Mutual fund:In terms of portfolio collects money from like minded investors and inve

Objectives
AMC appoints a person or group of persons called as fund manager
Steps of Portfolio management
portfolio invesments
portfolio evaluation/PM evaluation
Portfolio rebalanced or not

Types -open ended and close ended

close ended funds-in the form of NFO(New fund offering) opening date and closing date
opening date and closing date-listed and traded in a stock exchange-ETFS(exchange traded funds)

Open ended fund-no fixed tenure and any no of times you can enter and exit
NAV

NAV-Net assest value

A mutual fund has a corpus size of 500000/- each unit has a face value of Rs10(50000 units can be issued)

7/8/2021
Liablities Assests
Unit holders funds 500000 Invesments
cash and bank ballnace
500000
Case 1-Dividend reinvesments plan
The companies are paying divident to this mutual funds

Liablities Assests
Unit holders funds 500000 Invesments
Income 100000 cash and bank ballnace
600000

NAV 13
Invesments
cash and bank ballnace

case
Dividend payout plan Liablities Assests
Unit holders funds 500000 Invesments
Income 20000 cash and bank ballnace
 9.8
when NAV affected when divident is paid the NAV reduces
when divident id reinvested NAV increses

ETF(exchange traded funds)_are passive funds

Measures the performance of a mutual fund by taking risk adjusted measures

Sharpes measures=Rp-Rf/SD
SD-Total risk

For every one unit of

M^2=Rp*-Rm
Rp*-Rate of return on an adjusted portfolio with a volatility that matched with volatility of market index.(Leah and Franco mod

Sharpe ratio Rank

A 0.8 I
B 0.7 II

Ratio volatilty of market index/volatility of portfolio

There should be level playing field

minded investors and invest the money to fulfill the objectives of the fund

Corpus fund-

Return for individual stock

P1-P0+D1/P0

I invested(these are highly liquidity )

400000 1000 units
100000
500000 13000

400000
200000
600000

500000
100000 1.6 Dividedent NAV

400000
120000
I invested 1000 units if I take money today out
 9800
1600
11400

ndex.(Leah and Franco modiliani)

Q1

mutual funds Return% SD(%) Beta

A 15 5 1.5
B 10 4 0.5
C 17 7 1
D 11 6 0.7
E 19 5 1.3

Risk free rate is Rf 5

return on market is RM 18

Q2 Beta SD RP
KKK 1.5 15 15
CPZ 3.1 21.43 22

Rm 12
SD market 8
Rf 8

Q3
Funds RP-Rf Beta Jensen
R 7.7 1.02 -0.256
S 11.4 0.98 3.756
T 11.6 1.08 3.176
market Rm-RF 1
7.8

Q5 Rp SD Beta
Birla 25.38 4 0.24
PICICI GP 36.35 6.88 0.52
Alliance 46.56 4.36 0.64
RM S&P 500 CNX 36.74 3.71 1
Tisk free rate 8
Q6
Beta Jenses
Fund A 17 1.65 -6.5
Fund b 20 0.7 6

Rm 17
Rf 7

Q7
Rf 6

Managed portfolio markete index

Avg return 25 20
Beta 1.35 1
SD 45 30
Non systematic risk 19 0

Ratio volatilty of market index/volatility of portfolio

0.67 0.33
Risk assest Risk freee assest is t-bills

R*p 18.6666666666667
Rm 20
M2 -1.33333333333334

is -ve the portfolio has lower sharpe ratio

is +ve the portfolio has higher sharpe ratio

Informatio ratio excess return/residual risk

alpha/Sigma ei

Informatio ratio 1
Sharpe ratio Rank Treynor ratio Rank Jensen ratio(Alpaha)
2 II 6.6667 V -9.5000
1.25 IV 10.0000 III -1.5000
1.71 III 12.0000 I -1.0000
1V 8.5714 IV -3.1000
2.8 I 10.7692 II -2.9000

If the funds are well diversified then Sharpe ratio and TR will be alsmost equal

TR sys+unsys unsys-Diversible
SYS-Undiversible

Sharpe ratio Treynor ratio Jensen ratio Jensen ratio

0.466666667 4.666666667 1
1.026598227 7.096774194 1.6

Jensens Treynor Predictive ability of fund managers

10.4824 72.41666667 105.75
13.4052 54.51923077 69.9038461538462
20.1664 60.25 72.75

Predictive ability of fund managers

measures the returns earned by the fund managers for every unit of systema

Jensens measures
Fund B is prefered
 alpha is -ve

gers for every unit of systematics risk