Académique Documents
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ON
Submitted by
Nitesh Kumar
Semester 3rd
RAI BUSINESS SCHOOL, New Delhi
INTRODUCTION
There are a lot of investment avenues available today in the financial market for
an investor with an invest able surplus. He can invest in Bank Deposits,
Corporate Debentures, Bonds, Mutual Fund where there is low risk but low
return. He may invest in Stock of companies where the risk is high and the
returns are also proportionately high. The recent trends in the Mutual Fund
Market have shown that an average retail investor always gain with good return.
People began opting for fund managers with expertise in markets who would
invest on their behalf. Thus we had wealth management services provided by
many institutions. However they proved too costly for a small investor. These
investors have found a good shelter with the mutual funds.
Like most developed and developing
countries the mutual fund cult has been catching on in India. The reasons for
this interesting occurrence are:
1.
Mutual funds make it easy and less costly for investors to satisfy their need
Through its products and services, the Reliance - ADA Group touches the life of 1 in 10 Indians every
single day. It has a business presence that extends to over 20000 towns and 4.5 lakhs villages in India,
and 5 continents across the world.
The interests of the Group range from communications (Reliance Communications) and financial
services (Reliance Capital Ltd), to generation, transmission and distribution of power (Reliance
Energy), infrastructure and entertainment.
Reliance Anil Dhirubhai Ambani Group (Reliance ADAG) ranks among India's top three private
sectors business houses. The group has a market capitalization of US$ 22 billion, net assets in excess
of US$ 7 billion, and net worth to the tune of US$ 6 billion. Reliance Anil Dhirubhai Ambani Group
has a customer base of over 50 million, the largest in India, and a shareholder base of over 8 million,
among the largest in the world. R-ADAG has a business presence that is spread over 4,500 towns and
300,000 villages in India, and 5 continents across the world.
Reliance Anil Dhirubhai Ambani Group came into existence when the business empire of the
Reliance Group founded by Dhirubhai Ambani was split between his two sons, Mukesh and Anil.
Mukesh Ambani, the elder brother, retained Reliance Industries Limited (RIL), the flagship company
of the Reliance Group. The part of the empire that was inherited by the younger brother Anil Ambani
was christened as Reliance Anil Dhirubhai Ambani Group. Hence, one can say that the founder of
Reliance ADAG was Dhrubhai Ambani. The interests of the Reliance Anil Dhirubhai Ambani span
communications, financial services, generation, transmission and distribution of power, infrastructure
and entertainment.
Reliance Health: Reliance Health aims at providing integrated health services and plans to venture
into diversified fields like Insurance Administration, Health care Delivery and Integrated Health,
Health Informatics and Information Management and Consumer Health.
Regulatory Authorities:5
To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It
notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. MF either
promoted by public or by private sector entities including one promoted by foreign entities is
governed by these Regulations.
SEBI approved Asset Management Company (AMC) manages the funds by making investments in
various types of securities. Custodian, registered with SEBI, holds the securities of various schemes
of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee Company or board of trustees
must be independent.
The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual funds
that the mutual funds function within the strict regulatory framework. Its objective is to increase
public awareness of the mutual fund industry.
AMFI also is engaged in upgrading professional standards and in promoting best industry practices in
diverse areas such as valuation, disclosure, transparency etc.
Diversification
Diversification is nothing but spreading out your money across available or different types of
investments. By choosing to diversify respective investment holdings reduces risk tremendously up to
certain extent.
The most basic level of diversification is to buy multiple stocks rather than just one stock. Mutual
funds are set up to buy many stocks. Beyond that, you can diversify even more by purchasing
different kinds of stocks, then adding bonds, then international, and so on. It could take you weeks to
buy all these investments, but if you purchased a few mutual funds you could be done in a few hours
because mutual funds automatically diversify in a predetermined category of investments (i.e. growth companies, emerging or mid size companies, low-grade corporate bonds, etc
expectations of unit holder and other market factors. Alternatively some close-ended schemes provide
an additional option of selling the units directly to the Mutual Fund through periodic repurchase at the
schemes NAV; however one cannot buy units and can only sell units during the liquidity window.
SEBI Regulations ensure that at least one of the two exit routes is provided to the investor.
3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-ended and close-ended
schemes. The units may be traded on the stock exchange or may be open for sale or redemption
during pre-determined intervals at NAV related prices.
The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly
he can expect higher returns and vise versa if he pertains to lower risk instruments, which would be
satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate
return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-
bonds that give out more return which is slightly higher as compared to the bank deposits but the risk
involved also increases in the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide
professional management, diversification, convenience and liquidity. That doesnt mean mutual fund
investments risk free. This is because the money that is pooled in are not invested only in debts funds
which are less riskier but are also invested in the stock markets which involves a higher risk but can
expect higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives
market which is considered very volatile.
Debt funds
The objective of these Funds is to invest in debt papers. Government authorities, private companies,
banks and financial institutions are some of the major issuers of debt papers. By investing in debt
instruments, these funds ensure low risk and provide stable income to the investors.
Gilt Funds
Invest their corpus in securities issued by Government, popularly known as Government of India debt
papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes
are safer as they invest in papers backed by Government.
Income Funds
9
Invest a major portion into various debt instruments such as bonds, corporate debentures and
Government securities.
MIPs
Invests maximum of their total corpus in debt instruments while they take minimum exposure in
equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the riskreturn matrix when compared with other debt schemes.
Liquid Funds
Also known as Money Market Schemes, These funds provides easy liquidity and preservation of
capital. These schemes invest in short-term instruments like Treasury Bills, interbank call money
market, CPs and CDs. These funds are meant for short-term cash management of corporate houses
and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return
matrix and are considered to be the safest amongst all categories of mutual funds.
Balanced Funds
As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and
fixed income securities, which are in line with pre-defined investment objective of the scheme. These
schemes aim to provide investors with the best of both the worlds. Equity part provides growth and
the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment
parameterEach category of funds is backed by an investment philosophy, which is pre-defined in the objectives
of the fund. The investor can align his own investment needs with the funds objective and invest
accordingly.
10
By investment objective:
Growth Schemes:
Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital
appreciation over medium to long term. These schemes normally invest a major part of their fund in
equities and are willing to bear short-term decline in value for possible future appreciation
Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to
provide regular and steady income to investors. These schemes generally invest in fixed income
securities such as bonds and corporate debentures. Capital appreciation in such schemes may be
limited.
Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically
distributing a part of the income and capital gains they earn. These schemes invest in both shares and
fixed income securities, in the proportion indicated in their offer documents (normally 50:50).
Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer, short-term instruments, such as
treasury bills, certificates of deposit, commercial paper and inter-bank call money.
Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex
or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the
index. The percentage of each stock to the total holding will be identical to the stocks index
11
weightage. And hence, the returns from such schemes would be more or less equivalent to those of
the Index.
Types of returns
There are three ways, where the total returns provided by mutual funds can be enjoyed by investors:
If income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income
it receives over the year to fund owners in the form of a distribution.
If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also
pass on these gains to investors in a distribution.
If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in
price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice
either to receive a check for distributions or to reinvest the earnings and get more shares.
managed, by well qualified professional. Investors purchase funds because they do not have the time
or the expertise to manage their own portfolio. A mutual fund is considered to be relatively less
expensive way to make and monitor their investments.
2.
Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds,
the investors risk is spread out and minimized up to certain extent. The idea behind diversification is
12
to invest in a large number of assets so that a loss in any particular investment is minimized by gains
in others.
3.
Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to
reducing transaction costs, and help to bring down the average cost of the unit for their investors.
4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their
holdings as and when they want.
management is not dynamic enough to explore the available opportunity in the market, thus many
investors debate over whether or not the so-called professionals are any better than mutual fund or
investor him self, for picking up stocks.
2. Costs
The biggest source of AMC income is generally from the entry & exit load which they
charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost
under layers of jargon.
3. Dilution - Because funds have small holdings across different companies, high returns from a few
investments often don't make much difference on the overall return. Dilution is also the result of a
successful fund getting too big. When money pours into funds that have had strong success, the
manager often has trouble finding a good investment for all the new money.
4. Taxes - when making decisions about your money, fund managers don't consider your personal tax
situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which
affects how profitable the individual is from the sale. It might have been more advantageous for the
individual to defer the capital gains liability.
13
Growth of Mutual Fund Industry in India:In India Mutual Fund Industry growing very rapidly. Since its inception of 1965, this industry has
collected many billions rupees. This graph showing this pace of the industry as on 30 th March 2009.
14
DEBT/LIQUID SCHEMES
Reliance Income Fund (An Open-ended Income Scheme)
Reliance Liquid Fund (An Open-ended Liquid Scheme)
Reliance Medium Term Fund (An Open-ended Income Scheme with no assured returns)
Reliance Short Term Fund (An Open-ended Income Scheme)
Reliance Gilt Securities Fund (An Open-ended Govt. Securities Scheme)
Reliance Monthly Income Plan (An Open-ended Fund-Monthly Income)
15
Reliance Banking Exchange Traded Fund (An Open-ended, exchange listed, index linked Scheme)
Reliance Gold Exchange Traded Fund (An open ended Gold Exchange Traded Fund)
16
Sr No
154787.95
372337.92
111985.24
24321.91
5628286.60
1826.22
762400.12
250850.60
1361563.21
1739634.99
4478.89
20144.95
937537.91
3589.23
802767.54
9234.94
2547284.93
18514.32
N/A
N/A
7819790.24
960483.83
7016946.33
2796.66
2167628.96
1254.72
239677.15
19046.64
777085.93
17
376635.88
3083302.28
16297.69
3241492.12
23788.46
220835.95
869538.09
6663.52
10833236.33
N/A
N/A
1003125.02
21253.53
3406103.72
N/A
N/A
1331465.05
2122280.89
56126.70
6797818.56
67093661.3
72560.42
The mutual fund is constituted as trust in India, which is supervised by the Board of Trustees.
Mutual funds in India are structurally arranged into 3-tier: Sponsor Trustee AMC
18
19
20
VOLATILITY MEASURES
Beta
0.8511
Standard Deviation
4.2468
R Squared
0.9039
Sharpe Ratio
0.0766
1.99
VISION FUND
INVESTMENT OBJECTIVE
21
The primary investment objective of the scheme is to achieve long-term growth of capital by
investment in equity and equity related securities through a research based investment approach.
FUND DATA
Structure . . . .... Open-ended Equity Growth Scheme
Date of allotment . . . . . . . . . . . October 8, 1995
Inception Date . . . . . . . . . . . . . . . .October 8, 1995
Corpus: ..3453.32 cr(30/06/2009)
Minimum Investment
Retail Plan- Rs 5,000
Institutional Plan (IP)- Rs 5 cr
Fund Manager . . . . . . . . . . . . . . . Ashwani Kumar
Benchmark. . . . . . . . . . . . . . . . . .. BSE 100 Index
22
23
24
FUND DATA
Structure . . . Open-ended Diversified Equity Scheme
Date of allotment: . . . . . . . . . . November 15, 2004
Inception Date . . . . . . . . . . . . . November 16, 2004
Corpus: 118.47 crore . . . . . . . . . . . (30/06/2009)
Minimum Investment . . . . . . . . . . . . . . . . .Rs 5,000
Fund Manager . . . . . . . . . . . . . . Omprakash Kuckian
Entry Load . . . . . . . . . . <2cr - 3%; >_2cr <5cr - 2% >_5cr - Nil
Exit Load . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nil
No Entry Load for Direct Investments w.e.f
January 4, 2008
Benchmark. . . . . . . . . . . . . . . . . . . . BSE 200 Index
VOLATILITY MEASURES
Beta
0.9631
Standard Deviation
4.8298
R Squared
0.8967
Sharpe Ratio
0.0834
25
BANKING FUND
INVESTMENT OBJECTIVE
The primary investment objective of the scheme is to generate continous returns by actively investing
in equity and equity-related or fixed-income securities of Banks.
FUND DATA
Structure . . . . . Open-ended Banking Sector Scheme
Date of allotment . . . . . . . . . . . . . . May 26, 2003
Inception Date . . . . . . . . . . . . . . . . . May 28, 2003
Corpus: 942.29 crore . . . . . . . . . . . (30/06/2009)
Minimum Investment . . Retail Plan- Rs 5000
Institutional Plan- Rs 5 cr
Fund Manager . . . . . . . . . . . . . . . . . . Sunil Singhania
Benchmark. . . . . . . . . . . . . . . . S&P CNX Bank Index
VOLATILITY MEASURES
Beta
0.9456
Standard Deviation
5.2473
R Squared
0.7318
Sharpe Ratio
0.1339
26
27
FUND DATA
Structure . . . . . .Open-ended Pharma Sector Scheme
Date of Allotment . . . . . . . . . . . . . . . .June 5, 2004
Inception Date . . . . . . . . . . . . . . . . . . June 8, 2004
Corpus . . . . . . . . . . . . 114.36 cr (30/06/2009)
Minimum Investment . . . . . . . . . . . . . .Rs 5,000
Fund Manager . . . . . . . . . . . . . . . . . Sailesh Rajbhan
28
VOLATILITY MEASURES
Beta
0.8579
Standard Deviation
4.4893
R Squared
0.8216
Sharpe Ratio
0.1594
PHARMA FUND
INVESTMENT OBJECTIVE
The primary investment objective of the scheme is to seek to generate consistent returns by investing
in equity and equity related or fixed income securities of Pharma and other associated companies.
29
FUND DATA
Structure . . . . Open-ended Media & Entertainment
Date of allotment: . . . . . . . . . . September 30, 2004
Inception Date . . . . . . . . . . . . . . . ...October 7, 2004
Corpus . . . . . . . . . . . . 127.21 cr (30/06/2009)
Minimum Investment . . . . . . . . . . . .Rs 5,000
Fund Manager . . . . . . . . . . . . . . . . Sailesh Rajbhan
Benchmark. . S&P CNX Media & Entertainment Index
VOLATILITY MEASURES
Beta
0.6297
Standard Deviation
4.0613
R Squared
0.5423
Sharpe Ratio
0.0960
30
FUND DATA
Structure . . . . . ..Open-ended Media & Entertainment
Date of allotment: . . . . . . . . . . ..September 30, 2004
Inception Date . . . . . . . . . . . . . . . . .October 7, 2004
Corpus . . . . . . . . . . . . 127.21 cr(30/06/2009)
Minimum Investment . . . . . . . . . . . Rs 5,000
Fund Manager . . . . . . . . . . . . . . . Sailesh Rajbhan
Benchmark. . S&P CNX Media & Entertainment Index
VOLATILITY MEASURES
Beta
0.8199
Standard Deviation
4.9842
R Squared
0.6091
Sharpe Ratio
0.0481
31
related securities and the secondary objective is to generate consistent returns by investing in debt and
money market securities.
FUND DATA
Structure . . Open-ended Diversified Equity Scheme
Date of allotment . . . . . . . . . . . . March 28, 2005
Inception Date . . . . . . . . . . . . . . . . March 31, 2005
Corpus . . . . . . . . . . 1506.76 cr (30/06/2009)
Minimum Investment . . . ..Retail Plan- Rs 5,000
IP Plan- Rs 5 cr
Fund Manager . . . . . . . . . . . . . . . . . Sailesh Raj Bhan
Benchmark. . . . . . . . . . . . . . . . . . . . BSE 100 Index
32
VOLATILITY MEASURES
Beta
0.8512
Standard Deviation
4.3592
R Squared
0.8586
Sharpe Ratio
0.0547
0.98
33
FUND DATA
Structure . . . . . . . . . . . . . . . . ..Open-ended Scheme
Date of allotment . . . . . . . . . . . . . . . June 8, 2005
Inception Date . . . . . . . . . . . . . . . . . ....June 9, 2005
Corpus . . . . . . . Rs. 1112.38 cr (30/06/2009)
Minimum Investment . . .. Rs 500
Fund Manager . . . . . . . . . . . . . Omprakash Kuckian
Benchmark. . . . . . . . . . . . . . . . . . . . .BSE 100 Index
34
VOLATILITY MEASURES
Beta
0.8995
Standard Deviation
4.7029
R Squared
0.8237
Sharpe Ratio
0.1138
1.98
35
FUND DATA
Structure . . . . . . . . . . . . . . . . .Open-ended Scheme
Date of allotment . . . . . . . . . ..June 8, 2005
Inception Date . . . . . . . . . . . ..June 9, 2005
Corpus . . . . . . . . .Rs. 86.86 cr (30/06/2009)
Minimum Investment . . . Rs 500 & in multiples of Re 1
Fund Manager. ...Arpit Malaviya & Omprakash Kuckian
Benchmark. . . . . . . . . . . . Crisil Balanced Fund Index
36
VOLATILITY MEASURES
Beta
1.0640
Standard Deviation
3.3220
R Squared
0.7917
Sharpe Ratio
0.0799
9.78
37
FUND DATA
Structure . . . . . . . . . . . . . . . . . Open-ended Scheme
Date of allotment . . . . . . . . . . . . . . . . June 8, 2005
Inception Date . . . . . . . . . . . . . . . . . . .June 9, 2005
Corpus . . . . . . . . . . . . .Rs 2.37 crore (30/06/2009)
Minimum Investment.. Rs 500
Fund Manager . . . . . . . . . . . . . . . . . . .Arpit Malaviya
Benchmark. . . . . . Crisil Composite Bond Fund Index
38
FUND DATA
Structure . . . .Open-ended Equity Linked Savings Scheme
Date of allotment . . . . . . .. ..September 21, 2005
Inception Date . . . . . . . . . . .September 22, 2005
Corpus . . . . . . . . . Rs 1879.81 crore (30/06/2009)
Minimum Investment . . . . . Rs 500
Fund Manager . . . . . . . . . . Ashwani Kumar
Benchmark. . . . . . . . . . . . . . .BSE 100 Index
39
VOLATILITY MEASURES
Beta
0.7840
Standard Deviation
4.1772
R Squared
0.7945
Sharpe Ratio
0.0570
1.78
40
EQUITY FUND
INVESTMENT OBJECTIVE
The primary investment objective of the scheme is to seek to generate capital appreciation and
provide long term growth opportunities by investing in a portfolio constituted of equity and equity
related securities of top 100 companies by market capitalization and of companies which are available
in the derivatives segment from time to time and the secondary objective is to generate consistent
returns by investing in debt and money market securities.
FUND DATA
Structure . . . . .Open-ended Diversified Equity Scheme
Date of allotment . . . . . . . . . . . . . .March 28, 2006
Inception Date . . . . . . . . . . . . . . . .March 30, 2006
Corpus . . . . . . . . Rs. 2232.02 crore (30/06/2009)
Minimum Investment . . . Retail Plan- Rs 5,000
Institutional Plan (IP)- Rs 5 cr and
Fund Manager . . . . . . . . . . . . . . . . .Sunil Singhania
Benchmark. . . . . . . . . . . . . . . . . . . . .S&P CNX Nifty
41
VOLATILITY MEASURES
Beta
0.7499
Standard Deviation
3.7354
R Squared
0.9097
Sharpe Ratio
0.0745
1.10
42
FUND DATA
Structure . . . . . .A 36-month close-ended diversified
Date of allotment . . . . . . . . . . .December 26, 2006
Inception Date . . . . . . . . . . . . . December 27, 2006
Corpus . . . . . . . . .Rs 1922.99 cr (30/06/2009)
Minimum Investment . . . . . . . . . . . Rs 5,000
Fund Manager . . . . . . . . . . . . . . . . ..Sunil Singhania
Benchmark. . . . . . . . . . . . . . . . . . . . BSE 200 Index
43
VOLATILITY MEASURES
Beta
0.6901
Standard Deviation
4.0827
R Squared
0.7392
Sharpe Ratio
0.0265
0.77
44
FUND DATA
Structure . . . Open-ended Diversified Equity Scheme
Date of allotment . . . . . . . . . . . . . ..August 8, 2007
Inception Date . . . . . . . . . . . . . . . . .August 9, 2007
Corpus . . . . . . . . ...Rs 1869.15 cr(30/06/2009)
Minimum Investment . . . ..Retail Plan- Rs 5,000 and
Fund Manager . . Ashwani Kumar & Sailesh Raj Bhan
Benchmark. . . . . . . . . . . . . . . . . . . . .S&P CNX Nifty
45
VOLATILITY MEASURES
Beta
0.9098
Standard Deviation
5.2003
R Squared
0.9713
Sharpe Ratio
0.0270
1.16
46
FUND DATA
Structure . . . . . . . . . . . .Open-ended Equity Scheme
Date of allotment . . . . . . . . . . . February 25, 2008
Inception Date . . . . . . . . . . . . . . ..February 26, 2008
Corpus . . . . . . . . ...Rs 4419.12 crore (30/06/2009)
Minimum Investment . . Retail Plan- Rs 5000
Institutional Plan (IP) - Rs 5 cr
Fund Manager . . . . . .Ashwani Kumar & Shiv Chanani
47
48
VOLATILITY MEASURES
Beta
0.7327
Standard Deviation
4.5916
R Squared
0.839
Sharpe Ratio
-0.0269
2.06
49
FUND DATA
Structure . . . . . . . . . . Open-ended Equity Scheme
Date of allotment . . . . . . . . . . . . . .April 18, 2008
Inception Date . . . . . . . . . . . . . .. . .April 18, 2008
Corpus . . . . . . . . . . . Rs 42.73 crore (30/06/2009)
Minimum Investment . . . Retail Plan - Rs 5,000
Institutional plan - Rs 5 cr
Fund Manager . . . . . . . . . . . . . . . . . Krishan Daga
Benchmark ..................................... S&P CNX Nifty
50
VOLATILITY MEASURES
Beta
0.8763
Standard Deviation
5.2696
R Squared
0.9577
Sharpe Ratio
0.0145
2.17
51
INCOME FUND
INVESTMENT OBJECTIVE
The primary investment objective of the scheme is to generate optimal returns consistent with
moderate level of risk. This income may be complemented by capital appreciation of the portfolio.
Accordingly, investments shall predominantly be made in Debt & Money Market Instruments.
FUND DATA
Structure . . . . . . . . ... . .Open-ended Income Scheme
Date of allotment . . . . . . . . . . . . . January 1, 1998
Inception Date . . . . . . . . . . . . . . . . ..January 1, 1998
Corpus . . . . . . . . ..Rs 1560.75 crore (30/06/2009)
Min Investment For Growth Option..Rs. 5,000;
Mthly Div Plan:
Rs 25,000; . . . .
Rs 10,000
Rs 5,000;
Rs 5,000
52
MEDIUM-TERM FUND
INVESTMENT OBJECTIVE
The primary investment objective of the scheme is to generate regular income in order to make
regular dividend payments to unit holders and the secondary objective is growth of capital.
FUND DATA
Structure . . ... . Open-ended Income Scheme with no assured returns
Date of allotment . . . . . . . . . September 14, 2000
Inception Date . . . . . . . . . . . . .September 25, 2000
Corpus . . . . . . . ...Rs 10400.49 crore (30/06/2009)
Minimum Investment . . . . . . . . . . . Rs. 5,000
Fund Manager . . . . . . . . . . . . . . . . .Amit Tripathi
Weighted Average YTM . . . . . . . . . 7.00%
Modified Duration . . . . . . . . . . . . .. . 0.40 Years
Weighted Avg. Maturity . . . . . . . . . . 0.43 Years
Benchmark. . . . . .. Crisil Short-term Bond Fund Index
53
SHORT-TERM FUND
INVESTMENT OBJECTIVE
The primary investment objective of the scheme is to generate stable returns for investors with a short
term investment horizon by investing in fixed income securitites of a short term maturity.
FUND DATA
Structure . . . . . . . . .. . Open-ended Income Scheme
Date of allotment . . . . . . . . . . December 18, 2002
Inception Date . . . . . . . . . . . . . ..December 23, 2002
Corpus . . . . . . . . Rs 2865.78 crore (30/06/2009)
Minimum Investment . . . . . . . . . . . . ..Rs 50,000
Fund Manager . . . . . . . . . . . . . . . . .
Prashant Pimple
54
FUND DATA
Structure . . . . . . . . .. . . . . . . . . . . Open-ended Fund
Date of allotment . . . . . .. . . . . December 29, 2003
Inception Date . . . . . . . . . . . . . . . January 13, 2004
Corpus . . . . . . . . . Rs 233.18 crore (30/06/2009)
Minimum Investment . . ...For Growth Plan: Rs 10,000;
Benchmark. . . . . . . . . . . . Crisil MIP Blended Index
55
FUND DATA
Structure . . . . . . . . . . .Open-ended Income Scheme
Date of allotment . . . . . . . . . . November 15, 2004
Inception Date . . . . . . . . . . . . . ..November 16, 2004
Corpus . . . . . . . . . . Rs 0.39 crore (30/06/2009)
Minimum Investment . . . . . . . . . . . . .Rs 50,000
Fund Manager . . . . . . . . . . . . . . . . . Prashant Pimple
Weighted Average YTM . . . . . . . . . . 3.98%
Modified Duration . . . . . . . . . . . . . . .. 0.11 Years
Weighted Avg. Maturity . . . . . . . . . . . 0.12 Years
Benchmark. . . . . . Crisil Composite Bond Fund Index.
56
FUND DATA
Structure . . . . . . . .. . .. Open-ended Income Scheme
Date of allotment . . . . . . . . . . . . .March 20, 2007
Inception Date . . . . . . . . . . . . . . . March 21, 2007
Corpus . . . . . . . Rs 15979.80 crore (30/06/2009)
Minimum Investment . . . . . For Retail Plan: Rs 1 lakh
Fund Manager . . . . . . . . . . . . . . . . . . .Amit Tripathi
Weighted Average YTM . . . . . . . . . . .. . .6.76%
Modified Duration . . . . . . . . . . . . . . . . . . 0.42 Years
Weighted Average Maturity . . . . . . . . .. . 0.46 Years
Benchmark. . . . . . . . . . . . . . .Crisil Liquid Fund Index
57
FUND DATA
Structure . . . . . . . . . .. . .Open-ended Liquid Scheme
Date of allotment . . . . . . . . ... . . . .March 18, 1998
Inception Date . . . . . . . . . . . . . . . March 23, 1998
Corpus . . . . . . . .Rs 5494.38 crore (30/06/2009)
Minimum Investment . . . . . . . . . . . .Retail: Rs. 5,000
Istitutional Plan Rs. 1,00,00,000
Fund Manager . . . . . . . . . . . . . . . . Prashant Pimple
Weighted Average YTM . . . . . . . . . . . . . . 6.33%
Weighted Avg. Maturity . . . . . . . . . . . . . 0.21 Years
Benchmark. . . . . . . . . . . . ... . .Crisil Liquid Fund Index
58
59
60
Sharpe Ratio
A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted
performance. The Sharpe ratio is calculated by subtracting the risk-free rate - such as that of the 10year .Treasury bond - from the rate of return for a portfolio and dividing the result by the standard
deviation of the portfolio returns.
The Sharpe ratio formula is:
The Sharpe ratio tells us whether a portfolio's returns are due to smart investment decisions or a result
of excess risk. This measurement is very useful because although one portfolio or fund can reap
higher returns than its peers, it is only a good investment if those higher returns do not come with too
much additional risk. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance
has been. A negative Sharpe ratio indicates that a risk-less asset would perform better than these
security being analyzed.
A variation of the Sharpe ratio is the Sortino ratio, which removes the effects of upward price
movements on standard deviation to measure only return against downward price volatility.
Alpha
Alpha is a risk-adjusted measure of the so-called active return on an investment. It is the
return in excess of the compensation for the risk borne, and thus commonly used to assess
active managers' performances. Often, the return of a benchmark is subtracted in order to
61
consider relative performance; the alpha coefficient (i) is a parameter in the capital asset
pricing model (CAPM). It is the intercept of the Security Characteristic Line (SCL).
Alternatively, it is also the coefficient of the constant in a market model regression.
It can be shown that in an efficient market, the expected value of the alpha coefficient equals
the return of the risk free asset: E(i)
= r f.
Therefore the alpha coefficient indicates how an investment has performed after accounting
for the risk it involved:
i < rf: the investment has earned too little for its risk (or, was too risky for the
return)
i = rf: the investment has earned a return adequate for the risk taken
i > rf: the investment has a return in excess of the reward for the assumed risk
Beta
Where ra measures the rate of return of the asset, rp measures the rate of return of the
portfolio, and Cov
(ra, rp) is the covariance between the rates of return. In the CAPM
formulation, the portfolio is the market portfolio that contains all risky assets, and so the rp
terms in the formula are replaced by rm, the rate of return of the market.
Beta is also referred to as financial elasticity or correlated relative volatility, and can be
referred to as a measure of the sensitivity of the asset's returns to market returns, its nondiversifiable risk, its systematic risk, or market risk. On an individual asset level, measuring
beta can give clues to volatility and liquidity in the marketplace. In fund management,
62
measuring beta is thought to separate a manager's skill from his or her willingness to take
risk.
Volatility is measured by the standard deviation of a stock or a portfolios return from the
mean. Thus, beta is one important measure of volatility.
Ideally, alternative investment strategies will not only minimise downside risk, they will also
aim to achieve low levels of volatility.
Many managers perform statistical analysis to rank securities according to their expected
returns and risk factors, this is called quantitative risk analysis.
From this analysis, they make judgments on stock selectionto enhance alpha and minimise
beta risk. The mathematical analysis is usually performed by computer generated models,
earning the epithet black box investing.
Standard Deviation
A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher
the deviation. Standard deviation is calculated as the square root of variance.
Standard deviation is a statistical measurement that sheds light on historical volatility. For example, a
volatile stock will have a high standard deviation while the deviation of a stable blue chip stock will
be lower. A large dispersion tells us how much the return on the fund is deviating from the expected
normal returns.
63
Sharpe
RRatio
Beta Alpha Square
0.78
0.81 9.67
0.94
--
39.22
0.88
1.07
22.32
0.91
Avg.
29.35
36.29
0.23
0.99
-3.1
0.92
Reliance Growth
Avg.
37.32
0.48
1.02
6.13
0.93
Reliance Income
9.12
0.76
0.91
4.02
0.25
Above
Avg.
High
0.36
0.82
0.02
0.25
0.01
Low
0.19
14.18
0.01
2.61
0.02
Low
0.19
15.37
0.01
2.89
0.02
Reliance Liquidity
Below
Avg.
--
0.2
14.68
0.01
2.91
0.02
0.51
6.45
0.01
3.29
--
0.51
6.09
0.01
3.06
--
0.32
10.07
0.01
3.21
0.01
--
40.95
0.24
0.99
-1.51
0.72
Low
0.28
7.92
0.02
2.18
0.09
Reliance MIP
10.33
0.72
0.8
10.75
0.45
0.2
15.97
0.01
3.2
0.01
Above
Avg.
Below
Avg.
Below
Avg.
0.2
15.07
0.01
2.94
0.01
Avg.
36.73
0.41
3.66
0.91
Fund Name
Reliance Banking Retail
Reliance Diversified Power
Sector Retail
64
--
0.41
-8.83
-3.6
Reliance Pharma
--
35.1
0.48
1.07
13.34
0.76
Avg.
27.88
0.41
1.01
3.58
0.87
--
2.44
0.57
0.04
1.26
0.01
Avg.
42.1
0.6
1.12
12.31
0.87
Reliance Short-term
Avg.
2.44
2.6
6.38
Avg.
33.29
0.28
0.02
0.88
-0.99
0.86
Reliance Vision
Avg.
34.5
0.36
0.95
1.51
0.93
Investment Details
Fund Name
Reliance
Banking ETF
Reliance
Banking Retail
Reliance
Diversified
Power Sector
Inst
Reliance
Diversified
Power Sector
Retail
Reliance ELSS
Series I
Reliance Equity
Mim
Expense Entry
Exit
Initial
Ratio % Load % Load % Inv.
(Rs)
0.35
0.00
0.00
--
Portfolio
Manager
Tenure
(Yrs.)
Krishan Daga
Sunil B.
Singhania
Sunil B.
Singhania
2.14
2.25
0.00
5,000
1.72
0.00
0.00
5 crore
1.82
2.25
0.00
5,000
Sunil B.
Singhania
2.46
0.00
0.00
500
1.89
2.25
0.00
5,000
0.00
0.00
5 crore
2.25
0.00
5,000
Sailesh Raj
Bhan
Sunil B.
Singhania
Ashwani
Kumar, Sailesh
Raj Bhan
Ashwani
3
2, 2
2, 2
65
Fund Name
Mim
Expense Entry
Exit
Initial
Ratio % Load % Load % Inv.
(Rs)
Advantage
Retail
Portfolio
Manager
Tenure
(Yrs.)
Kumar, Sailesh
Raj Bhan
2.25
0.00
5,000
Sailesh Raj
Bhan
Reliance Gilt
Securities Inst
Reliance Gilt
Securities Inst
PF
Reliance Gilt
Securities Retail
Reliance Gilt
Securities Retail
PF
Reliance Gold
ETF
Reliance Growth
1.40
0.00
0.00
1 crore
--
0.00
0.00
1 crore
Prashant R
Pimple
Prashant R
Pimple
1.50
0.00
0.00
10,000
--
0.00
0.00
Prashant R
Pimple
Prashant R
Pimple
1.00
--
--
1.82
2.25
0.00
0.00
0.00
0.00
0.00
Reliance
Infrastructure
Inst
Reliance
Infrastructure
Retail
Reliance Liquid
Cash
Reliance Liquid
Treasury
Reliance Liquid
Treasury Inst
Reliance
Liquidity
--
0.00
0.00
Hiren
Chandaria
Sunil B.
Singhania
Sunil B.
Singhania
Prashant R
Pimple
Sunil B.
Singhania
--
2.25
0.00
Sunil B.
Singhania
0.38
0.00
0.00
Amit Tripathi
1.13
0.00
0.00
0.89
0.00
0.00
0.68
0.00
0.00
Prashant R
Pimple
Prashant R
Pimple
Amit Tripathi
5
2
1
0
1
4
66
Fund Name
Mim
Expense Entry
Exit
Initial
Ratio % Load % Load % Inv.
(Rs)
1.94
0.00
0.00
Reliance Long
Term Equity
Reliance Media 2.46
& Entertainment
Reliance
0.81
Medium Term
Reliance MIP
2.00
Portfolio
Manager
Tenure
(Yrs.)
Sunil B.
Singhania
Sailesh Raj
Bhan
Amit Tripathi
5, 1
2.25
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Ashwani
Kumar, Amit
Tripathi
Amit Tripathi
0.00
0.00
Amit Tripathi
0.00
0.00
1, 1
2.25
0.00
Reliance NRI
Equity
Reliance NRI
Income
Reliance
Pharma
2.46
3.00
0.00
1.36
0.00
0.00
2.50
2.25
0.00
Ashwani
Kumar, Shiv
Chanani
Ashwani
Kumar, Shiv
Chanani
Omprakash
Kuckian
Prashant R
Pimple
Sailesh Raj
Bhan
1, 1
1
1
4
67
Distribution Cost
Distribution cost the combination of sales loads and 12b-1 fees incurred by buyers of mutual funds
decreased 60 percent for equity fund share classes with loads and 43 percent for bond fund share
classes with loads between 1980 and 2001. Distribution cost fell as load share classes were sold with
greater frequency in retirement plans and other accounts that reduce or waive the
load. The decline in cost of purchasing load share classes was also partly in response to competition
from no-load fund companies. To meet the competition, load funds reduced front-end sales loads in
68
the 1980s and offered lower-cost alternatives to front-end loads. _For the mutual fund industry as a
whole, distribution costs fell as sales of no-load share classes increased through the direct,
supermarket, and retirement plan channels. The combination of lower distribution costs among load
share classes and increased sales of no-load share classes caused overall distribution costs to fall by
73 percent for equity funds and 60 percent for bond funds between 1980 and 2001. _ Since the
adoption of Rule 12b-1 in 1980, asset-based distribution fees have become a significant element of
distribution cost. In 2001, 12b-1 fees represented an estimated 48 percent of all distribution costs for
equity fund load share classes and 49 percent for bond fund load share classes. The use of 12b-1 fees
has not offset reductions in sales loads, however.
Advice Channel:
The principal feature of the advice channel is the provision of investment guidance, assistance,
and advice by financial professionals. These include full-service brokers at national wirehouses,
independent financial planners and advisers, registered sales representatives at banks and savings
institutions, and insurance agents. Such advisers help fund shareholders identify financial goals such
as retirement, tax management, education savings, and estate planning. They assess therisk tolerance
of their clients and select mutual funds and other investments to meet these goals.
As an intermediary between investors and funds, financial professionals conduct transactions
for the shareholder, maintain the financial records for the investments under their management, send
periodic financial statements to shareholders, and coordinate the distribution of prospectuses,
financial reports, and proxy statements to shareholders on behalf of the funds. Shareholders questions
about their funds and accounts often are handled by the financial professionals rather than by the fund
companies themselves.
69
typically handles the recordkeeping and other administrative services and assists the employer in the
selection of the investment options offered to employees. Investment options typically include mutual
funds, guaranteed investment contracts, stable value funds, and company stock.6 Among the services
provided by these third parties are educational materials and seminars for employees that explain the
retirement plan, investment options, and investment principles.
Supermarket Channel
The introduction of the first mutual fund supermarket by a discount broker in 1992 represented a
significant innovation in the distribution of mutual funds. Many other discount brokers, some
affiliated with mutual fund companies, have since organized fund supermarkets.
The most important feature of a fund supermarket is its no transaction- fee (NTF) program, whereby
an investor may purchase mutual funds with no transaction fees from a large number of fund
companies. The NTF offerings at a discount broker often number in the thousands, providing an
investor the convenience of purchasing no load funds from different families at a single location.
Supermarkets generally do not provide investment advice, and investors must undertake their own
research when choosing funds. However, supermarkets provide a variety of products and tools to
assist shareholders decision making. In addition, the supermarkets provide a convenient platform
through which investors can research funds, obtain fund literature, and purchase fund shares.
The supermarket platform not only provides fund sponsors with access to a national retail
distribution channel, but it also promotes competition among funds because investors can
readily compare fund fees, expenses, and returns. The fund supermarket holds a single account
with each fund and maintains shareholder transaction records for the mutual fund. The
supermarket also provides consolidated reports to fund shareholders, distributes mutual fund proxy
statements, financial reports, prospectuses, and tax reports. In addition, because the supermarket
maintains the relationship with the investor rather than the fund itself, fund shareholders rely on
the supermarkets telephone representatives and website for account information, reducing the
funds direct cost for providing these services.
Institutional Channel
The institutional channel comprises a variety of institutions purchasing fund shares for their own
accounts. These institutions include businesses, financial institutions, endowments, foundations,
and state and local governments. Fund sponsors often create special share classes or funds for
70
institutional investors. Because these investors have large average account balances, the cost of
managing a fund or share class with institutional accounts is lower than that for funds with a large
number of small accounts. Consequently, the expense ratios for institutional funds and share classes
tend to be lower than for comparable funds sold to individual investors.
Institutional investors can purchase shares directly from fund companies, but they also rely on third
parties to purchase their fund shares. For example, banks and other third parties that help institutions
manage their cash holdings have created platforms that offer a variety of money market funds. These
platforms permit institutional investors to place money in multiple money market funds and to move
money between the funds on this platform. These arrangements allow institutional investors, which
are often restricted as to the portion of their cash holdings that can be held in any particular mutual
fund, to easily diversify their holdings across funds.
71
Summary
The Indian mutual fund industry is in a relatively burgeoning stage with respect to its product
offerings, and tends to compete with products offered by the government providing fixed
guaranteed returns. While the Indian mutual fund industry has shown a striking growth rate
in the last few years, the recent developments triggered by the global financial meltdown
have impacted the industry resulting in AUM decline, adversely impacting the revenue and
profitability. This report discusses about the key issues facing the Indian MF industry and
how the penetration of mutual fund could be potentially increased. In order to increase the
penetration of MF, it is also imperative to understand the investors buying behavior. At the
retail level, investors comprising of a highly heterogeneous group are unique. Hence, their
purchasing pattern and behaviour also widely differs. This makes it mandatory for the Asset
Management Companies (AMCs) to understand the fund/scheme selection/switching
behaviour of the investors in order to design suitable for the end customers. With this
background a survey was conducted among 20 Mutual Fund distributors in NCR region to
understand the factors influencing the fund/scheme selection behaviour of Retail Investors.
This paper discusses the survey findings. It is hoped that the report will have some useful
managerial insight for the Reliance AMC in their product and distribution strategy.
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72
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