rahul mutual fund report
TRANSCRIPT
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Introduction
Introduction
To get a high-quality return from Funds investors generally baffle in taking
decision for choosing the optimum funds. We here trying to get out from this
problem by comparing two funds.
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I am emphasising to establish a analytical comparison between diversified
Equity- Growth funds and Sectorial Funds..
Diversified funds hold low risk than Sectorial funds because sectorial funds
concentrate only a particular sector of economy. Since we know that profit is in
proportion to risk so it make a point to study that return from sectorial funds
should be higher than diversified funds.
Comparing mutual funds is fairly simple when you have a good understanding
of the key statistics and know how to employ them effectively. The key
statistics listed below should serve you well in comparing mutual funds.
Mutual Fund Returns
Average Return
Risk-Adjusted Return
Mutual Fund Risk
Standard Deviation
Beta
Risk-to-Return
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Sharpe Ratio
Coefficient of Variation
Treynor Ratio
NAV
About Mutual Funds
A mutual fund share represents a proportionate ownership of all the underlying
securities in the fund, allowing investors to spread their money over many more
securities than one person could typically put together in a portfolio. A mutual
fund is a more diversified than a typical individual's portfolio, thereby reducing
your comparative risk and, consequently increasing your comparative return.
The amount of capital needed to obtain this diversification is too large for the
average individual investor.
Besides, mutual funds can achieve economies of scale in trading and transaction
costs, economies unavailable to the typical individual investor. Also,
professional money managers should be able to earn above average returns
through successful securities analysis. Moreover, mutual funds allow
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individuals to earn a certain return without needing to constantly monitor the
market.
Diversification
Successful investors know that diversifying their investments can help reduce
the adverse impact of a single investment. Mutual funds introduce
diversification to your investment portfolio automatically by holding a wide
variety of securities. Moreover, since you pool your assets with those of other
investors, a mutual fund allows you to obtain a more diversified portfolio than
you would probably beable to comfortably manage on your own — and at a
fraction of the cost. In short, funds allow you the opportunity to invest in many
markets and sectors. That‘s the key benefit of diversification.
Types of mutual funds:
Wide variety of Mutual Fund Schemes exist to cater to the needs such as
financial position, risk tolerance and return expectations etc. The table below
gives an overview into the existing types of schemes in the Industry.
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1. Schemes according to Maturity Period:
Open - Ended Schemes
Close - Ended Schemes
Interval Schemes
2. Fund according to Investment Objective:
Growth Schemes
Income Schemes
Balanced Schemes
Money Market Schemes
3. Other Schemes
Tax Saving Schemes
Special Schemes
Index Schemes
Sector Specific Schemes
1. Schemes according to Maturity Period:
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(A). An open ended mutual fund
A mutual fund that continually creates new shares on demand. Mutual fund
shareholders buy the funds at net asset value and may redeem them at any time
at the prevailing Net Asset Value.
(B). An close ended mutual fund
A mutual fund that closes after the initial offering, and has fixed duration open
for subscription only during a specified period. Listing in a recognized stock
exchange is a basic feature of a closed-ended mutual fund. Existing
investors/new investors can exit from or invest in these funds at the quoted
market prices subject to a specified bid/offer spread.
2. Fund according to Investment Objective:
(A). 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
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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
investors must indicate the option in the application form. 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.
(B). 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.
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(C). 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 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.
(D). 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.
3. Other Funds
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(A). Sectorial funds
Sectorial funds are those funds that restrict their investments to a particular
segment or sector of the economy. These funds concentrate on one industry
such as Infrastructure, Power , Auto , Heath care, Media , Pharmaceuticals etc.
The idea is to allow investors to place bets on specific industries or sectors,
which have strong growth potential. These funds tend to be more volatile than
funds holding a diversified portfolio of securities in many industries. Such
concentrated portfolios can produce tremendous gains or losses, depending on
whether the chosen sector is in or out of flavor.
(B). Index Funds
An index fund is a type of mutual fund that builds its portfolio by buying stock
in all the companies of a particular index and thereby reproducing the
performance of an entire section of the market. Investing in an index fund is a
form of passive investing. Passive investing has two big advantages over active
investing. First, a passive stock market mutual fund is much cheaper to run than
an active fund. Second, a majority of mutual funds fail to beat broad indexes
such as the S&P 500.
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(C).Tax saving funds or Equity Linked Svings Scheme (ELSS) :
These funds have a lock-in period of three years. Much better when compared
to the lock-in periods of four and 15 years of NSC and PPF respectively. The
dividends earned will be tax free. When you sell the units of these funds, you
can avail of the long-term capital gain for which there is no tax. View the three
year lock-in period as a benefit. Because when you invest in equity, you must
take a long-term view. The real potential of equities starts to show only after a
few years. This allows you to ignore the short-term slumps and stay invested for
the long haul. Also, the lock-in gives fund managers the freedom to take sector
and stock bets, which they are not able to do in the regular equity schemes.
Before we go on to that, we would like to explain a term: market cap. You will
come across it quite often as we talk of fund managers investing in large cap,
small cap and mid cap.
Market capitalisation = Market price of the share x The number of shares in a
company
Large cap = Companies with a market cap of over Rs 1,500 crore (Rs 15
billion)
Mid cap = Those between Rs 25 crore (Rs 250 million) and Rs 1,500 crore (Rs
15 billion)
Small cap = Those less than Rs 25 crore (Rs 250 million
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PRINCIPAL INVESTMENT STRATEGIES
At least 80% of the Diversified Equity Fund‘s net assets (including borrowings
for investment purposes) consists of common stocks of
large-capitalization U.S. companies that are diversified among various
industries and market sectors. For this purpose, City National Asset
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Management, Inc. (―CNAM‖), the Fund‘s investment adviser, considers a large-
capitalization company to be a company with a market
capitalization satisfying Standard & Poor‘s eligibility criteria for inclusion in
the S&P 500 Index at the time of investment (currently $4
billion or greater). This investment strategy may be changed at any time, with
60 days‘ prior notice to shareholders.
CNAM manages a portion of the Diversified Equity Fund‘s assets by
replicating the holdings of the S&P 500 Index other than tobaccorelated
companies. The investments of the remainder of the Fund are typically equity
securities that a sub-adviser believes have one or more
of the following characteristics: a price significantly below the intrinsic value of
the issuer; favorable prospects for earnings growth; above
average return on equity and dividend yield; and sound overall financial
condition of the issuer.
Up to 20% of the Diversified Equity Fund‘s net assets may consist of equity
securities, consisting primarily of common stock, of midcapitalization
companies. For this purpose, CNAM considers a mid-capitalization company to
be a company with a market capitalization
satisfying Standard & Poor‘s eligibility criteria for inclusion in the S&P Midcap
400 Index at the time of investment (currently $1 billion to
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$4.4 billion). In addition to investing in U.S. corporations, the Fund invests in
U.S. dollar denominated sponsored American Depositary
Receipts of foreign corporations. The Fund‘s sub-advisers may buy and sell
securities in the Fund‘s portfolio frequently, which may result
in higher transaction costs and produce capital gains and losses. The Fund‘s
sub-advisers may determine to sell a security when its target
value is realized, its earnings deteriorate, changing circumstances affect the
original reasons for the security‘s purchase, or more attractive
investment alternatives are identified.
PRINCIPAL RISKS OF INVESTING IN THE FUND
As with any mutual fund, there are risks to investing. None of the Diversified
Equity Fund, CNAM and the Fund‘s sub-advisers can
guarantee that the Fund will meet its investment goal. The Fund will expose
you to risks that could cause you to lose money. Here are the
principal risks to consider:
Market Risk of Equity Securities – By investing in common stocks, the Fund
may expose you to a sudden decline in the share price of a
particular portfolio holding or to an overall decline in the stock market. In
addition, the Fund‘s principal market segment may underperform
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other segments or the market as a whole. The value of your investment in the
Fund will fluctuate daily and cyclically based on movements
in the stock market and the activities of individual companies in the Fund‘s
portfolio.
Index Risk – The performance of the portion of the Fund designed to replicate
the S&P 500 Index may not exactly match the performance
of the Index. That portion of the Fund does not hold every stock contained in
the Index and the performance of the stocks held in the Fund
may not track exactly the performance of the stocks held in the Index.
Furthermore, unlike the Index, the Fund incurs management fees,
12b-1 fees (for Class N shares only), administrative expenses and transaction
costs in trading stocks.
Medium Capitalization (Mid-Cap) Companies – Investments in mid-cap
companies may involve greater risks than investments in larger,
more established companies, such as limited product lines, markets and
financial or managerial resources. In addition, the securities of midcap
companies may have greater price volatility and less liquidity than the securities
of larger capitalized companies.
Foreign Investments (American Depositary Receipts) – Foreign investments
tend to be more volatile than domestic securities, and are
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subject to risks that are not typically associated with domestic securities (e.g.,
unfavorable political and economic developments and the
possibility of seizure or nationalization of companies, or the imposition of
withholding taxes on income). The Fund invests in U.S. dollar
denominated American Depositary Receipts of foreign companies (―ADRs‖)
which are sponsored by the foreign issuers. ADRs are subject to
the risks of changes in currency or exchange rates (which affect the value of the
issuer even though ADRs are denominated in U.S. dollars)
and the risks of investing in foreign securities.
Sub-Adviser Allocation – The Fund‘s performance is affected by CNAM‘s
decisions concerning how much of the Fund‘s portfolio to
allocate for management by each of the Fund‘s sub-advisers or to retain for
management by CNAM.
Management – The Fund‘s performance depends on the portfolio managers‘
skill in making appropriate investments. As a result, the Fund
may underperform the equity market or similar funds.
Defensive Investments – During unusual economic or market conditions, or for
temporary defensive or liquidity purposes, the Fund may
invest 100% of its assets in cash or cash equivalents that would not ordinarily
be consistent with the Fund‘s investment goals.CNI CHARTER FUNDS
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PERFORMANCE
The bar chart and the performance table that follow illustrate some of the risks
and volatility of an investment in the Diversified Equity
Fund by showing changes in the Fund‘s performance from year to year and by
showing the Fund‘s average annual total r eturns for 1, 5 and
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10 years and since inception. Of course, the Fund‘s past performance (before
and after taxes) does not necessarily indicate how the Fund
will perform in the future. Call (888) 889-0799 or visit
www.cnicharterfunds.com to obtain updated performance information.
This bar chart shows the performance of the Diversified Equity Fund‘s
Institutional Class shares based on a calendar year.
29.18%
13.53%7.35%
14.72%
0.63%
28.46%
12.51% 13.36%
(38.08)%
(6.96)%
-60%
-40%
-20%
0%
20%
40%
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60%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Best Quarter
16.06%
Q2 2003
Worst Quarter
(23.29)%
Q4 2008
This table shows the average annual total returns of each class of the
Diversified Equity Fund for the periods ended December 31, 2012.
The table also shows how the Fund‘s performance compares with the returns of
an index comprised of companies similar to those held by
the Fund.
Average Annual Total Returns(1)
(for the periods ended December 31, 2012) One Year Five Years Ten Years
Since Inception
Institutional Class
Return Before Taxes 13.36% (1.15)% 5.55% 8.75%
Return After Taxes on Distributions 13.21% (1.26)% 4.87% 6.33%
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Return After Taxes on Distributions and Sale of Fund Shares 8.88% (0.99)%
4.73% 6.34%
Class N
Return Before Taxes 13.02% (1.40)% 5.27% 8.63%
S&P 500 Index
(Reflects no deduction for fees, expenses or taxes) 16.00% 1.66% 7.10% 9.37%
(1) Performance for ―Since Inception‖ for all classes is shown for periods
beginning October 20, 1988, which is the date the predecessor to the
Diversified Equity Fund (the
―Predecessor Fund‖) commenced operations. On September 30, 2005, the
Predecessor Fund reorganized into the Fund. The performance results for
Institutional Class shares
of the Fund before September 30, 2005, reflect the performance of the
Predecessor Fund‘s Class I shares. Class A shares of the Predecessor Fund, the
predecessor to the Class N
shares of the Fund, commenced operations on December 30, 2002.
The performance results for Class N shares of the Fund for the period of
December 30, 2002, to September 29, 2005, reflect the performance of the
Predecessor Fund‘s Class
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A shares. The performance results for Class N shares of the Fund for the period
of October 20, 1988 to December 30, 2002, reflect the performance of the
Predecessor Fund‘s
Class I shares. The performance of the Predecessor Fund‘s Class I Shares has
not been adjusted to reflect the higher Rule 12b-1 fees and expenses applicable
to the Fund‘s Class
N shares. If it had, the performance of the Fund‘s Class N shares would have
been lower than that shown.
For the index shown the measurement period used in computing the returns of
the index for the ―Since Inception‖ period begins on October 31, 1988.
After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of
state and local taxes. Actual after-tax returns depend on an investor‘s tax
situation and may differ from those shown. The performance of
Institutional Class shares does not reflect Class N shares‘ Rule 12b-1 fees and
expenses. After-tax returns for Class N shares will vary from
the after-tax returns shown above for Institutional Class shares. The after-tax
returns shown are not relevant to investors who hold their
Fund shares through tax-deferred arrangements, such as 401(k) plans or
individual retirement accounts.CNI CHARTER FUNDS | PAGE 5
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CNI-SM-016-0500
INVESTMENT MANAGER
City National Asset Management, Inc.
SUB-ADVISERS
SKBA Capital Management, LLC (―SKBA‖)
Turner Investments, L.P. (―Turner‖)
PORTFOLIO MANAGERS
Thomas Kuo and Dimitry Kirstman are primarily responsible for the day-to-day
management of the portion of the Fund‘s assets managed
by CNAM and have served as portfolio managers of the Fund since March
2012. Andrew W. Bischel, Kenneth J. Kaplan, Joshua J. Rothé
and Shelley H. Mann are responsible for the day-to-day management of the
portion of the Fund‘s assets managed by SKBA and have served
as portfolio managers for the Fund since 2006. Robert E. Turner is responsible
for the day-to-day management of the portion of the Fund‘s
assets managed by Turner and has served as portfolio manager for the Fund
since 2008.
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PURCHASE AND SALE OF FUND SHARES
The minimum initial investment for Institutional Class shares is $1,000,000.
The minimum initial investment for Class N shares is $1,000.
There is no minimum for subsequent investments in Institutional Class shares or
Class N shares. The Fund reserves the right to change the
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minimum amount required to open an account or to add to an existing account
without prior notice. The Fund may accept investments
of smaller amounts at its discretion; however, your financial institution or
financial professional may establish higher minimum investment
requirements than the Fund and may also independently charge you transaction
fees and additional amounts in return for its services.
The shares of the Diversified Equity Fund are redeemable. You may redeem
some or all of your shares on any day the NYSE is open for
regular session trading. The Fund ordinarily pays redemption proceeds on the
business day following the redemption of your shares.
However, the Fund reserves the right to make payment within seven days of the
redemption request. Redemption proceeds will be sent to
you via check to your address of record or will be wired to your bank via the
instructions on your account.
TAX INFORMATION
The Diversified Equity Fund intends to make distributions that may be taxed as
ordinary income or capital gains.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES
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If you purchase the Diversified Equity Fund through a broker-dealer or other
financial intermediary (such as a bank), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest
by influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary‘s web site for more information.
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Literature Review
Literature Review
Empirically, most papers have concentrated on the issue whether managed
funds are able to outperform some relevant benchmark portfolios. Typically, the
conclusion of these papers has been that, on average, funds did not significantly
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earn more than the passive benchmark performance on a risk-adjusted basis
after deduction of expenses and commissions. Some authors even find that risk-
adjusted fund returns are significantly negative. However, some individual
funds were found to outperform the benchmarks significantly
Factors affecting mutual funds
Risk
Risk can be a great ally when trying to estimate the reward potential of a stock
investment. The greater the stock volatility, or risk, the greater also is the
reward. There are several new risk measurements that give guidance for
selecting mutual stocks.
Time Horizon
The time horizon of an individual will also influence the performance measures
he/she will look at more closely. If you are investing for less than four years,
you need a fund with consistent performance, so all your money will be there
when you need it. You also do not have time to earn back a large commission
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charge on the front end.
Conversely, if you plan to invest your money for 30 years, neither consistency
nor load is very important: you have plenty of time for the market to recover.
With a long-term horizon, your biggest enemies are poor performance and high
annual expenses, both of which can erode that all-important compounding.
Index funds Vs. activety managed equity funds
Deciding between mutual and index funds is not a matter of attempting to
assess which is better, but simply a matter of selecting one's own personal
investment style. Index funds are specially attractive to more passive investors,
who do not believe in constant out-
The major attractiveness of index funds lies in their low cost for the investor.
Low fees and low turnover holds down transaction costs and minimizes capital-
gains taxes.
Index funds are steady performers that have been trouncing the average mutual
fund for along time. They are great core holdings, particularly for beginning
investors and anyone
They are managed so that their returns will match, as exactly as possible, the
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returns of a broad market index. If the overall market goes up, the index fund
will go up almost exactly as far. The most popular and well-known index funds
track the Standard & Poor's 500, which is basically a group of the largest blue-
chip stocks on the market.
Index funds are often criticized for chasing mediocrity; their returns will always
be slightly behind the market as a whole, by the margin of the (generally very
low) expenses.
However, over the last 3-,5-,and 10-year periods, the indexes (and index funds)
have outperformed almost three-quarters of all portfolio managers. There are
certainly managers who have consistently beaten the indexes. But some
investors are more comfortable knowing that they will get whatever the market
gives out, and they are not subject to the whims of a portfolio manager who
may or may not live up to his or her track record.
Growth Funds :
Growth Fund, mainly mutual funds that is, or made up of shares in companies
in order to better yield dividends. They do resubmit the potential for higher
growths but then this is a bit risky. In general, investors prefer to invest in the
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fund for general fund revenue growth, because they offer a better return
potentials. Besides their main objective is to strive for both dividend income
and capital as they invest in companies that have a reputation for dividends and
capital gains.
They also called as equity funds as the goal is to achieve long-term growth of
capital, and then stable income. It is always prudent to invest in diversified
growth fund that not only covers a group of companies, but also various sectors,
as well as investments it allows the investor bifurcate its resources, thus
opening them up to a wide range of options. For example, if you invest in
Growth Fund, which has five stock options it IT, cement, steel, pharmaceutical
and FMCG (Fast Moving Consumer Goods). Now say two or three of those five
stocks are not doing well enough, and you losses on investments, still you will
have several more units left to look forward too.
Growth funds, mainly fall into two categories: 1) Aggressive, 2) Conservatives.
Aggressive Growth Fund mutual fund, which is trying to achieve high income
from capital gains. Investments held in these funds are companies that show
high growth potential. People invest in this kind of growth funds should be
prepared to accept the high risk of compromise to return. They also referred to
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as "capital appreciation fund" or "maximum capital gains fund". For example:
the possibility of US Franklin funds. Now the Conservative part. Conservative
Growth Fund is just opposite the aggressive growth fund. This investment is
mainly targeted at people who are willing to earn the section on a regular basis,
then a high capital gains. He is safe and secured and non-risky investments.
Basically, most investors prefer to invest in specific sectors such as IT
(information and technology) and FMCG (Fast Moving Consumer Goods). To
meet their needs, sector specific scheme launched to enable investors to decide
how aggressive or conservative they want to be. As of today the most popular
forms of industry funds, although a number of other funds also exist. Some
examples of Birla IT Fund, the Union of the new millennium, and prudential
ICICI FMCG fund. These funds basically
invest in various sectors, mainly focusing on the order of the activities of many
domestic companies. This makes his specialty, rather than fund industry.
However, they are contrary to greater risk than large diversified investment
funds, but you can expect longer term, and returns.
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Benefits of Growth funds
Growth Fund, mainly mutual funds that is, or made up of shares in companies
in order to better yield dividends. They do resubmit the potential for higher
growths but then this is a bit risky. In general, investors prefer to invest in the
fund for general fund revenue growth, because they offer a better return
potentials. Besides their main objective is to strive for both dividend income
and capital as they invest in companies that have a reputation for dividends and
capital gains.
They also called as equity funds as the goal is to achieve long-term growth of
capital, and then stable income. It is always prudent to invest in diversified
growth fund that not only covers a group of companies, but also various sectors,
as well as investments it allows the investor bifurcate its resources, thus
opening them up to a wide range of options. For example, if you invest in
Growth Fund, which has five stock options it IT, cement, steel, pharmaceutical
and FMCG (Fast Moving Consumer Goods). Now say two or three of those five
stocks are not doing well enough, and you losses on investments, still you will
have several more units left to look forward too.
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Growth funds, mainly fall into two categories: 1) Aggressive, 2) Conservatives.
Aggressive Growth Fund mutual fund, which is trying to achieve high income
from capital gains. Investments held in these funds are companies that show
high growth potential. People invest in this kind of growth funds should be
prepared to accept the high risk of compromise to return. They also referred to
as "capital appreciation fund" or "maximum capital gains fund". For example:
the possibility of US Franklin funds. Now the Conservative part. Conservative
Growth Fund is just opposite the aggressive growth fund. This investment is
mainly targeted at people who are willing to earn the section on a regular basis,
then a high capital gains. He is safe and secured and non-risky investments.
Basically, most investors prefer to invest in specific sectors such as IT
(information and technology) and FMCG (Fast Moving Consumer Goods). To
meet their needs, sector specific scheme launched to enable investors to decide
how aggressive or conservative they want to be. As of today the most popular
forms of industry funds, although a number of other funds also exist. Some
examples of Birla IT Fund, the Union of the new millennium, and prudential
ICICI FMCG fund. These funds basically
invest in various sectors, mainly focusing on the order of the activities of many
domestic companies. This makes his specialty, rather than fund industry.
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However, they are contrary to greater risk than large diversified investment
funds, but you can expect longer term, and returns.
NAV
The Term Net Asset Value (NAV) is used by investment companies to measure
net assets. It is calculated by subtracting liabilities from the value of a fund's
securities and other items of value and dividing this by the number of
outstanding shares. Net asset value is popularly used in newspaper mutual fund
tables to designate the price per share for the fund.
The value of a collective investment fund based on the market price of
securities held in its portfolio. Units in open ended funds are valued using this
measure. Closed ended investment trusts have a net asset value but have a
separate market value. NAV per share is calculated by dividing this figure by
the number of ordinary shares. Investments trusts can trade at net asset value or
their price can be at a premium or discount to NAV.
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Value or purchase price of a share of stock in a mutual fund. NAV is calculated
each day by taking the closing market value of all securities owned plus all
other assets such as cash, subtracting all liabilities, then dividing the result (total
net assets) by the total number of shares outstanding.
Calculating NAVs - Calculating mutual fund net asset values is easy. Simply
take the current market value of the fund's net assets (securities held by the fund
minus any liabilities) and divide by the number of shares outstanding. So if a
fund had net assets of Rs.50 lakh and there are one lakh shares of the fund, then
the price per share (or NAV) is Rs.50.00.
Mutual Fund Industry
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The mutual fund industry is a lot like the film star of the finance
business.Though it is perhaps the smallest segment of the industry, it is also the
most glamorous – in that it is a young industry where there are changes in the
rulesof the game everyday, and there are constant shifts and upheavals. The
mutual fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is achieved
by the pooling of a number of small investments into a large bucket.Yet it has
been the subject of perhaps the most elaborate and prolonged regulatory effort
in the history of the country.
As on September 30, 2006, the domestic mutual fund industry held assets under
management of over Rs 290,000 crore (Rs 2,900 billion); a growth of nearly
46% over the last 12 months.
Other statistics reveal that a higher portion of investors' savings is now invested
in market-linked avenues like mutual funds as compared to earlier times. Media
reports suggest that a number of new fund houses will commence operations in
the near future.
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Hence investors will have an even wider range of products to choose from.
Meanwhile the existing ones are keeping investors occupied by regularly
launching new fund offers (NFOs).
In effect, one would be tempted to conclude that the domestic mutual fund
industry has finally "come of age". However, we at Personal have a slightly
different view on the state of affairs. Sure, the industry has grown in terms of
asset size and Rs 300,000 crore (Rs 3,000 billion) could well be the next
landmark. But that's hardly a reason to celebrate. More fund houses or funds
don't make the industry, existence of the right ones does.
We believe that the mutual fund industry has only grown in terms of size or
choices available, but is still a long distance from being regarded as a mature
one. For example, for all the NFOs being launched incessantly, there are very
few that can truly claim to be unique or have the ability to add value to
investors' portfolios.
In fact, the industry's functioning style could well classify as a classic example
of herd mentality at work. Products like monthly income plans (MIPs), mid cap
funds, flexi cap funds and derivatives-based funds have found favor with
various industry players at the same time.
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Is it a case of all fund houses thinking alike? Similarly, the launch of NFOs has
largely coincided with conducive market sentiments (read upswing in markets)
and investor euphoria.
In the recent past, close-ended funds have emerged as the season's flavour.
Fund houses have been quoted as saying that the close-ended nature promotes
long-term investing and enables the fund manger to make investment decisions
with a long-term perspective.
While we don't dispute this argument, the timing of launch of close-ended funds
does make us curious. It coincides with a regulation issued by the markets
regulator, the Securities and Exchange Board of India (Sebi), that only close-
ended NFOs will be permitted to charge initial issue expenses.
Conversely, open-ended NFOs will be required to meet sales, marketing and
other related expenses from the entry load and not through initial issue
expenses. Weren't long-term investing and the other virtues of close-ended
funds relevant earlier?
Another initiative which is conspicuous by its absence is investor education. It
would be safe to say that most fund houses have done precious little to further
the cause of investor education.
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Mutual fund distributors who help fund houses garner monies continue to rule
the roost. They have been lavished with attractive brokerage structures, regular
NFO launches (read opportunity to make "big bucks") and other incentives.
In turn, these distributors have on numerous occasions been guilty of mis-
selling and acting in their own interest, rather than the investor's. Despite this,
the investor, who should be at the very core of every fund house's activity, has
been left to fend for himself.
In recent times, Sebi has been forced (at an alarming frequency) to step in to aid
the investor. For issues like lack of uniqueness in NFOs, method of declaring
dividends, issue expenses on NFOs among others, when it seemed like the
investor's interests are being compromised with, the regulator introduced
measures to safeguard the investor.
This doesn't reflect too well on the mutual fund industry. Instead of playing
"follow the regulator", one would expect the mutual fund industry to
proactively take steps and act in the investor's interests.
Don't get us wrong, we aren't suggesting that every fund house is guilty of
transgression, but most of them have erred on one front or the other. Sure some
fund houses have been responsible and acted in a forthright manner; sadly, they
are in a minority.
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An asset size of Rs 300,000 crore shouldn't be seen as a milestone or even a
reason to celebrate. Instead, fund houses should get their act in place and work
towards revamping the mutual fund industry into a better and "mature"
investment destination.
Mutual funds are a versatile investment avenue and hold the potential to emerge
as preferred investment avenues for retail investors. Few would dispute the fact
that a large section of the investing community remains untapped as far as
mutual funds are concerned. Should this potential be tapped, fund houses (along
with investors) stand to emerge as the biggest beneficiaries.
However, for this to happen, the mutual fund industry must finally come of age.
And the onus for achieving this rests with the fund houses.
History of Mutual Funds in World
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The advent of mutual funds in 1774 heralded a significant development in the
democratization of investing, allowing the average person to participate in the
markets through a reasonably priced, pooled product diversified to manage risk.
That one small fund saw the beginnings of a new financial services industry that
has now grown to US$22.72 trillion in assets around the world.
The history of the mutual fund is more than two centuries old with the creation
in 1774 of what‘s believed to be the first (closed-end) mutual fund by Dutch
merchant Adriaan Van Ketwich. Subscription to the fund, which Van Ketwich
called ―Eendragt Maakt Magt‖ (―unity creates strength‖), was available to the
public until all 2,000 units were purchased. After that, participation in the fund
was available only by buying shares from existing shareholders in the open
market. The fund‘s prospectus required an annual accounting, which investors
could view if they requested. Two subsequent funds set up in the Netherlands
increased the emphasis on diversification to reduce risk, escalating its appeal to
smaller investors with minimal capital.
These early mutual funds then took root in England and France before heading
to the United States in the 1890s. Most of the first mutual funds were of the
closed-end variety, issuing a fixed number of shares. What is hailed as the first
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modern-day mutual fund, Massachusetts Investors Trust, was created on March
21, 1924. It was the first mutual fund with an open-end capitalization, allowing
for the continuous issue and redemption of shares by the investment company.
After just one year, the fund grew to $392,000 in assets from $50,000. The fund
went public in 1928 and eventually became known as MFS Investment
Management. The first Canadian fund, Canadian Investment Fund Ltd. (CIF),
was established in 1932, with assets of $51 million in 1951. It changed its name
to Spectrum United Canadian Investment Fund in Nov 1996 and this fund
changed name at the end of August 2002 to CI Canadian Investment Fund.
‗Ordinary‘ investors save
The growth of mutual funds and their impact on investing in general was
nothing short of revolutionary. For the first time, ordinary investors with
minimal capital could pool their resources into a professionally managed,
diversified basket of investments, rather than going the more expensive route of
buying individual stocks of varying risks. This was considered a giant step in
the democratization of investments for the average person.
The first major sign of growth and popularity of mutual funds in Canada took
place in the early 1960‘s when total assets doubled from $540 million in 1960
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to more than $1 billion by the end of 1963. But the largest influx into mutual
funds in Canada came during the 1990s when double-digit interest rates that
had lured Canadian savers into GICs tumbled and investors moved into
investments with the potential for higher returns.
Growth of mutual funds in Canada.
Interest rates and mutual fund sales had a direct correlation in the 1990s. In
May 1990, the Bank of Canada rate – on which financial institutions base their
interest rates – stood at one of its highest levels ever -- 14.05 per cent. The
Bank rate steadily declined and by January 1993, was sliced in half at 6.81 per
cent and by the end of December 1993 it was down again to 4.11 per cent.
Mutual fund sales surged 140 per cent from the end of 1992 to the end of 1993
and strong markets sent assets up to almost $114.6 billion. The Bank rate
dropped to 3.25 per cent in January 1997 before slowly climbing to five per
cent in January 2000.
At the same time, mutual funds continued their climb and became the fastest-
growing segment of the Canadian financial services sector during the 1990s,
with assets under management increasing from $25 billion in December 1990 to
$426 billion by December 2001, an increase of 1,700 per cent. These assets
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were managed in about 1,800 different mutual funds held in more than 50
million unit holder accounts.
Mutual funds offer Canadians a superior means of accumulating wealth through
access to a broad range of personalized investment solutions based on sound
investing principles.
Mutual funds include:
Professional portfolio management
Streamlined and convenient administration
Risk management through diversification
Innovative solutions that meet a wide range of investment objectives and
evolving investor needs
Opportunities for foreign and domestic investment that may not
otherwise be directly accessible to investors
Liquidity, enabling investors to respond to changes in their personal
circumstances
Access to investing for all types of people, including those who prefer to
invest small amounts at regular intervals
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Choice of purchase methods and fee structures, including full service,
fee-for-service and do-it-yourself
Accountability and fairness to investors through industry regulation and
transparency
Foreign Property Rule
The Foreign Property Rule (FPR) was introduced in Canada in 1971 to ensure
that a substantial proportion of tax-deferred retirement savings flowed to
Canadian companies and provided support for the development of Canada‘s
capital markets. The FPR applied mainly to those in tax-deferred savings plans
such as RRSPs, and it was up to the mutual fund industry to come up with a
compromise.
The Canadian mutual fund industry responded with great innovation in 1999,
creating ―clone‖ global funds that qualified as Canadian content and were
therefore 100 per cent eligible for personal RRSPs. These clone funds used
sophisticated derivative products to mirror the performance of an underlying
international fund -- while retaining their eligibility as ―domestic‖ content. To
get this global exposure, MERs were slightly higher than for stand-alone,
domestic funds.
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In 2000, the federal government increased the restriction on foreign property
content in personal RRSP accounts to 30 per cent from 25 per cent, following
comments by many financial observers that investors who bought strictly
Canadian funds were only availing themselves of three per cent of the world‘s
investment opportunities as well as international diversification.
Then in July 2005, the federal budget changes went into effect, removing the
30% restriction on foreign content and ―clone‖ funds were dismantled. Since
then international and global funds have taken a significantly larger share in the
mutual fund portfolios of many Canadian investors.
As of the end of August 2007, mutual fund assets in Canada stood at more than
$695.9 billion and foreign sales have gained a larger part of mutual fund assets.
For the latest statistics compiled by IFIC, the industry association representing
mutual fund managers and dealers, please visit www.ific.ca.
The growth of the industry
To meet the growing regulatory and trade needs of the mutual fund industry, the
Canadian Mutual Funds Association was established in 1963. Original members
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of the CMFA were individual mutual funds themselves, and not fund
management companies, as is the case currently. In 1963, the CMFA published
a Code of Ethics and Regulation for its members. Ten years later, it formally
incorporated with a mandate to engage in and support activities conducive to
high ethical standards and efficiency of administration and operations within
the Canadian mutual fund industry. In 1976, the CMFA changed its name to
The Investment Funds Institute of Canada (IFIC).
Since then, IFIC has taken an integral role in the regulatory development of the
mutual fund industry in Canada, proactively influencing and advancing industry
issues within the regulatory framework, while increasing our members‘
efficiencies, knowledge and proficiency. IFIC provides a consistently high level
of service to enable dealer and manager members to work together in a co-
operative forum to enhance the integrity and growth of the industry and
strengthen investor confidence.
Specifically, IFIC:
Created its Recommendations for a Code of Sales Practices for the Mutual Fund
Industry, which was published in 1996. It was adopted two years later by
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securities regulators and incorporated by securities regulators into an
enforceable rule.
Published its Privacy Code in 2000
Developed a guide in 2002 to assist members in complying with their
obligations regarding Canada‘s Proceeds of Crime (Money Laundering) and
Terrorist Financing Act and regulations
Produced in 2004 a comprehensive toolbox of measures for IFIC members to
detect and deter short-term abusive trading, which has since become part of the
OSC‘s latest recommendations on the subject
Was vocal in the federal government removing foreign content limits on tax-
deferred savings plans
Has always been supportive of raising RRSP contribution limits and
encouraging government to find ways in which Canadians can better save for
their retirement
In 2006-2007, created a charter framework and readiness checklist to provide
assistance to fund managers and legal counsel charged with drafting or
reviewing an IRC charter
Introduced a new statistics reporting method in 2007 to show both where the
money is managed and where clients are making their purchases
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Works with the Canadian Investment Funds Standards Committee to achieve a
single set of industry-wide categories for Canadian investment funds on an
ongoing basis
In 2006, created the Investor Education Award presented during the Canadian
Investment Awards.
History of Mutual Fund in India
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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. 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
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(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.
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.
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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.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March
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2000 more than Rs.76,000 crores of assets under management and with the
setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different private
sector funds, the mutual fund industry has entered its current phase of
consolidation and growth.
Assets Management Company (AMC)
List of major AMC of world
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This is a list of wold‘s leading corporations that provide financial asset
management
Acadian Asset Management
AllianceBernstein
Allianz Global Investors
Ameriprise Financial, Inc.
Barclays Global Investors
Bear Stearns
BlackRock
Columbia Management Group
Covestor
Citigroup Asset Management (now merged into the subsidiaries of Legg
Mason)
Credit Suisse
Deutsche Asset Management
F&C Asset Management
Fidelity Investments
Global Investment House
The Hartford Financial Services Group
Henderson Group
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ING Investment Management
Invesco Perpetual
Kenneth L. Fisher (Fisher Investments)
Legal & General
Legg Mason
Lord Abbett & Co.
Mekong Capital
Morgan Keegan & Company - Morgan Asset Management
M&G
New Star Asset Management
Northern Trust
PTI Securities & Futures
Putnam Investments
Prudential Financial
Schroders
Smith Breeden
ThinkEquity Partners, LLC
T. Rowe Price
Global Alliance Realty
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Major AMC of India
List of India‘s leading Asset Management Companies -
Deutsche Bank has compiled a shortlist of top- performing funds from India‘s
leading fund houses. These have been chosen through a rigorous selection
procedure and constantly undergo a comprehensive review. They cover all the
fund categories and cater to varied investor needs and risk profile. Choose from
the following fund houses:
ABN Amro Asset Management Pvt Ltd
AIG GIG Asset Management Pvt Ltd
Benchmark Asset Management Pvt Ltd
Birla Sun Life Asset Management Pvt Ltd
Deutsche Asset Management Pvt Ltd
DSP Merrill Lynch Asset Management Pvt Ltd
Fidelity Asset Management Pvt Ltd
Franklin Templeton Asset Management Pvt Ltd
HDFC Asset Management Pvt Ltd
HSBC Asset Management Pvt Ltd
ICICI Prudential Asset Management Pvt Ltd
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ING Asset Management Pvt Ltd
JP Morgan Asset Management Pvt Ltd
Kotak Mahindra Asset Management Pvt Ltd
Optimix Asset Management Pvt Ltd
Principal PNB Asset Management Pvt Ltd
Reliance Asset Management Pvt Ltd
SBI Asset Management Pvt Ltd
Standard Chartered Asset Management Pvt Ltd
Sundaram BNP Paribas Asset Management Pvt Ltd
Tata Asset Management Pvt Ltd
UTI Asset Management Pvt Ltd
Major AMC of India
AIG
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AIG offers asset management services through AIG Investments, a group of
international companies which provide investment advice and market asset
management products and services to clients around the world. AIG
Investments was formed in 1996 by consolidating the investment divisions of
various AIG subsidiaries worldwide. In its short history, it has grown both
organically and by acquisition.
AIG Investments is headquartered in New York and has a total of 46 investment
offices operating in regional centers in North America, Europe, South America,
Africa and Asia and employing over 2,100 persons as of 30 September 2008.
Additionally, the extensive network and resources of AIG, which operates in
130 countries and jurisdictions, complement AIG Investments‘ network.
AIG Investments offers the widest range of investment capabilities divided into
five major groups – Equity, Fixed Income, Real Estate, Private Equity, Hedge
funds and Other Alternate asset classes. It is also one of the largest asset
management firms in the world with nearly US $676 billion in assets as of 30
September 2008.
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Our strengths lie in our globally integrated operations and investment teams,
our disciplined and established investment processes, and the knowledge and
expertise of our diverse group of employees.
With AIG as our parent company, we also enjoy the benefits of a premier
insurance and financial services organization with a distinguished history,
renowned financial leadership and extensive resources.
AIG major funds in India are-
Growth :
AIG Global Investment Group Mutual Fund
AIG India Equity Fund- Institutional Plan- Dividend Option
AIG India Equity Fund- Institutional Plan- Growth Option
AIG India Equity Fund- Regular Plan- Dividend Option
AIG India Equity Fund- Regular Plan- Growth Option
AIG Infrastructure and Economic Reform Fund - Institutional Plan-
Dividend
AIG Infrastructure and Economic Reform Fund - Institutional Plan-
Growth
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AIG Infrastructure and Economic Reform Fund - Regular Plan-Dividend
AIG Infrastructure and Economic Reform Fund - Regular Plan-Growth
Income
AIG India Treasury Fund-Institutional Plan-Daily Dividend Option
AIG India Treasury Fund-Institutional Plan-Growth Option
India Treasury Fund-Institutional Plan-Monthly Dividend Option
AIG India Treasury Fund-Institutional Plan-Weekly Dividend Option 1
AIG India Treasury Fund-Retail Plan-Bonus Option
AIG India Treasury Fund-Retail Plan-Daily Dividend Option
AIG India Treasury Fund-Retail Plan-Growth Option
AIG India Treasury Fund-Retail Plan-Monthly Dividend Option
AIG India Treasury Fund-Retail Plan-Quarterly Dividend Option
AIG India Treasury Fund-Retail Plan-Weekly Dividend Option
AIG India Treasury Fund-Super Institutional Plan-Daily Dividend Option
AIG India Treasury Fund-Super Institutional Plan-Growth Option
AIG India Treasury Fund-Super Institutional Plan-Monthly Dividend
Option
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AIG India Treasury Fund-Super Institutional Plan-Weekly Dividend
Option
AIG Short Term Fund-Institutional Plan-Growth Option
AIG Short Term Fund-Institutional Plan-Monthly Dividend Option
AIG Short Term Fund-Institutional Plan-Weekly Dividend Option
AIG Short Term Fund-Retail Plan-Bonus Option
AIG Short Term Fund-Retail Plan-Growth Option
AIG Short Term Fund-Retail Plan-Monthly Dividend Option
AIG Short Term Fund-Retail Plan-Weekly Dividend Option
Liquid
AIG India Liquid Fund-Institutional Plan-Daily Dividend Option
AIG India Liquid Fund-Institutional Plan-Growth Option
AIG India Liquid Fund-Institutional Plan-Weekly Dividend Option
AIG India Liquid Fund-Retail Plan-DailyDividend Option
AIG India Liquid Fund-Retail Plan-Growth Option
AIG India Liquid Fund-Retail Plan-Monthly Dividend Option
AIG India Liquid Fund-Retail Plan-Quarterly Dividend Option
AIG India Liquid Fund-Retail Plan-Weekly Dividend Option
AIG India Liquid Fund-Super Institutional Plan-Daily Dividend Option
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AIG India Liquid Fund-Super Institutional Plan-Growth Option
AIG India Liquid Fund-Super Institutional Plan-Weekly Dividend Option
HDFC Asset Management Company Limited (AMC)
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HDFC Asset Management Company Ltd (AMC) was incorporated under the
Companies Act, 1956, on December 10, 1999, and was approved to act as an
Asset Management Company for the HDFC Mutual Fund by SEBI vide its
letter dated July 3, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T.
Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020.
In terms of the Investment Management Agreement, the Trustee has appointed
the HDFC Asset Management Company Limited to manage the Mutual Fund.
The paid up capital of the AMC is Rs. 25.161 crore.
The present equity shareholding pattern of the AMC is as follows :
Particulars % of the paid up equity capital
Housing Development Finance Corporation Limited 60
Standard Life Investments Limited 40
Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund,
following a review of its overall strategy, had decided to divest its Asset
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Management business in India. The AMC had entered into an agreement with
ZIC to acquire the said business, subject to necessary regulatory approvals.
The AMC is managing 24 open-ended schemes of the Mutual Fund viz.
HDFC Growth Fund (HGF)
HDFC Balanced Fund (HBF)
HDFC Income Fund (HIF)
HDFC Liquid Fund (HLF)
HDFC Long Term Advantage Fund (HLTAF)
HDFC Children's Gift Fund (HDFC CGF)
HDFC Gilt Fund (HGILT)
HDFC Short Term Plan (HSTP)
HDFC Index Fund, HDFC Floating Rate Income Fund (HFRIF)
HDFC Equity Fund (HEF)
HDFC Top 200 Fund (HT200)
HDFC Capital Builder Fund (HCBF)
HDFC TaxSaver (HTS)
HDFC Prudence Fund (HPF)
HDFC High Interest Fund (HHIF)
HDFC Cash Management Fund (HCMF)
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HDFC MF Monthly Income Plan (HMIP)
HDFC Core & Satellite Fund (HCSF)
HDFC Multiple Yield Fund (HMYF)
HDFC Premier Multi-Cap Fund (HPMCF)
HDFC Multiple Yield Fund . Plan 2005 (HMYF-Plan 2005)
HDFC Quarterly Interval Fund (HQIF)
HDFC Arbitrage Fund (HAF).
The AMC is also managing 11 closed ended Schemes of the HDFC Mutual
Fund
HDFC Long Term Equity Fund
HDFC Mid-Cap Opportunities Fund
HDFC Infrastructure Fund, HDFC Fixed Maturity Plans
HDFC Fixed Maturity Plans - Series II, HDFC Fixed Maturity Plans -
Series III
HDFC Fixed Maturity Plans - Series IV
HDFC Fixed Maturity Plans - Series V
HDFC Fixed Maturity Plans - Series VI
HFDC Fixed Maturity Plans - Series VII
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HFDC Fixed Maturity Plans - Series VIII.
The AMC is also providing portfolio management / advisory services and such
activities are not in conflict with the activities of the Mutual Fund. The AMC
has renewed its registration from SEBI vide Registration No. - PM /
INP000000506 dated December 8, 2006 to act as a Portfolio Manager under the
SEBI (Portfolio Managers) Regulations, 1993. The Certificate of Registration is
valid from January 1, 2007 to December 31, 2009.
HSBC Asset Management Pvt Ltd
HSBC Mutual Fund is one of the premier asset management companies in
India. We aim to offer you with optimum investment performance (with an
institutionalised investment management process), efficient service, and a
flexible product range to create wealth in the long term. Our diverse range of
products across the risk spectrum range from liquid / cash funds, fixed income
funds, balanced funds to equity funds suited for both individual as well as
institutional investors. Through our product range, we aim to be true to our
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reputation in India of being a provider of international quality investment
products and services.
Click here to visit our Mutual Fund website for more details.
Portfolio Management Services :
With HSBC Portfolio management services, we aim to provide long-term
wealth creation to high net-worth individuals through active portfolio
management. We believe that it takes a committed perfectionist to bring out the
very best in an investment. Our portfolio management team aims to be just that
- perfectionists - who will analyse your risk profile and accordingly custom
design an investment portfolio for you. With their local knowledge of capital
markets coupled with the global markets coupled with the global strength and
capabilities of HSBC Group, you can expect nothing short of a rewarding
experience.
Click here to visit our Portfolio Management Services website for more details.
Welcome to HSBC Global Asset Management India, the core global investment
platform of the HSBC Group.
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World class investment solutions backed by the strength of HSBC Group.:
HSBC Global Asset Management has an outstanding track record and a
longstanding presence globally. With approximately $299 billion (as on 31
October 2008) assets under management worldwide and presence in about 20
countries, it is one of the premier fund management organisations in the world.
HSBC Global Asset Management in India provides a comprehensive range of
investment management solutions to a diverse client base and committed to
delivering consistent investment performance, world class service and a broad
range of solutions for all types of investors. Our range of offerings in India
come under 2 broad categories –
Mutual Fund and Portfolio Management Services.
HSBC major funds in India are-
Growth Schemes
Balanced Schemes
Income Schemes
Money Market Schemes
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Open-ended schemes
These funds do not have a fixed maturity and one can invest in such funds on
any working day, during business hours. Investors can buy or sell units of open-
ended schemes directly from the fund house at NAV related prices.
Close-ended schemes
Such funds have a fixed maturity period and are open for subscription only for a
specified period. After the expiry of this period, investors can buy or sell the
units on the stock exchanges where such funds are listed. Some funds also have
the option of periodic repurchase, whereby investors can sell back their units to
the fund at NAV related prices.
Interval schemes
Interval schemes are a combination of both open and close-ended schemes.
Investors can purchase or redeem their shares from the fund house at pre-
determined intervals at NAV related prices
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Growth schemes
Such funds are aimed at capital appreciation over the medium to long term.
Usually, such funds invest a major portion of the portfolio in equities.
Balanced schemes
Such funds have a balanced portfolio and invest in equity and preference shares
in addition to fixed income securities. The aim of such funds is to provide both
income and capital appreciation over a long-term.
Income schemes
These schemes invest primarily in fixed income instruments issued by the
government, banks, financial institutions and private companies. The main
objective of income schemes is preservation of capital and to provide fixed
income over the medium to long term.
Money market schemes
Money market schemes invest in short-term debt instruments, which earn
interest and have high liquidity. Though these are considered to be the safest
investment option, such funds are subject to fluctuations in the rates of interest.
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Tax saving schemes
Such schemes are aimed at offering tax rebates to investors under specific
provisions of the Income Tax Act, 1961. For instance, investors of Equity
Linked Savings Schemes (ELSS) and Pension Schemes are applicable for
deduction u/s 88 of the Income Tax Act, 1961.
Index schemes
Such funds strive to mirror the performance of specific market indices, such as
the BSE SENSEX, CNX Nifty, etc which are called the base index. Investments
in such funds are made in the same stocks as the base index and in similar
proportion.
Sector-specific schemes
Such funds invest in a specific industry or sector. The investments could be in a
particular industry (Banking, Pharmaceuticals, Infrastructure, etc) or a group of
industries, or various segments (like ‗A‘ Group shares).
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Exchange-traded funds
Such funds are listed and traded on the stock exchange in a similar manner as
stocks. Such funds invest in a basket of stocks and aim at replicating an index
(S&P CNX Nifty, BSE Sensex) or a particular industry (banking, information
technology) or commodity (gold, crude oil, petroleum).
Capital protection funds
These funds are designed to safeguard the capital invested therein, by investing
in suitable securities.
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JP Morgan Asset Management Pvt Ltd
JPMorgan Asset Management is one of the six largest active investment
managers in the world on the basis of assets under management (Source:
Pensions & Investments, December 2005). As of 30 June 2007, assets under
management stand at US$1,108.6 billion - a reflection of the high regard in
which we are held by investors across the world.
We are a truly global investment manager, with over 5,700 employees in 40
cities around the world. We employ over 670 investment professionals
(portfolio managers, analysts, investment team heads etc) who are based in
investment centres across Europe, Asia, Japan and the Americas, connected by
four investment hubs in London, New York, Tokyo and Hong Kong.
We manage assets on behalf of a broad range of private and institutional
investors. Private investors primarily access our expertise through pooled funds,
including a range of Luxembourg-domiciled SICAVs, UK-domiciled OEICs
and investment trusts and our Hong Kong-registered JF funds.
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Institutional investors can choose to invest through pooled funds or segregated
portfolios, and the same highly-regarded investment teams are used in both
cases. Institutional clients include pension funds, charities & foundations,
corporates and central banks.
It is our aim to be the world‘s best investment manager by delivering to each
and every investor:
Excellence and continuity in investment management
A comprehensive and competitive range of products
The highest quality of client service
Global coverage with local delivery
JP Morgan Mutual Fund
The Mutual Fund was established as a trust under the Indian Trusts Act, 1882,
in terms of the Trust Deed dated December 4, 2006 and is registered under the
Indian Registration Act, 1908. The fund has been registered with SEBI vide
Registration No.MF/053/07/01
JPMorgan Mutual Fund India Private Limited
JPMorgan Mutual Fund Private Limited, a company incorporated under the
Companies Act, 1956, acts as the trustee company of the Fund.
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Board of Directors
Mr. Jagadish Salunkhe
Mr. P. G. R. Prasad
Dr. Dharmendra Bhandari
Mr. M. G. Bhide
JPMorgan Asset Management India Private Limited
In conformity with the Regulations, JPMorgan Asset Management India Private
Limited, a company registered under the Companies Act, 1956 and having its
registered office at Mafatlal Centre, 9th Floor, Nariman Point, Mumbai 400
021, has been appointed as the investment manager to the Fund.
JPMorgan Asset Management India Private Limited ("AMC") was approved by
SEBI to act as the asset management company for the Fund vide letter no.
IMD/MS/86193/07 dated February 12, 2007. The AMC manages the Scheme /
options of the Fund in accordance with the provisions of the Investment
Management Agreement, the Trust Deed, the Regulations and the objectives of
each Scheme / option.
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Kotak Mahindra Asset Management Pvt Ltd
Kotak Mahindra is one of India's leading financial institutions, offering
complete financial solutions that encompass every sphere of life. From
commercial banking, to stock broking, to mutual funds, to life insurance, to
investment banking, the group caters to the financial needs of individuals and
corporates.
The group has a net worth of around Rs.5,997 crore and employs around 20,000
employees across its various businesses servicing around 5 million customer
accounts through a distribution network of branches, franchisees, representative
offices and satellite offices across 370 cities and towns in India and offices in
New York, London, Dubai, Mauritius and Singapore.
Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly
owned subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual
Fund (KMMF). KMAMC started operations in December 1998 and has over 10
Lac investors in various schemes. KMMF offers schemes catering to investors
with varying risk - return profiles and was the first fund house in the country to
launch a dedicated gilt scheme investing only in government securities.
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OBJECTIVE OF
THE STUDY
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OBJECTIVE OF THE STUDY
Objective of my study can be defined with the help of following points.
To analyze the two major types of Mutual Funds.
To understand the return of funds on historic return of 3 Years.
To suggest the retail investors where they can earn more return in
proportion to risk
To find out that Sectorial funds are really provide higher return as they
have higher risk.
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Research
Methodology
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Research Methodology
According to Clifford Woody-research comprises defining and redefining
problems, formulating hypothesis, or suggested solutions; collecting, organizing
and evaluating data, making deductions and reaching conclusions; and at last
carefully testing the conclusions to determine whether they fit the formulating
hypothesis. The purpose of research is gaining knowledge, which will be used
for solving problems (applied research) or for satisfying one‘s thirst for
knowledge (pure research).
Objective of the study-
“All progress is born of inquiry. Doubt is often better than over confidence,
for it leads to inquiry and inquiry leads to invention.”
Research is a systematic method to gain new knowledge. The purpose of
research is to discover answers to questions through the application of scientific
procedure. The main aim of research is to find out the truth that is hidden and
has not been discovered yet. Research is thus an original contribution to the
existing stock of knowledge making for its advancement.
Research methodology used for the study is as follows: -
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Type of Research
Descriptive & Analytical Research
Descriptive research includes surveys and fact findings enquiries of
different kinds. The major purpose of describes research is description of the
state of affairs as it exists at present. In social science and business research
we quite often use the term Ex post facto research for descriptive research
studies. The main characteristic of this method is that the researcher has no
control over the variable, he can only report what has happened or what is
happening. The methods of research utilized in descriptive research are
survey methods of all kinds, including comparative and correlational
methods.
Analytical research, on the other hand, the researcher has to use facts or
information already available, and analyze these to make a critical
evaluation of the material.
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Research Design
Descriptive Design:- It enables researchers to describe or present a picture of
phenomena under investigation. The objective of this study is to answer the
who, when, where & how of the subject.
Data Type
Secondary Data:
Secondary data means data that are already available i.e., they refers to the data
which have already been collected and analyzed by someone else. When the
researcher utilizes secondary data, then he has to look into various sources from
where he can obtain them.
Data Sourse
Books
websites
magazines
Duration-
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Findings and
Analysis
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Findings and Analysis
Table.1 : Top 10 Equity (Diversified Funds
Ran
k
Scheme Name NAV
As on Mar
26’09
Return
in 3
Years%
Since
Incept
n
1 Reliance Regular Savings Fund - Equity –
Growth
13.44 6.75 8.02
2 DSP BlackRock Top 100 Equity Fund –
Growth
52.31 3.66 31.46
3 Sahara Growth Fund – Growth 46.58 3.64 26.32
4 IDFC Imperial Equity Fund – Growth 11.11 2.38 3.55
5 Birla Sun Life Frontline Equity Fund –
Growth
42.02 2.19 24.4
6 IDFC Premier Equity Fund – Growth 12.71 1.9 7.11
7 DWS Alpha Equity Fund – Growth 44.31 1.65 27.23
8 UTI Dividend Yield Fund – Growth 15.19 1.42 11.45
9 HSBC Equity Fund – Growth 60.97 1.16 33.26
10 DWS Investment Opportunity Fund – 20.23 1.14 14.63
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Growth
Table.2 :Top 10 Equity (Sectorial Funds)
Rank Scheme Name NAV
As on Mar
26’09
Return
in 3
Years%
Since
Incepti
1 Reliance Diversified Power Sector Fund –
Growth
40.51 10.7 33.16
2 ICICI Prudential Infrastructure Fund –
Growth
17.56 6.84 17.08
3 Reliance Banking Fund – Growth 36.39 5.01 24.76
4 UTI Thematic Banking Sector Fund –
Growth
16.98 1.85 21.27
5 Reliance Pharma Fund – Growth 21.27 -1.95 17.39
6 UTI Infrastructure Fund – Growth 17.92 -2 12.89
7 Tata Infrastructure Fund – Growth 18.26 -2.51 14.68
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8 Franklin FMCG Fund – Growth 11.05 -5.09 3.06
9 ICICI Prudential FMCG – Growth 30.57 -5.45 11.83
10 Canara Robeco Infrastructure Fund –
Growth
30.89 -6.5 11.95
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Conclusion
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Conclusion
While studying the performance measurement of mutual funds, one particular
area caught my attention. As we are comparing two special funds Diversified
Equity and Sectorial Equity funds. We took top 10 AMC‘s funds in both
segment on the basis of return. Based on the analysis of two tables following
conclusions can be draw-
There is high variation in return of sectorial funds compare to diversified
funds.
Return of top 3 schemes in both funds have a difference that diversified
funds are giving less return.
NAV is in proportion to return in case of sectorial funds whereas in
sectorial funds though return is high but NAV is not high.
Another conclusion that we can draw from our results is that size does
not matter. The size of a fund does not affect the performance of a fund.
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Recommendations and
suggestions
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Recommendations and suggestions
While studying the performance measurement of mutual funds I will like to
give suggestion to investors and AMC both. To avoid unsystematic risk
Investors invest in Mutual funds where they can in bunches of equity shares. So
it a kind of relief to balance negative return by positive return in portfolio.
For Investors-
By investing through divesrsified equity fund an investor invest in equity
funds of various company of various sector whereas in investing sectorial
funds investor look only in companies of a particular sector.
After analysing the top 10 schemes of both funds I would like to
recommend to investor that-
Due to lots of ups and down in economy investors should switch there
portfolio accordingly, we can see that in current market situation where
there is global slow down India is facing problem in its all time premium
sector i.e Information Technology so in top 10 funds we are not having
any I.T scheme. So the investors of IT funds earned highest positive
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return in good time are facing highest negative return which means that
in diversified equity funds these heavy losses from IT sectors companies
are covered with other sectors companies..
Hence we have Power sector scheme on top position which is performing
with 10.7 % in last three year it reflect that since power is extreme need
of human being and due to heavy demand of power even in market
slowdown this scheme is resulting better so we can not find such
advantage with diversified funds.
This comparison of both funds also suggest that equity fund is giving a
moderate return and not touching negative return while major sectorial
funds schemes are performing in negative return so it because of high
risk associated with sectorial funds.
If we talk about inception point of scheme we will find that as the scheme
is get older NAV grow up. We can view in table of diversified fund
HSBC equity growth fund is giving highest return with 33 % return but
on ranking in 7th , whereas in sectorial funds Reliance power sector fund
is showing highest return from its inception point and also it is on rank 1
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in respect of list, it means that we are seeing a constant performance by
sectorial funds which is lacking in diversified funds.
For AMC-
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Limitations
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Limitations
Although it‘s good to go through this type of study during the MBA programme
but
during my project I have faced the following limitations :
Role of SEBI become a point of argument because performance of
companies under various funds are loosing reliability after scandal of
SATYAM
Results of comparison is not certified by the AMC though it was a total
transpartent procedure of comparison.
Due to high pace fluctuation every interpretation on a day results unfair
in next day.
Lack of time duration is flaw for this study.
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Bibliography
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Bibliography
1. Business Today
2. Economics Times
3. Financial Express
4. Kothari.C.R; ―RESEARCH METHODOLOGY‖; Second Edition;
2002; wishwa Prakashan, New Delhi.
Webliography
www.amfiindia.org
www.mutualfundsindia.com