Asset Management

August 25, 2010

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 Asset Management

Asset Management

Public Markets Private Markets

Private Equity: Venture Capital:

Long-Only Funds
Hedge Funds: Absolute Returns, Absolute Returns,
(FIIs, MFs,
Absolute Returns, Hurdle Rates, Hurdle Rates,
Insurers): Relative
Hurdle Rates involvement in co involvement in co
Returns
management management

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 Penetration of Financial
Services Low in India
• Bank accounts: 45% of income earners
• Life insurance: 10% of population
• ATM / debit cards: 13% of population
• Credit cards: 2% of population
• Loans: 67% of individuals borrow from non-institutions
• Consumer credit / GDP: lower than most countries at 11.3%,
mortgage to GDP at just 5.6%
• Financial assets: below 10% of household assets (2002),
compared to 66% in USA
• Equities & MFs: 10% of household financial assets, compared
to 27% in USA
Data Sources: Various RBI reports & presentations, IIMS 2007 Report, US Federal Reserve, NSSO, CLSA
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Bank Deposits Dominate Indian
Household Financial Assets

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 Investment Process – Equities
• Quantitative Screening: Market capitalization, free float analysis,
ownership analysis
• Fundamental Analysis: Focus on business, management and valuation
– Size of opportunity, nature of business, competitive landscape
– Financial statement analysis & forecasts
– Management quality & integrity
– Valuation (absolute / relative)
• Investment Recommendation: Buy / hold / sell (absolute) or portfolio
stance (relative)
• Portfolio Construction: Key decisions to buy / hold / sell OR be
overweight / equalweight / underweight certain sectors or stocks
• Portfolio Review: Periodic review, review of sector weights, review of
individual weights

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Measurement of Fund Performance
• Returns (Value Research Fundcard)
• Risk (Standard Deviation, Beta)
• Risk-adjusted returns

– Sharpe Ratio

– Treynor Ratio

– Alpha

– Information Ratio

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 Industry Challenges
• Competition
• Distribution
• Regulation
• Cost pressures
• Efficient markets

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 Career Roles – Research Track
• Junior Analyst (Equity / Credit) – 2-3 Years
• Analyst (Equity / Credit) – 2-5 years
• Senior Analyst (Equity / Credit) OR Fund Manager
(Equity / Debt)
• Senior Fund Manager (Equity / Debt)
• Head of Equities / Debt
• Chief Investment Officer
• Cross-functional experience a plus
• One can join in at any level from other industries like
brokerages, commercial banks, investment banks, rating
agencies, corporates

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 Career Roles – Trader Track
• Junior Trader (Equity / Debt) – 2-3 Years
• Trader (Equity / Debt) – 2-5 years
• Senior Trader (Equity / Debt) OR Fund Manager
(Equity / Debt)
• Senior Fund Manager (Equity / Debt)
• Head of Equities / Debt
• Chief Investment Officer

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 Career Roles – Sales Track
• Institutional sales
– Key clients are banks and corporate treasuries
– Products sold are mostly fixed income
• Retail sales, channel management
– Products sold are mainly equity (including tax saver schemes)
– Products sold to HNI clients could include portfolio management
services offered by the AMC
• Product development
– Product design keeping in mind investor trends, regulatory
issues
– Co-ordination with in-house compliance
– Preparation of marketing material

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 Further References
Marketing / Sales / Product
• www.valueresearchonline.com
• National Institute of Securities Markets (NISM)
Workbook for MF Distributors
• NCFM / NISM Exams
Finance / Investments / Research / Portfolio
• Standard texts on Corporate Finance, Economics,
Financial Statement Analysis, Investment Analysis &
Portfolio Management
• The CFA Program
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Questions??

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