Financial Market Institution and Systems

End Term Project report on

‘MUTUAL FUNDS’

Submitted to: Prof. ​Vinay Kumar Dutta

Submitted by:
Section II
Group 8
Ayush Jain 271131
Deepak Arora 271074
Rajkunwar Singh 271100
Sagar Dua 271151
Yash Agarwal 271177
Table of Contents
Purpose: 2

Objectives: 2

Global Outlook 7

Chapter 3: Literature Review 13

1. Role of a Fund Manager 18
2. Duties of a Fund Manager 18
a. Meeting the reporting requirements 18
b. Complying with Regulatory Authorities 18
c. The Protection of Wealth 19
d. Monitor the growth and performance of the fund 19
e. Oversight and Hiring 19
3. How to evaluate a Fund Manager? 19
4. How do fund managers decide where to invest? 19
Custodian Bank Examples 20
Asset Allocation 26
b. Research and Analysis 26
c. Portfolio Construction 27
d. Performance Review 27

In order to evaluate the performance of a mutual fund, an investor needs to follow the following
steps: 32

HDFC AMC - Operations 35

Analysis of some Mutual Fund Schemes - An example 39

Fund Details 39

Comparison of Top AMCs in India 44

Bibliography 52

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Purpose:
The purpose of our project is to conduct a research of the current Mutual Fund Industry. Our
major focus will be to study how the industry is doing in India. This will give us a great depth of
Mutual funds, their structure, their working, risks associated with them and performance
evaluation of mutual funds. This will help us in building our knowledge base for mutual funds
and clear our concepts. Also, this will help us to get an idea of how the mutual fund industry will
evolve in the future by analyzing the past trends and investors perceptions.

Objectives:
Following are the objectives of our project:

● To study the current Mutual Fund Industry

● To understand the differences between mutual fund market in India and abroad
● To study the perception of investors towards Mutual Funds
● To evaluate advantages and disadvantages of Mutual Funds
● To analyze the various risks associated with Mutual Fund Business
● To study how to calculate NAV and evaluate performance of Mutual Funds
● To analyze what can be future trend of Mutual Fund Industry
● To analyze the practical working of mutual fund schemes
● To compare the performance of various mutual funds schemes

Methodology & Sources of Data:

To gain an overview about Mutual Funds, secondary data has been used and collected from the
annual reports, fact sheets, newspapers, journals, books and periodicals. The data were also
collected from various websites of AMCs, AMFI, moneycontrol.com etc. We have contacted Mr.
Tarun Kapoor, ICICI direct for the information.

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Chapter 1: Introduction

Indian Market
● The Indian mutual fund industry is one of the fastest growing and most competitive
segments of the financial sector
● The AUM of the Indian MF Industry has grown from ₹ 4.78 trillion as on 31st January,
2009 to ₹23.37 trillion as on 31st January, 2019, about 5 fold increase in a span of 10
years
● The Industry’s AUM had crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for the
first time in May 2014 and in a short span of about three years, the AUM size had
increased more than two folds and crossed ₹ 20 trillion (₹20 Lakh Crore) for the first
time in August 2017
● The total number of accounts (or folios as per mutual fund parlance) as on January 31,
2019 stood at 8.10 crore (81 million), while the number of folios under Equity, ELSS and
Balanced schemes, wherein the maximum investment is from retail segment stood at 6.82
crore (68.2 million)
● There exist more than ​44 Asset Management Companies in India. Major players are
ICICI Prudential Mutual Fund,HDFC Mutual Fund,Aditya Birla Sun Life Mutual
Fund,SBI Mutual Fund

Source: AMFI

Average Assets Under Management (AAUM) of Indian Mutual Fund Industry for the month of January
2019 stood at ₹ 24,52,085 crore. (AMFI)

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Global Market

Similarities​ between Indian and Global Markets

● Available to both the retail clients (individual investors) and institutional clients (large
companies, foundations, etc.).
● Wide selection of funds, both by company and style in each country, including a good
variety of stock, bond, money market and balanced funds (blends of stocks and bonds in
the same fund).
● Every major economy has specific rules pertaining to the registration, marketing and sale
of funds.The mutual fund industry is a highly regulated space, but those regulations differ
by country or region.
● Regulations are in place to protect the consumer; this helps to ensure that asset managers
are keeping the interests of the investor above their own, and that the investor does not
get taken advantage of

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 Key Differences

Parameter India Global

Regulator SEBI SEC (Securities and Exchange Commission)

in USA
ASIC (Australian Securities and Investments
Commission) in Australia
SFC (Securities And Futures Commission)
and MPFSA in Hong Kong
CESR (Committee of European Securities
Regulators) in Europe
FSC (Financial Supervisory Committee ) in
Taiwan

Annual Growth(Last 10 years) 12.5% 5.9%

AUM/GDP (%) 11 62

Largest AMC HDFC Mutual Blackrock - AUM $6.288 trillion

Funds AUM
$47.885 Billion

AUM $331.4 billion $88.5 trillion

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Source: Mckinsey Report

6
Global Outlook
Global Assets Under Management (AUM) grew some 11 percent, hitting a record $88.5 trillion.
While market appreciation accounted for a significant proportion of this growth, the industry
sustained healthy levels of organic growth with about $2 trillion of new money flowing into the
system. The scenario for the growth of Asset Management Industry looks positive in the coming
years.

Three of four major regions—North America, Western Europe, and Emerging Asia—took in
substantial new money, each accounting for approximately a third of global growth.

End clients and investors who deploy capital on their behalf continue to embrace active strategies
in areas where they can deliver demonstrable value. And the rapid adoption of passive vehicles
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like ETFs, while sometimes undercutting demand for active products, in many cases represents a
parallel and complementary trend as they are deployed against new use cases and client
segments.

In the first half of 2018, it has been witnessed a crossing of the Rubicon from “​low fee to no fee​”
as one major firm launched a series of index funds that effectively offered to manage client
money for no underlying fee. Concerns about a race to the bottom have reached fever pitch in
some quarters. Experts agree that ​pricing is becoming an area of profound structural change in
the asset management industry.

In 2019, the mutual funds outflows are increasing due to a fear of recession. BlackRock reports
the probability of Recession in US market in 2019 to be 19%, 2020 to be 38%, 2021 to be 54%.

Trade frictions remain elevated, but look more priced in by markets than a year ago. It’s Europe
that has us worried. BlackRock report expects no immediate flare-ups in the region, but believe
investors may be underappreciating medium-term threats to European unity. This is a major
threat for Asset Management Industry worldwide

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Chapter 2: About Mutual Funds

According to Association of Mutual Funds in India (AMFI), “A mutual fund is a trust that pools
the savings of a number of investors who share common financial goal. Anybody with an
investible surplus of as little as a few thousand rupees can invest in mutual funds. This investor
buys units of a particular mutual fund scheme that has a defined investment objective and
strategy.” In other words, ​a mutual fund is a professionally managed investment fund that pools
money from many investors to purchase securities. These investors may be retail or institutional
in nature.

1. Professional Management — A mutual fund offers investors access to full-time, professional

money managers who have the expertise, experience and resources to actively buy, sell,
and monitor investments.

2. Diversification — Buying shares in a mutual fund is an easy way to diversify your

investments across many securities, which is just another way of saying that you won't
have all your eggs in one basket. If one investment decreases in value, another investment
in the portfolio may increase.

3. Affordability — For many people, it would be more costly to purchase directly all of the
individual securities held by a single mutual fund. By contrast, the minimum initial
investments for most mutual funds are more affordable.

4. Liquidity — Most mutual funds allow you to sell your fund shares on any day the stock
markets are open, so you have easy access to your money. Of course, the value of your
shares, when redeemed, may be worth more or less than their original cost.

On the ​negative side​,

a) Investors in a mutual fund must pay various fees and expenses.
b) Distribution and adoption is limited
c) Despite awareness campaigns, the AUM of Mutual funds as compared to the GDP is far
less than the developed nations

Perception of Mutual funds

According to a research “Penetration of Mutual Funds in India: Opportunities and Challenges”

by Rajesh Chakrabarti , Sarat Malik , Sudhakar Khairnar , Aadhaar Verma

The research provided that investment behaviour could be explained with awareness,
perception and socioeconomic characteristics of individual investors. Better awareness related

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 to various aspects of mutual funds will have a positive effect on investment in mutual funds.
Contrary to belief, risk perception for mutual funds had no effect on the investment decision.
Further, socioeconomic characteristics such as age, gender, occupation, income and education
of investors had an impact on the awareness about mutual funds.

The awareness level of mutual fund among the investors are very low because of only having the
partial knowledge about the mutual fund which prevent them to Invest in mutual fund to avoid
risk bearing factor and fear of losing money.

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12
Chapter 3: Literature Review
Can Mutual funds give multibagger returns like stocks?, [2019]​,​Rajeev​ ​Thakkar
Rajeev Thakkar, ​Chief Investment officer, PPFAS Mutual Fund, at the ET Wealth Investment
Workshop, held in Delhi on February 15​, ​said “Mutual funds are designed in a manner where
they will give an average of total stocks held in the portfolio. If a mutual fund scheme has 25
stocks, the scheme’s return will neither be that of the worst stock, nor that of the best stock​.” ​This
way, returns also get average out," he added.

Further according to him, ​some of the common behavioural mistakes committed by are- Get
evenitis ( trying to recover losses from the same investment by investing more in it), loss
aversion ( ​Investors might irrationally hope that the price will come back to the original price and
in that wait, investor does not sell the bad investment)​, waiting for the price seen in the past, not
sticking to plans and decisions, and recency effect, etc.

Blockchain Technology for Mutual Fund Industry, [2018], Vijayu Kittu Manda, and Dr.
S.S. Prasada Rao
In this research paper, the authors tried to find out whether Blockchain can be used for Mutual
Fund Industry and how the legacy systems can be replaced with enterprise blockchain
technology. The authors also studied the possible challenges that will be encountered in this
implementation process.
They found out that blockchain technology can help all the stakeholders in the mutual fund
industry. It can provide the benefits like transparency, decentralization, accountability and
privacy. There will be a lot of savings in time and cost for all stakeholders. NAV computation
will also become quicker.Statement generation and redemption payments will take place on real
time basis. Overall, blockchain will have an immense positive impact on the mutual fund
industry.

A Study of Investor’s Perception Towards Mutual Fund Decision : An Indian Perspective,

[2017], Rajesh Trivedi, Prafulla Kumar Swain, and Manoranjan Dash

The authors of this research paper tried to study investor’s perception towards mutual funds.
They tried to find out the investor’s perception relating to liquidity and investment decision and
the financial awareness of mutual fund investors. They also studied the effect of gender
difference on investment decision and the effect of age factors on investment decision.

They were able to find out that low risk funds attract the investors in mutual fund schemes. Also
males are more interested in mutual fund investments than females. The youth and elderly people
are less aware of mutual funds so focus should be given to spread awareness about mutual funds
in order to boost success of the industry.

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A Comparative Study of Performance of Top 5 Mutual Funds in India, [2015],
S.Rajpurohit
As per a report by Rajpurohit,S., (2015), mutual fund investors pulled out a record Rs.4,713
crore from equity schemes of asset management companies (AMCs), the highest in any January
and also the highest monthly redemption of equity schemes in 27 months. While equities saw the
highest monthly redemption ever, AMCs’ debt schemes attracted Rs.43,804.7 crore—the highest
inflow in any January.

He compared the performance of top 5 Equity diversified [ ICICI Pru Exp & Other Services-
DP(G), ICICI Pru Exp & Other Services- RP(G), ICICI Pru US Bluechip Direct(G), ICICI Pru
US Bluechip Equity(G), Birla SL Intl.Equity A- Direct (G)], Debt- Long Term funds [ ICICI Pru
Long Term Plan (G), ICICI Pru Long Term Plan-PP (G), L&T Gilt Fund - Direct (G), ICICI Pru
Long Term - Direct (G) and Templeton Corporate Bond-Direct (G)] and Hybrid funds [DWS
Top Euroland Offshore Fund (G), FT (I) FF US Opp. -Direct (G), FT (I) Feeder-Franklin US
Opp. (G), DSP BR US Flexible* Eqty-Direct (G) and TDSP BR US Flexible* Equity Fund (G)].
Overall, all selected mutual fund companies have positive return during 2009 to 2014.. ICICI
mutual fund has performed well. Birla SL Intl. Equity A -Direct (G) and DWS Top Euroland
Offshore Fund (G) mutual fund have lower level of risk compare to Franklin and DSP.

Performance Evaluation of Mutual Funds: A Study of Selected Diversified Equity Mutual

Funds in India [2014]​, ​by Dr Vikas Choudhary, and Preeti Sehgal Chawla

In this research paper, the researchers evaluated the performance of some top performing mutual
funds through some parameters. These parameters include average returns, standard deviation,
beta, coefficient of determination, sharpe ratio and the treynor’s performance index

Can mutual funds outguess the market? [1996], by- Jack L Trenyor and Kay k Mazuy

This study provides a review of the main measures of portfolio performance. 57 Mutual funds
were studied and the behavior of the managers was analyzed with respect to the fluctuations.
Managers tend to have a stable portfolio in case of the falling market by purchasing bonds in the
portfolio. In case of rising market trends, managers tend to buy risky securities like equity shares
to gain a good amount of return.

Formula used to calculate the rate of return is –

Asset value per share at the end of the year + dividend

Starting per share asset value

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The paper discusses about the weaknesses and distinguishes between traditional performance
measures and more recent conditional performance measures. Study shows that the conditional
approach addresses one major shortcoming of the traditional approach (risk stability
assumption). Conditional measures allow expected returns and risk to vary with the state of the
economy.
A balanced fund is more is more likely to make frequent changes in the fund volatility so as to
balance the amount of debt and equity in the fund. Next the time period studied in the paper is 10
years from 1952-1962. This period was chosen because it showed a lot of ups and downs giving
upto 50% of return in an year to negative 20% in a single year.
This study shows that the investment managers of any 57 companies have not outguess the
market.

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Chapter 4 : Structure of Mutual Funds

Sponsor
A sponsor is a body corporate who establishes a mutual fund. It may be one person acting alone
or together with other corporate body. Additionally, the sponsor is expected to contribute at least
40% to the net worth of the AMC. However, if any person holds 40% or more of the net worth of
an AMC, he shall be deemed to be a sponsor and will be required to fulfill the eligibility criteria
specified in the mutual fund regulation.

Why does an MF need a sponsor?

The sponsor is the promoter of the mutual fund. The sponsor brings in capital and creates a
mutual fund trust and sets up the AMC.

The sponsor makes an application for registration of the mutual fund and contributes at least
40% of the net worth of the AMC. In other words, every MF needs a sponsor before it can
commence operations.

What are the requirements from a sponsor?

Among other requirements, the sponsor should also have a 5-year track record in the financial
services business and should have made profit in at least 3 out of the 5 years. The sponsors could
be a bank, a corporate or a financial institution.

Example
ICICI Prudential Asset Management Company Ltd. is a leading asset management company
(AMC) in India
Its sponsors are ICICI Bank, Prudential plc, Jackson National Life Insurance Company, M&G
Prudential

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Board of Trustees
A mutual fund house must have an independent Board of Trustees, where two-thirds of the
trustees are independent persons who are not associated with the sponsor in any manner. The
Board of Trustees of the trustee company holds the property of the mutual fund in trust for the
benefit of the unit-holders. They are responsible for protecting the unit-holder's interest.

What are the functions of the board of trustees?

The primary objective of the trustees of the mutual fund is to hold its property for the benefit of
the

unit-holders. The board acts as a protector of unit-holders’ interests: it appoints a custodian for
safekeeping of assets and closely monitors the AMC.

17
The trustees also have to spell out the responsibilities of the AMC, monitor any new scheme
introduced and ensure full compliance with regulatory guidelines.

Who appoints the board of trustees?

After SEBI approval, the sponsor has to appoint the board of trustees.

How many trustees does a fund house require?

Every fund house must have at least four trustees.If a trustee company has been appointed, then
that company would need to have at least four directors on the board. Two-thirds of the trustees
should be independent.

Asset Management Company

The role of an AMC is highly significant in the mutual fund operation. They are the fund
managers i.e. they invest investors' money in various securities (equity, debt and money market
instruments) after proper research of market conditions and the financial performance of
individual companies and specific securities in the effort to meet or beat average market return
and analysis.

Fund managers
One of the most important aspects of investing in mutual funds is the management of the
portfolio of the stocks and bonds and any other asset class. The fund is managed, either actively
or passively by a fund manager. This has a huge impact on the performance of the fund and your
portfolio over time. ​It will be fair to say that the role of a fund manager is pivotal in either
making or breaking your investment.

1. Role of a Fund Manager

As an investor, when you choose to invest in a mutual fund, it involves building a portfolio of
securities. It is the fund managers who, based on research and analysis, make the decisions
pertaining to buying and selling. Your portfolio can be active or passive. If your portfolio is
passively managed, it is based on an established index and the components are chosen by
keeping in mind the underlying index. In case of an actively managed portfolio, the fund
manager picks the components of the portfolio. These fund managers play a decisive role in the
performance of active mutual funds

2. Duties of a Fund Manager

a. Meeting the reporting requirements

b. Complying with Regulatory Authorities

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c. The Protection of Wealth

d. Monitor the growth and performance of the fund

e. Oversight and Hiring

3. How to evaluate a Fund Manager?

Fund managers are critical for the selection and performance of funds and so it is important to
take certain things into consideration when picking your manager. Most experienced investors
pay attention to the manager and their fund management team. One can discern between a good
fund manager and an average one by looking at such factors as:

a. Has the fund manager succeeded in outperforming the benchmark in perpetuity?

b. Does the manager keep track of the other institutional investors’ (DII or FII) buying and
selling of stocks?

c. Are they adequately experienced with a high compensation?

d. Are they able to identify scripts way ahead of their peers?

4. How do fund managers decide where to invest?

Apart from the comprehensive knowledge on the subject and far-reaching insights, fund
managers gather invaluable insights from their research team. Some other considerations include:

a. They check for the shifts in the stock market to analyze the volume of the shifts

b. An analysis of the competition in the industry plays an equally important role to gauge the
macroeconomic outlook

Investing in mutual funds is subject to market risk. Not having the insights to pick the right fund
or fund manager can be a costly affair.All the above information is provided in the Scheme
Information Document (SID) and Key Information Memorandum (KIM) provided by fund
houses, which undergo relevant revisions from time to time.

Custodian
The mutual fund is required by law to protect their portfolio securities by placing them with a
custodian. Nearly all mutual funds use qualified bank custodians. Only a registered custodian
under the SEBI regulation can act as a custodian to a mutual fund.​A custodian is a ​financial
institution that holds customers' securities for ​safekeeping so as to minimize the risk of their theft
or loss. A custodian holds securities and other assets in electronic or physical form. Since they
are responsible for the safety of assets and securities that may be worth hundreds of millions or
even billions of dollars, custodians generally tend to be large and reputable firms. A custodian is
sometimes referred to as a "custodian bank."

19
Over the years, with the involvement of the RBI and SEBI, the mutual fund industry has evolved
in a big way giving investors an opportunity to make the most of this investment avenue. With a
proper structure in place, the industry has been able to cater to more number of investors. With
the increase in awareness about mutual funds several new players have joined the bandwagon.

Custodian Bank Examples

Some of the largest custodian banks include The Bank of New York Mellon, JPMorgan Chase,
State Street Bank and Trust Co., and Citigroup. Abroad, some of the best-known custodians are
Bank of China (Hong Kong), Credit Suisse and UBS (Switzerland), Deutsche Bank (Germany),
Barclays (England) and BNP Paribas (France).

Registrar & Transfer Agent (RTA)

The RTA maintains and updates all the investor records. The functions of the RTA include
processing investor application, and also purchase and redemption transactions performed by the
investors in different plans and schemes.These agents are trusts or institutions that register and
maintain detailed records of the transactions of investors for the convenience of mutual fund
houses.

Investors' transactions like buying, exchanges, processing of mails and related information,
changes in personal data, etc occur frequently and have to be recorded. Registrar & transfer
agents have skilled expertise for maintenance of such data on a professional basis, thereby
contributing to saving costs and time involved in keeping detailed accurate records of the
investor transactions.

Their role also extends to providing information to the investors about new offers, maturity dates
and all other investor-friendly information at one place for their reference.

Some of the RTAs operating in India are Computer Age Management Services (CAMS), Karvy
etc.

20
Chapter 5: Classification of Mutual Funds

21
According to Structure

Open-Ended Fund
Open-ended funds are the funds in which maturity date is not fixed. The investors have the
opportunity to buy & sell units any time at NAV. These are the liquid funds & investors can
invest at any time during the year & redemption can also be done on continuous basis.

Close-Ended Fund
Close-ended funds are the funds where maturity period is fixed. These funds are not available for
subscription all the time like open-ended funds rather they are available for investment during
specified period of time i.e. when they are launched initially.

Interval Funds
Interval funds are the combined version of Open-ended as well as close-ended funds. These
funds are available for trading in stock exchange at predetermined intervals.

On the basis of Investment objectives

Equity or Growth funds
Equity funds are the funds in which majority of the investment is made in the equity shares.
Therefore it carries a high risk but also potential of high returns. The investment goal under such
kind of funds is to achieve long term growth. There may be funds which focus mainly on a single
market sector for eg Banking sector equity fund.

Debt or Income Funds

The investment under such kind of funds is made in securities such as bonds, debentures,
government securities, etc. Since investment is made in debt instruments, risk factor is low &

22
income is stable & regular. Debt or income funds are less volatile as compared to equity funds.
The investment goal under such type of funds is safety and to achieve moderate growth of funds.

Balanced funds
Under balanced funds, the money is invested in both equity & debt instruments. The investment
goal is to achieve both profits & moderate growth. They ensure stable returns & appreciation in
capital to the individuals who have invested money in balanced funds.

Money Market or Liquid funds

Such kind of funds go for short term investments such as Treasury bills, commercial papers, etc.
under which time period is less than 91 days. The investment objective under liquid funds is to
attain liquidity, increase in capital & moderate return on funds.

New mutual fund reclassification by SEBI to help investors choose and compare funds:

A brief on ​Systematic Transactions:

Majority of Mutual Fund schemes have features that allow for regular investments or
withdrawal, which are referred to as systematic transactions. The systematic investment
approach has become an extremely popular form of investing in the mutual fund industry as it
offers customers the opportunity to invest smaller amounts over longer periods of time and helps
mitigate the risk of market timing.
Types of systematic transactions are as follows:

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Systematic Investment Plans (“SIP”)
SIP is a disciplined, risk mitigating and a convenient way to invest in mutual funds regularly.
Customers have option to invest a fixed amount at regular intervals. Customers opting for SIPs
are expected to benefit from rupee cost averaging, an investment technique of buying a fixed
amount of a particular investment at regular intervals, regardless of the price. The customer
purchases more units when the NAVs are low and fewer units when the NAVs are high. This
technique allows a customer to invest over a period of time as opposed to purchasing units on a
lump sum basis. SIPs encourages investment discipline among customers as a fixed amount is
invested on a regular basis.

Systematic Transfer Plans (“STP”)

STPs allow customers to periodically transfer a certain amount of funds or units from one
scheme to another at regular intervals. Customers looking to invest in a particular scheme over a
period to tackle market volatility may choose to invest through STPs.
Some types of STPs:
● Fixed STP: Through fixed STPs, a pre-determined amount is transferred from one
scheme to another. Fixed STPs offer plans that permit such transfers on a daily, weekly,
monthly or a quarterly basis.
● Capital appreciation STP: Through capital appreciation STPs, only the capital
appreciation portion of the scheme is transferred to another scheme on a periodic basis.
Capital appreciation STPs offer plans that permit such transfers on a monthly or quarterly
basis.
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 ● Flex STP: Through flex STP, a target market value of the investor’s account is
pre-defined by the number of instalments and the instalment amount. The instalment
amount for any period is determined based on the shortfall to the target market value. The
instalment amount and any shortfall amount to the target market value is transferred to
the transferee scheme. If there is no shortfall to the target market value, the
predetermined instalment amount is the minimum transferred anyway. This would result
in a higher amount being transferred when the markets are low and lower amounts being
transferred when markets are high, subject to the minimum initial instalment amount.
Flex STPs offer plans that permit such transfers on a daily, weekly, monthly and
quarterly basis.
● Swing STP: Through swing STP, a target market value of the investor’s account is
pre-defined by the number of instalments and the instalment amount. The instalment
amount for any period is determined based on the shortfall or surplus to the target market
value. An amount lower than the target market value is transferred to the transferee
scheme, while an amount higher than the target value is transferred back to the transferor
scheme. Swing STPs offer plans that permit such transfers on a weekly, monthly and
quarterly basis.

Systematic Withdrawal Advantage Plan (“SWAP”)

Customers in need for cash flow on a periodic basis may opt for this facility. Some types of
SWAP facilities are:
● Fixed SWAP: Through fixed SWAP, a fixed amount is redeemed from a scheme at a
periodic intervals. Monthly, quarterly, half yearly or yearly withdrawals are available
under this facility.
● Variable SWAP: Through variable SWAP, only the capital appreciation portion or
dividend of a scheme will be withdrawn on a periodic basis. Quarterly, half-yearly and
yearly withdrawal is available under this facility.

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Chapter 6: Understanding of Asset Management Company (AMC)

An asset management company (AMC) is a company that invests its clients' pooled funds
into securities that match declared financial objectives. Asset management companies
provide investors with more diversification and investing options than they would have by
themselves. AMCs manage mutual funds, hedge funds and pension plans, and these
companies earn income by charging service fees or commissions to their clients.

Operating Model

● Flat Fee based

● Commission based on percentage

Working of an Asset Management Company (AMC)

AMCs offer their clients diversification because they have a larger pool of resources than the
individual investor could access on his own. Pooling assets together and paying out proportional
returns allow investors to avoid minimum investment requirements often required when
purchasing securities on their own, as well as the ability to invest in a larger set of securities with
a smaller investment.
When someone invests with an AMC, they are actually purchasing a portfolio they offer. The
company is principally responsible for driving the mutual fund and make decisions that benefit
the investors.

Under the leadership of an asset manager, it invests the money in line with the trust deed and the
financial objective of the scheme.

The process is broadly listed below:

Asset Allocation
Every mutual fund comes with a definite financial objective or a theme– this helps the asset
manager to shortlist and decide on which asset to invest in. For instance, many debt-oriented
funds put no more than 20% of their assets under management in equities. Or a balanced fund
may choose to invest only 60% assets in equities. This is ​asset allocation – one of the crucial
decisions a fund manager has to take on a daily basis.

b. Research and Analysis

Building a portfolio rides on plenty of in-depth study on a daily basis. Analysts study the market,
micro and macro-economic aspects and fund performances regularly, and pass the reports to the
manager. He makes decisions that can help the company beat the benchmark and rise above its

26
peers (apple to apple comparison). Then the fund manager takes the final call on stock selection,
which decides the fate of the fund.

c. Portfolio Construction
An AMC will have a slew of researchers and analysts who report their market findings and
trends to the fund manager. Based on these findings and investment objectives, he chooses which
securities to buy, sell or whether to hold them. This is how a company builds a portfolio, which
depends predominantly on the experience and expertise of the manager.

d. Performance Review
Even with disclaimers in the fine print, an AMC faces a lot of flak from the investors and
trustees, if it cannot justify its investment decisions. For instance, the company must provide
unit- holders with information that have a direct impact on their holdings. It must also send
regular updates on sales and repurchases, NAV, portfolio details etc. to investors.

Typically, AMCs are considered buy-side firms. This simply refers to the fact that they help their
clients invest money or buy securities. They decide what to buy based on in-house research and
data analytics, but they also take public recommendations from sell-side firms.

Costs related to Asset Management Companies:

“In the mutual fund field, costs assume a tremendous importance for the long-term investor.
Other things held equal, lower costs mean higher returns." -John Bogle, "Bogle on Mutual
Funds: New Perspectives for the Intelligent Investor" (1994)
There are essentially four major components of a mutual fund's overall cost structure: sales
charges, expense ratios, transaction commissions and redemption fees. An understanding of what
these costs are and how they impact a fund's performance is extremely important in making
informed fund investing decisions.

Sales Charges
Among other distinguishing features, mutual funds are acquired with a sales charge (load) or
without a sales charge (no load). If there is a load, the charge can be as high as 8%, although it
seems that a 3-5.75% range is most common. This charge is paid by the investor (the buyer of
the fund) to the seller (a financial intermediary such as a brokerage firm, insurance company,
financial planner or investment advisor) for services rendered. The charge is deducted from the
amount being invested.

No-load mutual funds are offered directly to the investing public by fund companies, or they are
sold to investors by financial intermediaries who have a compensation arrangement (hourly, flat
fee or a percentage of assets) with the purchaser. In this case, a sales charge is not involved, and
the investor fully invests his or her available money into funds sponsored by a no-load fund
27
company. (For more insight, read The Lowdown On No-Load Mutual Funds.)

There are five general aspects of the load/no-load debate worth considering:.

Fund investors definitely need to understand that a load is a selling commission paid to a
financial intermediary and not the fund company. It does not buy increased investment expertise
by fund management. On the other hand, financial intermediaries defend their fees as fair
compensation for the investment advisory services they provide to the investor.

The load-fund business has complicated things for investors by confusing them with a variety of
fund share classes: A, B and C. In brief, these simply represent three different ways of applying a
sales charge. With A shares you pay up front and with B shares you pay at the back end. With C
shares, called "level-load," the year-to-year costs are usually high but spread out over time. (To
learn more, see The ABCs Of Mutual Fund Classes.)

A fund's load is not included in the computation of a mutual fund's expense ratio (see below)
and, therefore, is an additional cost to be considered when investing in load funds. (To learn
more, see Stop Paying High Fees.)

The long historical record on mutual funds shows that there is little difference in the total return
performance of load and no-load funds.

Employee participants in a defined-contribution, company sponsored retirement plan, such as a

401(k) and the like, generally need not be concerned about loads. In most instances, these
retirement plans waive any sales charges on their fund investment options.

Expense Ratio

A mutual fund's expense ratio is the result of a calculation as opposed to a type of expense. The
ratio's numerator is the sum of a variety of administrative and operating expenses; its
denominator is an average of the fund's assets. It is expressed as a percentage - lower is better -
and is a key indicator of a fund's investment quality.

In general operating terms, stock funds are more expensive than bond funds, international funds
are more expensive than domestic funds and small and mid cap funds are more expensive than
large cap funds.

The largest component of a fund's operating expenses is the fee paid to its investment advisors,
or managers. A fund must also pay for recordkeeping, custodial services, taxes, legal costs and
accounting and auditing fees.

28
In addition to these conventional operating expenses, some funds also have a marketing, or
distribution, fee commonly referred to as a 12b-1 fee. If this fee is charged, it is included in a
fund's operating expenses, unlike a fund's sales charge, which is not considered an operating
expense. In the mutual fund industry's early days, a provision in the regulations permitted funds
to incur promotional expenses to help develop mutual fund activity. The maximum 12b-1 fee
allowable is an annual 1% of a fund's assets. To be considered a no-load fund, the 12b-1 annual
charge must be no more than 0.25%.

Many mutual fund observers find it hard to justify this type of fee. With the increasing popularity
of mutual funds, how much more "promotion" is really necessary? Today, the 12b-1 fee is used
almost exclusively to reward intermediaries for selling a fund's shares. There is a movement
underway to eliminate the fee, but the fund industry as a whole is resisting the change.

Lastly, it seems that some mutual fund investors are not all that clear on how operating expenses
are paid. The simple answer is that whatever is included in a fund's operating expense is charged
against the assets under management. In other words, the fund's investors pay the tab. This is
how costs reduce investment returns.

Invisible Charges
Investment experts have speculated that brokerage commissions can add as much as 0.15% to a
fund's annual expenses. However, these costs are not included in a fund's expense ratio. They
seem to fit the definition of an operating expense but, as of today, are not so considered.

Redemption Fee
Designed to discourage market timers, an increasing number of mutual funds are charging a flat
fee, usually 1%, on withdrawals (shares redeemed) made within a certain time frame. Generally,
redemption fees are in effect for one year or less following the date of the investor's initial
purchase. If you are an investor (in for the long term), as opposed to a speculator (in and out for
the short term), this type of fee will have no effect on your fund investment.

Sources of Funds for an Asset Management Company

The basic source of fund for an asset management company is the unit holder’s funds. It is one of
the initial source of fund for any asset management company. Further, if the unit holder’s funds
are invested, it will generate some returns. So these returns which become another source of fund
for an asset management company can be divided into two parts:
1- If it is invested in a debt fund, interest and capital gains are the sources of funds.
2- If it is invested in an equity fund, dividends and capital gains are the sources of funds.

29
Risks Involved in Mutual Fund Business

Risks with respect to AMCs

Credit Risk Credit risk is the risk of a decline in creditworthiness of the

borrower or its default. This is because the Asset Management
Company is not able to deliver the interest rates which it promised
for its schemes.

Market Risk Market risk is the change in prices including interest rate and
currency risks. If a market is performing poorly, then the NAV of
the mutual funds may fall down due to poor performance of
securities.

Redemption Risk Redemption risk is the lack of saleability of an asset. Generally

open ended schemes face liquidity risk. An AMC must invest some
amount in the money market securities so that whenever it face
liquidity crunch, it can sell these securities to payback to the
investors.

Operational Risk Operational risk is the loss due to a failed process or inefficient
operations in handling the funds of the investors.

Regulatory Risk Regulatory risk is the risk that a change in laws and regulations
will materially impact a security, business, sector or market. A

30
 change in laws or regulations made by the government or a
regulatory body can increase the costs of operating a business,
reduce the attractiveness of an investment, or change the
competitive landscape.

Concentration Risk Concentration generally means focusing on one thing.

Concentrating a huge amount of a person’s investment in one
particular scheme is not a good option. Best way to minimize this
risk is by diversifying your portfolio. Concentrating and investing
heavily in one sector is also very risky. The more diverse the
portfolio, the lesser the risk is.

Risk of loss of The greatest risk which an asset management company face is the
Reputation risk of loss of reputation. For any asset management company
(AMC), investing people’s money is a matter of building a track
record of good investment practices, careful selection of
investments in quality assets while optimizing the returns
generated. It is very crucial, therefore, that the AMC has strong
risk management practices.

Risks with respect to Investors

Country Risk Country risk is a term for the risks involved when someone invests in a
particular country. In particular, country risk denotes the risk that a
foreign government will default on its bonds or other financial
commitments. In a broader sense, country risk is the degree to which
political and economic unrest affect the securities of issuers doing
business in a particular country.

Currency Risk Currency risk, commonly referred to as exchange-rate risk, arises from
the change in price of one currency in relation to another. Investors or
companies that have assets or business operations across national
borders are exposed to currency risk that may create unpredictable
profits and losses.

Interest Rate Risk Interest rate changes depending upon the credit available with lenders
and the demand from borrowers. They are inversely related to each
other. Increase in the interest rates during the investment period may
result in a reduction of the price of securities.

Liquidity Risk Liquidity risk refers to the difficulty to redeem an investment without
incurring a loss in the value of the instrument. It can also occur when a
seller is unable to find a buyer for the security. Sometimes due to lack
of buyers in the market, you might be unable to redeem your

31
 investments when you need them the most. The best way to avoid this
is to have a very diverse portfolio and making fund selection diligently.

Market Risk Market risk is basically a risk which may result in losses for any
investor due to a poor performance of the market. There are a lot of
factors which affect the market. A few examples are a natural disaster,
inflation, recession, political unrest, fluctuation of interest rates. Market
risk is also known as systematic risk.

Credit Risk Credit risk basically means that the issuer of the scheme is unable to
pay what was promised as interest. Usually, agencies which handle
investments are rated by rating agencies on this criteria. So, a person
will always see that a firm with a high rating will pay less and
vice-versa.

Performance Evaluation of Mutual Funds

In order to evaluate the performance of a mutual fund, an investor needs to follow the following
steps:
a. Define the Investment Goals
It is important to define your financial goal first and then decide your investment. This also has a
crucial role in fund evaluation. For instance, if you want a regular income with capital protection,
you can choose to invest in a debt fund. But if you have a higher risk appetite and an aim to build
your wealth, equities will suit your purpose.

b. Shortlist a few peer Funds to compare

It is difficult to assess a mutual fund in isolation. So, an investor should always make a small list
of comparable funds and constantly compare them. There are many Fintech firms and third party
websites that offer free mutual fund screener tools.

c. Check the historical Performance Data

Historical Performance data can help us check how the fund has fared across different market
cycles. Consistency can also shed light on the skill of the fund manager. In short, it will be easier
for us to find a fund with lower risks but higher returns.

d. Fee Structure of the Fund

A mutual fund company charges you for its services and expertise. Some funds require deft
management and quick decisions on whether to buy, sell or hold on to an asset. We should
remember that a fund with a higher fee is automatically better.

32
e. Risk-Adjusted Returns
Every fund expects certain risks, related to the market and the industry. When a fund strategizes
in such a way that they make more returns against expected risks, we call them risk-adjusted
returns.

f. Performance against Index

Indexes like Nifty, BSE Sensex, and BSE 200 set benchmarks, and all fund performances are
evaluated on this basis. Comparing different timelines against the benchmark as well as peers
can be insightful. A well-managed fund won’t fall too hard during a market low.

Some key performance indicators / Financial Ratios

a. Average Returns
The performance evaluation is done by comparing the returns of a mutual fund scheme with
returns of a benchmark portfolio. Average return is obtained by taking the simple mean of
monthly returns, whereby monthly returns are calculated by using the NAVs of the mutual fund
scheme.
return= (NAV​t​ - NAV​t-1​)/ NAV​t-1

b. Standard Deviation (SD)

Measures the absolute dispersion, the greater the SD; greater will be magnitude of the deviation
of the values from their mean. Small SD means high degree of uniformity & homogeneity of a
series. The total risk is measured in terms of standard deviation.

c. Beta
Beta is a commonly used measure of risk. It basically indicates the level of volatility associated
with the fund as compared to the benchmark. The success of beta is heavily dependent on the
correlation between a fund and its benchmark. If the fund portfolio doesn’t have relevant
benchmark index then the beta would be inadequate. A beta that is greater than one means that
fund is more volatile than the benchmark, while a beta of less than one means that the fund is
less volatile than the index. A fund with a beta very close to 1 means the fund’s performance
closely matches the index or benchmark.

d. Coefficient of Determination (R^2 )

33
The R^2 is a measure of a security’s diversification in relation to the market. The closer the R^2
is to 1.00, the more completely diversified the portfolio. R^2 is ranging from 1 to 100, gives an
idea about how well a fund’s performance correlates with that of the benchmark. An R of 0
means that a fund’s returns have no correlation with the market and an R of 1.00 indicates that a
fund’s returns are completely in sync-up and down-with the benchmark.

e. Expense Ratio
This is essentially the fee for the fund house for managing your mutual fund. Expense ratio
reflects the value-for-money aspect of a fund. It consists of fund management charges and all the
other costs related to fund management. It impacts your ultimate take-home returns.

f. The Sharpe Measure

The Sharpe Ratio measures the fund’s excess return per unit of its risk (i.e. total risk). This ratio
indicates the relationship between the portfolio’s additional return over risk-free return and total
risk of the portfolio, which measured in terms of standard deviation. A high and positive Sharpe
ratio shows a superior risk-adjusted performance of a fund while low and negative Shape Ratio is
an indication of unfavorable performance.

g. The Treynor’s Performance Index

Treynor ratio measures the relationship between fund’s additional return over risk-free return and
market risk is measured by beta. The larger the value of Treynor ratio, the better the portfolio has
performed. Generally, if the Treynor ratio is greater than the benchmark comparison, the
portfolio has outperformed the market and indicating superior risk-adjusted performance. Using
the beta, rather than the standard deviation (as in the Sharpe Index), we are assuming that the
portfolio is a well diversified portfolio.

34
Chapter 7: Practical Analysis of Mutual Fund Industry

Operations of Mutual Funds - An example

HDFC AMC - Operations

HDFC AMC’s operations are broadly bifurcated into two important functions, the mutual fund
operations (“MFO”) and portfolio management services operations (“PMSO”).

The MFO team is responsible for servicing customers of the Mutual Fund and segregated
accounts. Their primary responsibilities include investment administration, banking, asset
valuation and unit pricing, unit administration, overseeing customer service center operations
and co-ordination with the RTA ​(Registrar & Share Transfer Agents)​, redressal of customer
grievances, anti-money laundering (“AML”), regulatory compliances/reporting and management
information system.

Mutual fund operations​ are broadly classified into the following:

● Investment administration operations: This function ensures that investment decisions

made by its investment team are executed and assets acquired or liquidated for respective
schemes are either received or delivered against consideration. As required by SEBI
regulations, they have appointed SEBI registered custodians for all of their schemes.
Custodians hold securities and facilitate in trade settlements.

35
 ● Banking operations: The AMC needs to maintain relationships with leading banks in
India for the smooth completion of our customer’s investments in different schemes.
These banks collect funds from customers for subscription of units and facilitate prompt
payout of funds to customers against redemptions requested and dividends declared.
AMC also facilitates all banking services offered by banks to the customers and as part of
its digital initiatives, has been encouraging customers to use their online services.

● Fund accounting operations: Accounting of the schemes is carried out by in-house team
and all assets held by respective schemes are valued on a daily basis in accordance with
the valuation policy of the respective schemes. The AMC accounts for the units
subscribed or redeemed, trades executed, valuation of securities, accrual of incomes and
expenses on a daily basis and the NAV of the respective scheme or plan is computed.
NAV information is disseminated to RTA and to customers.

● Unit administration at Computer Age Management Service (“CAMS”) – HDFC

AMC has appointed CAMS to be their RTA to manage the unit administration for all our
schemes. CAMS’ services ranges from acceptance of transactions at their front offices to
allotment of units, issuing account statements, computation and payment of brokerage to
distributors, dividend and redemption processing and support digital initiatives. CAMS
has a centralized business model with their main operations located in Chennai and
Coimbatore, India.

● Investor service centers (“ISC”) operations – It aims to ensure consistent service to

customers through ISCs while maintaining regulatory standards. The service standards
are defined keeping in mind regulatory and risk management considerations. A front
office application is provided by the RTA to all ISC personnel to address most of the
customer service requirements. Additionally, a bespoke customer service application is
used by ISCs for recording interactions with customers.

● AML (​Anti-money laundering) - Put in place processes, controls and checks to ensure
that the provisions of Prevention of Money Laundering Act, 2002 and Prevention of
Money Laundering (Maintenance of Records) Rules, 2005 are adhered to.

● MIS and regulatory reporting - The RTA is the repository of all information relating to
customers’ transactions. Reports received from RTA are customized to provide sales
related MIS to a wide spectrum of users from the senior management to the sales
personnel as well as to regulators from time to time.

HDFC AMC also provides portfolio management services, including discretionary,

non-discretionary and advisory services, to HNIs, family offices, domestic corporates, trusts,
provident funds and domestic and global institutions.

36
PMSO team performs functions such as, post trade investment support, cash management,
treasury and settlement functions, recording of transactions in the books of accounts of the
respective clients, valuation of securities in the clients’ portfolios, providing various reports to
management, liaising with bankers and custodians.
It manages the accounting of the portfolio services in-house and provides an audited statement of
accounts to the customers at the end of the concerned financial year. A robust web based
integrated application system catering to the front office, back office and client reporting is in
place to take care of the portfolio management and segregated account and advisory services’
business.
The PMSO is independent of our MFO and is conducted on an arms-length basis with a separate
set of systems and teams.

All operational activities are subject to audit. They appointed internal auditors that perform
transactional and risk based audit, and process reviews on a regular basis. They have also
appointed auditors as required under relevant regulations for different schemes and the portfolio
management and segregated account services. They audit the Mutual Fund scheme accounts and
the customer’s accounts in respect of the Portfolio Management Service.
An auditor also periodically audits application systems used by them and there are regulatory
audits conducted by SEBI appointed auditors to report on various SEBI compliances. The audit
committee reviews the auditors’ reports and these reports are placed before the board and the
board of the Trustee Company.

Systems and processes form the backbone of AMC’s operations with extensive focus on internal
controls, minimizing operational risks, scalability and bringing about efficiency to meet various
timelines. Also, it is an endeavor to keep upgrading the systems and re-engineer the processes to
ensure maintenance of a very high standard of regulatory compliance and governance.

Marketing and Digital Initiatives

HDFC AMC marketing function aims to capitalize on the opportunities available in the mutual
fund industry in India, due to low awareness and penetration of the sector amongst Indian
audiences. The audience can be divided into two broad segments, customers and distributors.
Customers can further be categorised as existing customers and prospective customers. Based on
this categorization, they have divided marketing objectives into two:

● Product communication meant for current and prospective customers and distributors
● Communication for mutual fund awareness for prospective customers
As part of the product communication objective, they cover regular updates on schemes through
various modes, such as presentations, leaflets, posters, fact sheets and videos. They support
distributors with sales material and ideas that they can use in their interaction with customers. As
part of their customer awareness communication objective, they cover topics such as importance
of financial planning and investing, planning for children, retirement and other financial goals,

37
understanding asset classes and power of compounding, amongst others programs. They also
engage with audience through television, radio, outdoor marketing, digital and social media. To
reach out to current customers, in addition to the above, they effectively employ website,
emailers and SMS systems amongst others. They aim to leverage the power of internet to reach
out to their customers and distributors. They have a strong online presence via digital platform
for customers and distribution partners. Offer services through our online portal, HDFC
MFOnline and mobile applications.

Apart from that HDFC AMC’s other activities also involve:

Compliance - Monitor compliance with applicable regulatory requirements laid down by SEBI
and other related regulations that are applicable to us.

Risk Management - ​The Audit Committee is responsible for overseeing the risk management
framework, reviewing the key risks and mitigation strategies, and ensuring the effectiveness of
risk management policies and procedures. The Management is also responsible for ensuring that
the risk management framework is effectively implemented within all areas of their respective
functions.

Customer Service - ​Customers are the focal point of the service delivery model and the aim
should be to continue servicing them efficiently.

Training and Investor Education - ​HDFC has always been at the forefront for innovative ideas
to engage with distributors under the Learning & Development academy, LEAP
(Learn.Evolve.Achieve.Progress). LEAP provides various classroom based learning
interventions covering technical skills, functional skills, life skills and experiential learning
modules. Many distributors have undertaken these courses. Through LEAP they customise the
training program as per the audience, such as an advanced customised learning program or a
facilitator-led program, and intend to continue preparing well thought and high quality training
modules.

Information Technology & Digital Platforms - ​They have build digital properties for partners
and customers, using latest technologies available in the market, which will ensure scale, fault
tolerance, and security. The entire suite of applications is stateless and distributed ensuring high
availability. Support for omni-channel presence enables a seamless user experience. This design
also facilitates faster launch to the market and ease of working with ecosystem partners. The
partner portal and mobile application (MFOnline Partners) for IFAs (Independent Financial
Adviser) supports transactions and reports for end customers along with all reports and tools,
including financial planning and digital marketing to help IFAs better manage their business
digitally. The customer portal and mobile application, MFOnline Investors enables digital
transactions, reporting and host of other services for end customers.

38
Performance of some of the schemes:

Analysis of some Mutual Fund Schemes ​- An example

Aditya Birla Sun Life Equity Fund

It is an​ ​open ended equity scheme investing across large cap, mid cap, small cap stocks.

Investment objective: The objective of the scheme is to achieve long term growth of capital,
through a portfolio with a target allocation of 90% equity and 10% debt and money market
securities.

This product is suitable for investors who are seeking:

1- Long term capital growth
2- Investments in equity and equity related securities.

Fund Details

Fund Type - Open-Ended

Class - Equity
Category - Multi Cap
Min Investment - Rs. 1000/-
Fund Manager - Mr. Anil Shah

39
Latest NAV - 696.07 (as on 05-Mar-2019)
Inception Date - Aug 27, 1998

Fund Performance:

40
 Time 1- Year 3- Year 5- Year Since Inception

CAGR -0.53% 16.10% 18.49% 22.95%

Portfolio and Sector Holdings:

Top 10 issuers-

Issuer % to Net Assets

HDFC Bank Ltd. 8.97

ICICI Bank Ltd. 8.57

Clearing Corporation Of India Ltd. 5.65

ITC Ltd. 4.59

41
Dr. Reddys Laboratories Ltd. 4.47

Tech Mahindra Ltd. 3.91

Infosys Ltd. 3.69

Tata Steel Ltd. 2.96

PVR Ltd. 2.67

Hindalco Industries Ltd. 2.59

Fund Summary:

Entry Load Exit Load Load Comments

NIL 1% For redemption/switch out

of units within 365 days
from the date of allotment:
1.00% of applicable NAV.
For redemption/switch out
of units after 365 days from

42
 the date of allotment: Nil
**Exit Load is NIL for units
issued in Dividend
Reinvestment.

Highlights:
1- Diversified portfolio
2- Flexibility across market segments

43
Comparison of Top AMCs in India

Source:​ ​https://economictimes.indiatimes.com/marketstats/pageno-1,pid-134,quarter-Q3,sortby-aum.cms

44
Top Equity MF in India

Source: ​https://www.valueresearchonline.com/toprated.asp

45
Comparison of Different Schemes

Banking

Fund Name Fund Risk Standard Sharpe Beta Alpha R-Squared

Grade Deviation Ratio

Aditya Birla Sun Life Banking & Financial

Services Fund - Regular Plan Average 21.43 0.76 1.08 -2.98 0.76
ICICI Prudential Banking And Financial
Services Fund Average 19.07 0.98 0.99 0.97 0.8
LIC MF Banking & Financial Services Fund Above
- Regular Plan Average 21.98 0.36 1.05 -10.81 0.68
below
Reliance Banking Fund Average 18.11 0.85 0.96 -1.68 0.83
UTI Banking And Financial Services Fund - Above
Regular Plan Average 18.64 0.76 1 -3.55 0.85

46
 Equity Savings

Risk and Volitality

Fund Name Fund Risk Standard Sharpe Ratio Beta Alpha R-Squared
Grade Deviation

Aditya Birla Sun Life Equity Savings

Fund - Regular Plan High 6.88 0.35 1.28 -1.81 0.66
HDFC Equity Savings Fund Average 5.61 1.02 1.07 2.19 0.7
below
ICICI Prudential Equity Savings Fund Average 4.17 0.94 0.76 1.38 0.64
Above
SBI Equity Savings Fund - Regular Plan Average 5.61 0.3 1.16 -2.14 0.82
UTI Equity Savings Fund - Regular Plan -- -- -- -- -- --

47
48
 Credit Risk
Risk and Volitality
Fund Name Fund Risk Standard Sharpe Ratio Beta Alpha R-Squared
Grade Deviation

Aditya Birla Sun Life Credit Risk Fund -

Regular Plan Average 1.96 0.76 3.66 8.87 0.21
HDFC Credit Risk Debt Fund - Regular Above
Plan Average 2.16 0.5 4.93 11.01 0.31
below
ICICI Prudential Credit Risk Fund Average 1.45 0.99 3.37 8.22 0.32
Kotak Credit Risk Fund Regular Plan Average 1.62 0.75 3.77 8.81 0.33
Reliance Credit Risk Fund Average 1.46 0.85 3.38 8.03 0.32

49
 Corporate Bond

Risk and Volitality

Fund Name Fund Risk Standard Sharpe Ratio Beta Alpha R-Squared
Grade Deviation

Aditya Birla Sun Life Corporate Bond below

Fund Average 1.54 0.92 0.6 1.11 0.87
HDFC Corporate Bond Fund Average 1.91 0.77 0.72 1.1 0.81
below
ICICI Prudential Corporate Bond Fund Average 1.58 0.7 0.59 0.8 0.82
SBI Corporate Bond Fund - Regular
Plan -- -- -- -- -- --
UTI Corporate Bond Fund - Regular
Plan -- -- -- -- -- --

50
51
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[Accessed 6 Mar. 2019]
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52