent of the total market capitalization of BSE, at Rs 58 lakh crore. Its holding in

Indian companies ranges between 1 per cent and almost 29 per cent, making them an

influential shareholder. Together with banks, insurance companies and FIIs- collectively

called institutional investors- they have the ability to ask company managements some

tough questions. India’s market for mutual funds has generated substantial growth in

assets under management over the past 10 years.

Ownership of mutual fund shares

One notable characteristic of India’s mutual fund market is the high percentage of

shares owned by corporations. According to the Association of Mutual Funds in India

( AMFI ) , Individual investors held slightly under 50% of mutual fund assets, and

corporations held over 50% as of the end of march 2007. This high percentage of

corporate ownership can be tracked back to tax reforms instituted in 1999 that lowered

the tax rate on dividend and interest income from mutual funds, and made that rate

lower than the corporate tax levied on income from securities held directly by

corporations.

Although there is no official data regarding the type investor in each class, the typical

pattern seems to be that individual investors primarily invest in equity funds, while

corporate investors favor bond funds, particularly short-term money market products

that provide a way for corp[orations to invest surplus cash.

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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. 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.

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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. The 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.

CURRENT SCENARIO:

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The fund industry has grown phenomenally over the past couple of years, and as on 31

January 2008, it had a debt and equity assets of Rs 5,50,157 crore. Its equity corpus of

Rs 2,20,263 lakh crore accounts for over 3 per cent of the total market capitalization of

BSE, at Rs 58 lakh crore. Its holding in Indian companies ranges between 1 per cent and

almost 29 per cent, making them an influential shareholder. Together with banks,

insurance companies and FIIs- collectively called institutional investors- they have the

ability to ask company managements some tough questions.

More significant than this stupendous growth has been the regulatory changes that the

capital market watchdog, Securities and Exchange Board of India, introduced in the past

two years. Outgoing Sebi Chairman M.Damodaran’s two year stint as chairman of Unit

Trust of India helped him reform the industry by making it much more transparent than

before. In the process, mutual funds have become a tad cheaper.

Until 2007, for instance, initial issue expenses on close-ended funds, which could be as

high as 6 per cent of the amount raised, could be amortized over the tenure of the fund.

This basically meant that even if an investor put in Rs 1 lakh, effectively only Rs 94,000

got invested by the fund. The initial expenses of the fund include commissions paid to

distributors and money spent on billboards for advertising the new offer. In 2006, the

regulator had scrapped the amortization benefit for open-ended schemes. Not

surprisingly, asset management companies started launching closed-ended funds. Of

the 34 new fund offers in 2007, 24 were closed-ended. In January this year, SEBI said all

closed-ended mutual fund schemes too will meet sales and marketing expenses from

the entry load. This made it more transport for investors, because funds had to either

hike their expense ratio (management fee and operating charges as a percentage of

assets under management) or change higher entry load.

More About Mutual funds

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According to SEBI "Mutual Fund" means a fund established in the form of a trust to raise

monies through the sale of units to the public or a section of the public under one or

more schemes for investing in securities, including money market instruments;"

To the ordinary individual investor lacking expertise and specialized skill in dealing

proficiently with the securities market a Mutual Fund is the most suitable investment

forum as it offers an opportunity to invest in a diversified, professionally managed

basket of securities at a relatively low cost. India has a burgeoning population of middle

class now estimated around 300 million. A typical Indian middle class family can pool

liquid savings ranging from Rs.2 to Rs.10 Lacs. Investment of this money in Banks keeps

the fund liquid and safe, but with the falling rate of interest offered by Banks on

Deposits, it is no longer attractive. At best a small part can be parked in bank deposits,

but what are the other sources of remunerative investment possibilities open to the

common man? Mutual Fund is the ready answer, as direct PMS investment is out of the

scope of these individuals. Viewed in this sense India is globally one of the best markets

for Mutual Fund Business, so also for Insurance business. This is the reason that foreign

companies compete with one another in setting up insurance and mutual fund business

shops in India. The sheer magnitude of the population of educated white-collar

employees with raising incomes and a well-organized stock market at par with global

standards, provide unlimited scope for development of financial services based on PMS

like mutual fund and insurance.

The alternative to mutual fund is direct investment by the investor in equities and bonds

or corporate deposits. All investments whether in shares, debentures or deposits

involve risk: share value may go down depending upon the performance of the

company, the industry, state of capital markets and the economy. Generally, however,

longer the term, lesser is the risk. Companies may default in payment of interest/

principal on their debentures/bonds/deposits; the rate of interest on an investment may

fall short of the rate of inflation reducing the purchasing power. While risk cannot be

eliminated, skillful management can minimise risk. Mutual Funds help to reduce risk

through diversification and professional management. The experience and expertise of

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Mutual Fund managers in selecting fundamentally sound securities and timing their

purchases and sales help them to build a diversified portfolio that minimises risk and

maximises returns.

ORGANISATION OF A MUTUAL FUND:

There are many entities involved and the diagram below illustrates the organizational

set up of a mutual fund:

The Advantages of Investing in a Mutual Fund

The advantages of investing in a Mutual Fund extending PMS to the small investors are

as under:

Professional Management - The investor avails of the services of experienced and

skilled professionals who are backed by a dedicated investment research team,

which analyses the performance and prospects of companies and selects suitable

investments to achieve the objectives of the scheme.

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Diversification - Mutual Funds invest in a number of companies across a broad

cross-section of industries and sectors. This diversification reduces the risk

because seldom do all stocks decline at the same time and in the same

proportion. You achieve this diversification through a Mutual Fund with far less

money than you can do on your own.

Convenient Administration - Investing in a Mutual Fund reduces paperwork and

helps you avoid many problems such as bad deliveries, delayed payments and

unnecessary follow up with brokers and companies. Mutual Funds save your

time and make investing easy and convenient.

Return Potential Over a medium to long-term - Mutual Funds have the potential

to provide a higher return as they invest in a diversified basket of selected

securities.

Low Costs - Mutual Funds are a relatively less expensive way to invest compared

to directly investing in the capital markets because the benefits of scale in

brokerage, custodial and other fees translate into lower costs for investors.

Liquidity - In open-ended schemes, you can get your money back promptly at net

asset value related prices from the Mutual Fund itself. With close-ended

schemes, you can sell your units on a stock exchange at the prevailing market

price or avail of the facility of direct repurchase at NAV related prices which

some close-ended and interval schemes offer you periodically.

Transparency - You get regular information on the value of your investment in

addition to disclosure on the specific investments made by your scheme, the

proportion invested in each class of assets and the fund manager's investment

strategy and outlook.

Flexibility - Through features such as regular investment plans, regular

withdrawal plans and dividend reinvestment plans, you can systematically invest

or withdraw funds according to your needs and convenience.

Choice of Schemes - Mutual Funds offers a family of schemes to suit your varying

needs over a lifetime.

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Well Regulated - All Mutual Funds are registered with SEBI and they function

within the provisions of strict regulations designed to protect the interests of

investors. The operations of Mutual Funds are regularly monitored by SEBI.

Other Special Features of MFs in terms of Portfolio Functions

These are special safeguards for the investor prescribed by SEBI.

Portfolio Investment operations are entrusted to a professional company, i.e.

The Asset Management Company. (AMC). Thus while MFs offer PMS functions

on behalf of its unit holders, the actual PMS services are rendered by the AMCs.

Physical custody of the securities is not with the AMC but with a custodian, an

independent organisation, appointed for the purpose. For instance, the Stock

Holding Corporation of India Ltd. (SCHIL) is the custodian for most fund houses in

the country.

Disadvantages:

1. No Control over Costs

2. No Tailor-made Portfolios

3. Managing a Portfolio of Funds

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Types of mutual fund schemesThe expertise and professional skill developed by different Mutual Funds in Portfolio

Management can be better expressed by listing the different financial products they

have developed to be offered to the investors:

1. Schemes according to Maturity Period:

A mutual fund scheme can be classified into open-ended scheme or close-ended

scheme depending on its maturity period.

o An open-ended fund or scheme is one that is available for subscription

and repurchase on a continuous basis. These schemes do not have a fixed

maturity period

o Close-ended Fund/Scheme : A close-ended fund or scheme has a

stipulated maturity period e.g. 5-7 years. The fund is open for

subscription only during a specified period at the time of launch of the

scheme. Investors can invest in the scheme at the time of the initial

public issue and thereafter they can buy or sell the units of the scheme

on the stock exchanges where the units are listed. In order to provide an

exit route to the investors, some close-ended funds give an option of

selling back the units to the mutual fund through periodic repurchase at

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NAV related prices. These mutual funds schemes disclose NAV generally

on weekly basis

2. Schemes according to Investment Objective :

A scheme can also be classified as growth scheme, income scheme, or balanced

scheme considering its investment objective. Such schemes may be open-ended

or close-ended schemes as described earlier. Such schemes may be classified

mainly as follows:

o Growth / Equity Oriented Scheme : The aim of growth funds is to provide

capital appreciation over the medium to long- term. Such schemes

normally invest a major part of their corpus in equities. Such funds have

comparatively high risks. These schemes provide different options to the

investors like dividend option, capital appreciation, etc. and the investors

may choose an option depending on their preferences. The mutual funds

also allow the investors to change the options at a later date. Growth

schemes are good for investors having a long-term outlook seeking

appreciation over a period of time.

o Income / Debt Oriented Scheme : The aim of income funds is to provide

regular and steady income to investors. Such schemes generally invest in

fixed income securities such as bonds, corporate debentures,

Government securities and money market instruments. Such funds are

less risky compared to equity schemes. These funds are not affected

because of fluctuations in equity markets. However, opportunities of

capital appreciation are also limited in such funds. The NAVs of such

funds are affected because of change in interest rates in the country. If

the interest rates fall, NAVs of such funds are likely to increase in the

short run and vice versa. However, long term investors may not bother

about these fluctuations.

o Balanced Fund : The aim of balanced funds is to provide both growth and

regular income as such schemes invest both in equities and fixed income

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securities in the proportion indicated in their offer documents. These are

appropriate for investors looking for moderate growth. They generally

invest 40-60% in equity and debt instruments. These funds are also

affected because of fluctuations in share prices in the stock markets.

However, NAVs of such funds are likely to be less volatile compared to

pure equity funds.

3. Money Market or Liquid Fund :

These funds are also income funds and their aim is to provide easy liquidity,

preservation of capital and moderate income. These schemes invest exclusively

in safer short-term instruments such as treasury bills, certificates of deposit,

commercial paper and inter-bank call money, government securities, etc.

Returns on these schemes fluctuate much less compared to other funds. These

funds are appropriate for corporate and individual investors as a means to park

their surplus funds for short periods.

4. Gilt Fund :

These funds invest exclusively in government securities. Government securities

have no default risk. NAVs of these schemes also fluctuate due to change in

interest rates and other economic factors as is the case with income or debt

oriented schemes.

5. Index Funds :

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive

index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the

same weightage comprising of an index. NAVs of such schemes would rise or fall

in accordance with the rise or fall in the index, though not exactly by the same

percentage due to some factors known as "tracking error" in technical terms.

Necessary disclosures in this regard are made in the offer document of the

mutual fund scheme. There are also exchange traded index funds launched by

the mutual funds which are traded on the stock exchanges.

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6. Sector specific funds/schemes :

These are the funds/schemes, which invest in the securities of only those

sectors, or industries as specified in the offer documents. e.g. Pharmaceuticals,

Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The

returns in these funds are dependent on the performance of the respective

sectors/industries. While these funds may give higher returns, they are more

risky compared to diversified funds. Investors need to keep a watch on the

performance of those sectors/industries and must exit at an appropriate time.

They may also seek advice of an expert.

7. Tax Saving Schemes :

These schemes offer tax rebates to the investors under specific provisions of the

Income Tax Act, 1961 as the Government offers tax incentives for investment in

specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes

launched by the mutual funds also offer tax benefits. These schemes are growth

oriented and invest pre-dominantly in equities. Their growth opportunities and

risks associated are like any equity-oriented scheme

8. Load or no-load Fund :

A Load Fund is one that charges a percentage of NAV for entry or exit. That is,

each time one buys or sells units in the fund, a charge will be payable. This

charge is used by the mutual fund for marketing and distribution expenses.

However, the investors should also consider the performance track record and

service standards of the mutual fund, which are more important. Efficient funds

may give higher returns in spite of loads.

9. No-load fund : is one that does not charge for entry or exit. It means the investors

can enter the fund/scheme at NAV and no additional charges are payable on

purchase or sale of units.

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10. Monthly Income Plan:

To generate regular income through investments in debt and money

market instruments and also to generate long-term capital appreciation

by investing a portion in equity related instruments.

Fund Objective :-Investors seeking regular income through investments in

fixed income securities so as to get monthly/quarterly/half yearly

dividend. The secondary objective of the scheme is to generate long term

capital appreciation by investing a portion of scheme’s assets in equity

and equity related instruments. Suitable for investor with medium risk

profile and seeking regular income.

11. FMP’s ( Fixed Maturity Plans ): These are close-ended income schemes with a

fixed maturity date. The period could range from fifteen days to as long as two

years or more. When the period comes to an end, the scheme matures and

money is paid back. Like an income scheme, FMPs invest in fixed income

instruments i.e. bonds, government securities, money market instruments etc.

The tenure of these instruments depends on the tenure of the scheme.

FMPs effectively eliminate interest rate risk. This is done by employing a

specific investment strategy. FMPs invest in instruments that mature at

the same time their schemes come to an end. So a 90-day FMP will invest

in instruments that mature within 90 days.

For all practical purposes, an FMP is an income scheme of a mutual fund.

Hence, the tax incidence would be similar to that on traditional income

schemes. The dividend from an FMP will be tax free in the hands of an

individual investor. However, it would be subject to the dividend

distribution tax.

Redemptions from investments held for less than a year will be short-

term gains and added to the investor's income to be taxed at slab rates

applicable. If such an investment were held for more than a year, the

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long-term gains would get taxed at 20 per cent with indexation or at 10

per cent without. These rates are subject to the surcharge and education

cess as normally applicable. One can avail the benefit of double

indexation and save tax on FMPs held for more than one year.

PERFORMANCE MEASURES OF MUTUAL FUNDSMutual Fund industry today, with about 34 players and more than five hundred

schemes, is one of the most preferred investment avenues in India. However, with a

plethora of schemes to choose from, the retail investor faces problems in selecting

funds. Factors such as investment strategy and management style are qualitative, but

the funds record is an important indicator too. Though past performance alone cannot

be indicative of future performance, it is, frankly, the only quantitative way to judge

how good a fund is at present. Therefore, there is a need to correctly assess the past

performance of different mutual funds.

Worldwide, good mutual fund companies over are known by their AMCs and this fame

is directly linked to their superior stock selection skills. For mutual funds to grow, AMCs

must be held accountable for their selection of stocks. In other words, there must be

some performance indicator that will reveal the quality of stock selection of various

AMCs.

Return alone should not be considered as the basis of measurement of the

performance of a mutual fund scheme, it should also include the risk taken by the fund

manager because different funds will have different levels of risk attached to them. Risk

associated with a fund, in a general, can be defined as variability or fluctuations in the

returns generated by it. The higher the fluctuations in the returns of a fund during a

given period, higher will be the risk associated with it. These fluctuations in the returns

generated by a fund are resultant of two guiding forces. First, general market

fluctuations, which affect all the securities present in the market, called market risk or

systematic risk and second, fluctuations due to specific securities present in the

portfolio of the fund, called unsystematic risk. The Total Risk of a given fund is sum of

these two and is measured in terms of standard deviation of returns of the fund.

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Systematic risk, on the other hand, is measured in terms of Beta, which represents

fluctuations in the NAV of the fund vis-à-vis market. The more responsive the NAV of a

mutual fund is to the changes in the market; higher will be its beta. Beta is calculated

by relating the returns on a mutual fund with the returns in the market. While

unsystematic risk can be diversified through investments in a number of instruments,

systematic risk can not. By using the risk return relationship, we try to assess the

competitive strength of the mutual funds vis-à-vis one another in a better way.

In order to determine the risk-adjusted returns of investment portfolios, several

eminent authors have worked since 1960s to develop composite performance indices

to evaluate a portfolio by comparing alternative portfolios within a particular risk class.

The most important and widely used measures of performance are:

Ø The Treynor Measure

Ø The Sharpe Measure

Ø Jenson Model

Ø Fama Model

The Treynor Measure

Developed by Jack Treynor, this performance measure evaluates funds on the basis of

Treynor's Index. This Index is a ratio of return generated by the fund over and above

risk free rate of return (generally taken to be the return on securities backed by the

government, as there is no credit risk associated), during a given period and systematic

risk associated with it (beta). Symbolically, it can be represented as:

Treynor's Index (Ti) = (Ri - Rf)/Bi.

Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the

fund.

All risk-averse investors would like to maximize this value. While a high and positive

Treynor's Index shows a superior risk-adjusted performance of a fund, a low and

negative Treynor's Index is an indication of unfavorable performance.

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The Sharpe Measure

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is

a ratio of returns generated by the fund over and above risk free rate of return and the

total risk associated with it. According to Sharpe, it is the total risk of the fund that the

investors are concerned about. So, the model evaluates funds on the basis of reward

per unit of total risk. Symbolically, it can be written as:

Sharpe Index (Si) = (Ri - Rf)/Si

Where, Si is standard deviation of the fund.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a

fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.

Comparison of Sharpe and Treynor

Sharpe and Treynor measures are similar in a way, since they both divide the risk

premium by a numerical risk measure. The total risk is appropriate when we are

evaluating the risk return relationship for well-diversified portfolios. On the other hand,

the systematic risk is the relevant measure of risk when we are evaluating less than

fully diversified portfolios or individual stocks. For a well-diversified portfolio the total

risk is equal to systematic risk. Rankings based on total risk (Sharpe measure) and

systematic risk (Treynor measure) should be identical for a well-diversified portfolio, as

the total risk is reduced to systematic risk. Therefore, a poorly diversified fund that

ranks higher on Treynor measure, compared with another fund that is highly

diversified, will rank lower on Sharpe Measure.

Jenson Model

Jenson's model proposes another risk adjusted performance measure. This measure

was developed by Michael Jenson and is sometimes referred to as the Differential

Return Method. This measure involves evaluation of the returns that the fund has

generated vs. the returns actually expected out of the fund given the level of its

systematic risk. The surplus between the two returns is called Alpha, which measures

the performance of a fund compared with the actual returns over the period. Required

return of a fund at a given level of risk (Bi) can be calculated as:

26

Ri = Rf + Bi (Rm - Rf)

Where, Rm is average market return during the given period. After calculating it, alpha

can be obtained by subtracting required return from the actual return of the fund.

Higher alpha represents superior performance of the fund and vice versa. Limitation of

this model is that it considers only systematic risk not the entire risk associated with

the fund and an ordinary investor cannot mitigate unsystematic risk, as his knowledge

of market is primitive.

Fama Model

The Eugene Fama model is an extension of Jenson model. This model compares the

performance, measured in terms of returns, of a fund with the required return

commensurate with the total risk associated with it. The difference between these two

is taken as a measure of the performance of the fund and is called net selectivity.

The net selectivity represents the stock selection skill of the fund manager, as it is the

excess return over and above the return required to compensate for the total risk

taken by the fund manager. Higher value of which indicates that fund manager has

earned returns well above the return commensurate with the level of risk taken by

him.

Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)

Where, Sm is standard deviation of market returns. The net selectivity is then

calculated by subtracting this required return from the actual return of the fund.

Among the above performance measures, two models namely, Treynor measure and

Jenson model use systematic risk based on the premise that the unsystematic risk is

diversifiable. These models are suitable for large investors like institutional investors

with high risk taking capacities as they do not face paucity of funds and can invest in a

number of options to dilute some risks. For them, a portfolio can be spread across a

number of stocks and sectors. However, Sharpe measure and Fama model that

consider the entire risk associated with fund are suitable for small investors, as the

ordinary investor lacks the necessary skill and resources to diversified. Moreover, the

27

selection of the fund on the basis of superior stock selection ability of the fund

manager will also help in safeguarding the money invested to a great extent. The

investment in funds that have generated big returns at higher levels of risks leaves the

money all the more prone to risks of all kinds that may exceed the individual investors'

risk appetite.

RISK FACTORAll investments involve some form of risk. Even an insured bank account is subject to

the possibility that inflation will rise faster than your earnings, leaving you with less real

purchasing power than when you started (Rs. 1000 gets you less than it got your father

when he was your age).

The discussion on investment objectives would not be complete without a discussion on

the risks that investing in a mutual fund entails.

At the cornerstone of investing is the basic principle that the greater the risk you take,

the greater the potential reward. Remember that the value of all financial investments

will fluctuate. Typically, risk is defined as short-term price variability. But on a long-term

basis, risk is the possibility that your accumulated real capital will be insufficient to meet

your financial goals. And if you want to reach your financial goals, you must start with an

honest appraisal of your own personal comfort zone with regard to risk. Individual

tolerance for risk varies, creating a distinct "investment personality" for each investor.

Some investors can accept short-term volatility with ease, others with near panic. So

whether you consider your investment temperament to be conservative, moderate or

aggressive, you need to focus on how comfortable or uncomfortable you will be as the

value of your investment moves up or down.

Managing risks

Mutual funds offer incredible flexibility in managing investment risk. Diversification and

Systematic Investing Plan (SIP) are two key techniques you can use to reduce your

investment risk considerably and reach your long-term financial goals.

Diversification

28

When you invest in one mutual fund, you instantly spread your risk over a number of

different companies. You can also diversify over several different kinds of securities by

investing in different mutual funds, further reducing your potential risk. Diversification is

a basic risk management tool that you will want to use throughout your lifetime as you

rebalance your portfolio to meet your changing needs and goals. Investors, who are

willing to maintain a mix of equity shares, bonds and money market securities have a

greater chance of earning significantly higher returns over time than those who invest in

only the most conservative investments. Additionally, a diversified approach to investing

-- combining the growth potential of equities with the higher income of bonds and the

stability of money markets -- helps moderate your risk and enhance your potential

return.

Types of risks:

Consider these common types of risk and evaluate them against potential rewards when

you select an investment.

Market Risk

At times the prices or yields of all the securities in a particular market rise or fall due to

broad outside influences. When this happens, the stock prices of both, an outstanding,

highly profitable company and a fledgling corporation may be affected. This change in

price is due to "market risk.”

Inflation Risk

29

Sometimes referred to as "loss of purchasing power." Whenever inflation sprints

forward faster than the earnings on your investment, you run the risk that you'll actually

be able to buy less, not more. Inflation risk also occurs when prices rise faster than your

returns.

Credit Risk

In short, how stable is the company or entity to which you lend your money when you

invest? How certain are you that it will be able to pay the interest you are promised, or

repay your principal when the investment matures?

Interest Rate Risk

Changing interest rates affect both equities and bonds in many ways. Investors are

reminded that "predicting" which way rates will go is rarely successful. A diversified

portfolio can help in offsetting these changes.

Effect of loss of key professionals and inability to adapt business to the rapid

technological change

An industries' key asset is often the personnel who run the business i.e. intellectual

properties of the key employees of the respective companies. Given the ever-changing

complexion of few industries and the high obsolescence levels, availability of qualified,

trained and motivated personnel is very critical for the success of industries in few

sectors. It is, therefore, necessary to attract key personnel and also to retain them to

meet the changing environment and challenges the sector offers. Failure or inability to

attract/retain such qualified key personnel may impact the prospects of the companies

in the particular sector in which the fund invests.

Exchange Risks

A number of companies generate revenues in foreign currencies and may have

investments or expenses also denominated in foreign currencies. Changes in exchange

rates may, therefore, have a positive or negative impact on companies which in turn

would have an effect on the investment of the fund.

Investment Risks

30

The sectoral fund schemes, investments will be predominantly in equities of select

companies in the particular sectors. Accordingly, the NAV of the schemes are linked to

the equity performance of such companies and may be more volatile than a more

diversified portfolio of equities.

Changes in the Government Policy

Changes in Government policy especially in regard to the tax benefits may impact the

business prospects of the companies leading to an impact on the investments made by

the fund.

Measuring Risks:

Risk Measure Implication Impact On Investor

High average maturity and

modified duration

More sensitive to interest

rate changes

Higher volatility in returns

Low average maturity and

modified duration

Less sensitive to interest

rate changes

Lower volatility in returns

Greater allocation to high

credit rated instruments

Low risk default Lower yield with lower risk

Greater allocation to low

rated instruments

Higher risk of default Higher yield but with

greater risk

31

Wealth ManagementWealth Management is a type of financial planning that provides high net worth

individuals and families with private banking, estate planning, legal resources, and

investment management, with the goal of sustaining and growing long-term wealth.

Whereas financial planning can be helpful for individuals who have accumulated wealth

or are just starting to accumulate wealth, you must already have accumulated a

significant amount of wealth for the wealth management process to be effective.

Services typically include:

Portfolio Management and Portfolio Rebalancing

Investment Management and Strategies

Trust and Estate Management

Private Banking and Financing

Tax Advice

Family Office Structures

Portfolio Management

PORTFOLIO:

A Portfolio is a diversified professionally managed basket of securities. A healthy

investment portfolio has the following features:

The right mix of assets and liabilities

Regular monitoring

Rebalancing portfolio when the asset mix gets skewed

Optimum returns in a reasonable time period

As per definition of SEBI Portfolio means "a collection of securities owned by an

investor”. It represents the total holdings of securities belonging to any person".

Obviously Portfolio Management refers to the management or administration of a

portfolio of securities to protect and enhance the value of the underlying investment.

SEBI has directed that portfolio management as a service by a financial intermediary is

32

to be carried out only by corporate entities. Portfolio management by a corporate body

can be either for management of its own pool of securities created out funds collected

from diverse sources or it can be offered as a financial service to other investors, who

choose to avail the expertise and skill of this company to carry out portfolio

investment/management on their behalf. Insurance companies, mutual funds, pension

and provident funds etc. carry out operations of portfolio management for investing

their own funds in remunerative channels. These companies are also referred as

investment companies or institutional investors. In fact they are portfolio managers in

respect of the back-end of their business activities. After initially pooling these funds

from smaller investors, they choose to invest them in a portfolio of securities intended

as a lucrative deployment option.

Portfolio Management

The goal of Portfolio Management is to assemble various securities and other assets

into portfolios that address investor needs and then to manage these portfolios so as to

achieve investment objectives. The investor’s needs are defined in terms of risk, and the

portfolio manager maximizes return for investment risk undertaken.

Portfolio Management consists of three major activities: 1) Asset Allocation, 2) Shifts in

weighting across major assets classes, and 3) Security selection within asset classes.

Asset allocation can best be characterized as the blending together of major asset

classes to obtain the highest long-run return at the lowest risk. Managers can make

opportunistic shifts in asset class weightings in order to improve return prospects over

the longest-term objective.

RISK RETURN TRADE OFF

In selecting asset classes for portfolio allocation, investors need to consider both the

return potential and the riskiness of the asset class. It is clear from empirical estimates

that there is a high correlation between risk and return measured over longer periods of

time. Furthermore capital market theory, posits that there should be a systematic

relationship between risk and return. This theory indicates that securities are priced in

33

the market so that high risk can be rewarded with high return, and conversely, low risk

should be accompanied by correspondingly lower return.

In the above figure a capital market line showing an expected relationship between risk

and return for representative asset classes arrayed over a range of risk. Note that the

line is upward-sloping, indicating that higher risk should be accompanied by higher

return. Conversely, the capital market relationship can be considered as showing that

higher return can be generated only at the “expense” of higher risk. When measured

over longer periods of time, the realized return and risk of the asset classes conform to

this sort of relationship.

Note that treasury bills are positioned at the low end of the risk range, consistent with

these securities’ generally being considered as representative of risk-free investing, at

least for short holding periods. Correspondingly, the return offered by T-bills is usually

considered as a basic risk-return. On the other hand, equities as a class show the highest

risk and return, with venture capital at the very highest position on the line, as would be

expected. International equities, in turn, are shown as higher risk than domestic

equities. Bonds and real estate are at an intermediate position on the capital market

34

line, with real estate showing higher risk relative to both corporate and government

bonds.

Types of portfolio based on Risk and Return

Whenever the money is invested a risk of not getting the money back is borne by the

investor. An investor wants a compensation for bearing such a risk also known as

returns. In theory “the higher is the risk the greater are the returns” and vice versa. The

chart below can explain the different types of securities and their associated risk.

Located towards the right of the diagram are investments that offer investors a higher

potential for above-average returns, but this potential comes with a higher risk.

Towards the left are much safer investments, but these investments having a lower

potential for high returns.

Conservative Portfolio

This model is ideal for those who wish to take least amount of risk and want a steady

income over a period of time from his investments. Conservative portfolio is designed by

investing greater proportion in the lower risk securities. Such a portfolio always tends to

generate income for the investor. Such a model aims at protecting the principal value of

the portfolio. Hence the investment is generally done in fixed income and money

market securities. Very less amount of the capital is invested in the equities. The model

is often known as the ‘capital preservation portfolio’.

35

Moderately Conservative Portfolio

A moderately conservative portfolio is ideal for those who want a fixed and steady

income as well as capital appreciation. This model not only offers a fixed income but

also grows the money of the investor. Although maximum amount of allocation is done

in lower risk securities, investment is also made in equities to some extent so that the

capital grow

Moderately Aggressive Portfolio

36

Source: Investopedia.com

Source: Investopedia.com

A moderately aggressive portfolio is ideal for those who want a balance of growth and

income. The asset composition is divided among equity and fixed income securities.

Maximum amount of investment is made in the equities. Assets allocated to the fixed

income securities is also no less. Such a model is often referred to as “balance portfolio”

Aggressive portfolios mainly consist of equities. So the value tends to fluctuate. Such a

portfolio provides long term appreciation to the capital. But to have some liquidity fixed

income securities are also added to the portfolio. It is always better to invest in such a

portfolio for a longer period of time so that the money gets sufficient time to grow. Such

a portfolio is risky.

37

Source: Investopedia.com

Source: Investopedia.com

Very Aggressive Portfolio

A very aggressive portfolio is one which consist mostly of equities. The portfolio is

suitable for those who have risk taking ability. Since the investment is done in equities

hence it provides a growth to the capital. The portfolio is designed for those who can

invest for a longer time period.

Investment Risk Pyramid

Once the risk acceptable in the portfolio has been decided by acknowledging the time

horizon and bankroll one can use the risk pyramid approach for balancing the assets.

38

Source: Investopedia.com

Source: Investopedia.com

This pyramid can be thought of as an asset allocation tool that investors can use to

diversify their portfolio investments according to the risk profile of each security. The

pyramid, representing the investor's portfolio, has three distinct tiers:

Base of the pyramid: this area is comprised of investments that are low in risk and

have good returns.

Middle portion: this area is made of medium risk investments that not only offers

stable returns but also allows capital appreciation.

Summit (top): the summit is for high risk investments. This is the area of the pyramid

and should be made up of money one can afford to lose.

Portfolio Management

Process of Portfolio Management

Following is the process of portfolio management:

1. Understanding the present market conditions

2. Framing of an Investment Policy

This involves mainly the following two parts:

a. Investment Objectives of an investor

b. Investment Constraints of an investor

3. Portfolio Policies and Strategies

4. Asset Allocation Process

5. Security Selection

6. Portfolio Construction

7. Portfolio Implementation and Execution

8. Portfolio Analysis

9. Portfolio Rebalancing and Revision

39

After you've built your portfolio of mutual funds, you need to know how to maintain it.

Four common strategies can be followed for the same:

o The "Wing-It" Strategy

This is the most common mutual-fund strategy. Basically, if your portfolio does not have

a plan or a structure, then it is likely that you are employing a wing-it strategy. If you are

adding money to your portfolio today, how do you decide what to invest in? Are you

one that searches for a new investment because you do not like the ones you already

have? A little of this and a little of that? If you already have a plan or structure, then

adding money to the portfolio should be really easy. Most experts would agree that this

strategy will have the least success because there is little to no consistency.

o Market-Timing Strategy

The market timing strategy implies the ability to get into and out of sectors or assets or

markets at the right time. The ability to market time means that you will forever buy low

and sell high. Unfortunately few investors buy low and sell high because investor

behavior is usually driven by emotions instead of logic. The reality is most investors tend

to do exactly the opposite – buy high and sell low. This leads many to believe that

market timing does not work in practice. No one can accurately predict the future with

any consistency.

o Buy-and-Hold Strategy

This is by far the most commonly preached investment strategy. The reason for this is

that statistical probabilities are on your side. Markets generally go up 75% of the time

and down 25% of the time. If you employ a buy-and-hold strategy and weather through

the ups and downs of the market, you will make money 75% of the time. If you are to

be more successful with other strategies to manage your portfolio, you must be right

more than 75% of the time to be ahead. The other issue that makes this strategy most

popular is it is easy to employ. This does not make it better or worse. It is just easy to

buy and hold.

40

o Performance-Weighting Strategy

This is somewhat of a middle ground between market timing and buy and hold. With

this strategy, you will revisit your portfolio mix from time to time and make some

adjustments. Let's walk through an oversimplified example using real performance

figures.

Let's say that at the end of 2007, you started with an equity portfolio of four mutual

funds and split the portfolio into equal weightings of 25% each.

Fund Allocation(Rs) Allocation (%)

Fund A 25000 25

Fund B 25000 25

Fund C 25000 25

Fund D 25000 25

100000 100

After the first year of investing, the portfolio is no longer an equal 25% weighting

because some funds performed better than others.

Fund 1-yr return End balance(Rs) Allocation (%)

Fund A 13.60% 28000 26.28

Fund B 6.80% 26700 24.71

Fund C 8.50% 27125 25.10

Fund D 3.40% 25850 23.92

108075 100

41

The reality is that after the first year, most investors are inclined to dump the loser

(Fund D) for more of the winner (Fund A). However, the right strategy is to do the

opposite to practice sell high, buy low. Performance weighting simply means that you

sell some of the funds that did the best to buy some of the funds that did the worst.

Your heart will go against this logic but it is the right thing to do because the one

constant in investing is that everything goes in cycles.

In year four, Fund A has become the loser and Fund D has become the winner.

Fund 1-yr return

Fund A -16.00%

Fund B 22.30%

Fund C 9.60%

Fund D 15.20%

Performance weighting this portfolio year after year means that you would have taken

the profit when Fund A was doing well to buy Fund D when it was down. In fact, if you

had re-balanced this portfolio at the end of every year for five years, you would be

further ahead as a result of performance weighting.

The key to portfolio management is to have a discipline that you adhere to. The most

successful money managers in the world are successful because they have a discipline to

manage money and they have a plan. Warren Buffet said it best: "To invest successfully

over a lifetime does not require a stratospheric I.Q., unusual business insight or inside

information. What is needed is a sound intellectual framework for making decisions

and the ability to keep emotions from corroding that framework."

42

What drives portfolio performance?According to Mahindra Finance team of wealth management, the most important step

in wealth management is asset allocation. But the least time is spent on this investment

decision. This step affects almost 92% of the returns expected from any portfolio.

Complex CopoundsThe crisil complexity classification denotes how easy it is for an investor to understand the risks associated with

different products.

PRODUCT SIMPLE COMPLEX HIGHLY COMPLEX

Debt Funds Gilt, Liquid, Debt

funds,Fixed Maturity

Plans, Interval Funds,

Monthly Income Funds

Mutual

Funds-

Structured

Capital protected funds-

static hedge, arbitrage

funds

Capital protected funds-

Leveraged,

constant,proportion portfolio

43

insurance,dynamic portfolio

insurance

Mutual

Funds-Eqity

and Others

Plain equity,sector based

balanced,gold,etf’s,index

linked funds

Derivative funds,fund of

funds,international,special

situation funds

Art funds

Equity Shares Exchange-traded equity

shares

Equity

Derivatives

Buying index/stock options

(long options),index/stock

futures(buying and selling)

Selling index/stock options(short

positions)

Commodity

Derivatives

Commodity futures

Others PPF,NSC/Kisan Vikas

Patra,Recuring deposit

Unit-linked insurance plans Real estate investment trusts

Source: CRISIL

Dummy portfolio

Here I have taken two portfolios- 1) only scripts 2) scripts and mutual funds

This dummy portfolio will enable us to understand how the portfolio is managed

through mutual funds. In the first portfolio I have taken a total amount of approx Rs

100000 invested in 5 securities covering 5 different sectors so as to taste the flavor of

diversification. The portfolio has taken the exposure of 100% equity with a blend of

growth and large as its style. The companies taken into the portfolio contains topost

companies in its sector like ITC, Bharti Airtel, ONGC,Parsvnath and ICICI bank.

The time duration of 1 year has been taken so as to taste the long term results. But the

overall results as of 1st juiy, 2008 stands negative. The portfolio gives a loss of Rs

44

1643.70.The detailed analysis of the portfolio can be well understood with the tables

mentioned below.

45

46

The second portfolio contains a blend of securities and mutual funds so as to

manage the portfolio in an efficient manner. Here to get a feel of diversification I have

taken 5 scripts which are common as in the first portfolio but this time with a little

changes in the amount. This time I have taken a total amount of Rs 100000 with Rs

50000 in scripts and Rs 50000 in mutual funds which are again not concentrated. In the

mutual funds I have taken gold ETFs , balanced fund, index fund and opportunities fund.

The reason being as the portfolio has already taken the exposure of 100% equity in the

scripts. Therefore to bang upon the diversification I have taken different mutual fund

schemes. The result has been astonishing with approx 1 year as the time duration and a

net profit on the whole portfolio standing at Rs 14513. The analysis can be observed

with the charts provided below. This portfolio explores the experience of portfolio

diversification with an asset allocation in equity and a little in debts and others. It also

gets an exposure of mid cap and small cap.

47

48

Finally to summarise and come to a conclusion we can for sure observe and deduce that

portfilo can really be managed through mutual funds. A number of permutation and

combination can be applied to design a model portfolio containing mutual funds. I have

just arrived at one portfolio which if present has really done wonders.

49

Different AMC’s in IndiaThe Mutual Fund Industry in India has grown steadily over the last couple of years

and is today managing assets in excess of Rs 5,50,000 crore meeting different

investment needs of millions of retail and institutional clients across debt, equity and

hybrid asset class.

As on 31st march 2008

Incorpora

ted On

Ownershi

p Foreign-

Domestic

- Sponsor

ABN AMRO Mutual

Fund 27/5/200

4 Private 75%, 25%

ABN AMRO Asset Management

(Asia) Ltd.

Benchmark Mutual

Fund

_ Private 0%, 100%

Niche Financial Services Private

Ltd

Birla Mutual Fund 23/12/19

94 Foreign JV 50%, 50%

Sun Life (India) AMC

Investments Inc., Birla Global

Finance Ltd

BOB Mutual Fund 30/10/19

92 Public 0%, 100% Bank of Baroda

Canbank Mutual Fund

15/12/19

87 Public 0%, 100% Canara Bank

DBS Chola Mutual

Fund 3/1/1997 Private 37.48%, 62.52%

Cholamandalam DBS Finance

Ltd.

Deutsche Mutual Fund

28/10/20

02 Private 100%, 0%

Deutsche Asset Management

(Asia) Limited

DSP Merrill Lynch

Mutual Fund

16/12/19

96 Foreign JV 40%, 60%

DSP Merrill Lynch Ltd, HMK

Investment Pvt. Ltd., ADIKO

Investment Pvt. Ltd.

Escorts Mutual Fund 15/4/199 Private 0%, 100% Escorts Finance Ltd

50

6

Fidelity Mutual Fund

17/2/200

5 Private 100%, 0%

Fidelity Internal Investment

Advisors

Franklin

19/2/199

6 Foreign JV 75%, 25% Franklin Resources, Inc.

HDFC Mutual Fund

30/6/200

0 Private 0%, 100% HDF Corporation Ltd

HSBC Mutual Fund 7/2/2002 Private -- 100%

HSBC Securities and Capital

Markets (India) Private Limited

ING Mutual Fund

11/2/199

9 Foreign JV 85.68%, 14.32%

National Nederlanden

Interfinance B.V (ING

Group),ING Vysya Bank Ltd.,

Kirti Equities Pvt. Ltd.(Mehta

JM Financial Mutual

Fund

15/9/199

4 Private 0%, 100%

J.M Financial Consultancy

Services Private Ltd, J.M Share

& Stock Brokers Ltd.

Kotak Mutual Fund

23/6/199

8 Private 0%, 100% Kotak Mahindra Finance Ltd

LIC Mutual Fund

19/6/198

9 Public 0%, 100% Life Insurance Corporation of

India

Morgan Stanley

Mutual Fund

5/11/199

3 Foreign JV 75%, 25%

Morgan Stanley Dean Witter &

Company

Principal Mutual Fund

25/11/19

94 Private 65%, 35% Principal Financial Services Inc.

Prudential ICICI

Mutual Fund

25/8/199

3 Foreign JV 55%, 45% Prudential plc, ICICI Bank

Quantum Mutual Fund

2/12/200

5 Private 0%, 100%

Quantum Advisors Private

Limited

51

Reliance Mutual Fund

30/6/199

5 Private 0%, 100% Reliance Capital Ltd

Sahara Mutual Fund

18/7/199

6 Private 0% 100% Sahara Ind Fin. Corporation Ltd

SBI Mutual Fund

29/6/198

7 Public 37%, 63% SBI, Societe Generale AM

Stan Chartered MF

13/3/200

0 Foreign JV 75%, 25% Standard Chartered Bank

Sundaram Mutual

Fund

24/8/199

6 Private 0%, 100% Sundaram Finance Ltd

Tata Mutual Fund

30/6/199

5 Foreign JV 0%, 100%

Tata InvestCorp Ltd, Tata Sons

Ltd

Taurus Mutual Fund

20/8/199

3 Private 0%, 100% HB Portfolio Ltd

UTI 1/2/1964 Public 100% 0% UTI

UTI Mutual Fund 1/2/2003 Public 0%, 100% SBI, LIC, PNB, Bank of Baroda

52

Fund Analysis Parameters

53

Top 5 Fund Houses

Fund House No. of top rated

funds

Total rated

funds

Reliance Mutual

Fund

10 17

ICICI Prudential

Mutual Fund

21 38

Tata Mutual Fund 14 30

Birla Sunlife

Mutual Fund

18 39

HSBC Mutual

fund

6 13

Source: Value Research

54

REFERENCES:

55

I. http://en.wikipedia.org/wiki/Mutual_fund II. http://finance.indiamart.com/markets/mutual_funds/

III. http://www.moneycontrol.com/mutualfundindia IV. http://www.mutualfundsindia.com/icra_m_power_institutional.asp#q3 V. http://www.amfiindi.com/navhistoryreport.asp

VI. www.nseindia.com VII. www.bseindia.com

VIII. http://www56.homepage.villanova.edu/david.nawrocki/ briefhistoryofdownsiderisknawrocki.pdf

IX. www.businessweek.com/investing/insights/blog/archives/2007/10/ new_research_co.html

X. www.unf.edu/~oschnuse/draft7.pdf XI. www.sebigov.in

XII. www.kotaksecurities.com XIII. http://www.moneycontrol.com/indiamutualfunds/mfinfo/14/51/snapshot/

imdesc/UTI%20Leadership%20Equity%20Fund%20(G)/fdec/UTI%20Asset%20Mgmt%20Company%20Pvt.%20Ltd./imid/MUT096/imffid/UT

XIV. www.valueresearchonline.com XV. www.waytowealth.com

XVI. www.eurekasecurities.comm XVII. www.myrisis.com

XVIII. www.geojit.com XIX. www.capitalmarket.com XX. Investors Guide to Mutual Funds- January 2008

XXI. Business Today(July2,2006 edition)XXII. Business World( March3, 2008 edition)

XXIII. Value researchXXIV. Economic times XXV. & Factsheet of Different AMC’s.

56