Professional Documents
Culture Documents
to the
Mutual Fund
Industry
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MUTUAL FUNDS: AN INTRODUCTION
A Mutual Fund is an investment tool that allows small investors access to a well-
diversified portfolio of equities, bonds and other securities. Each shareholder participates
in the gain or loss of the fund. Units are issued and can be redeemed as needed. The
fund's Net Asset Value (NAV) is determined each day. The income earned through these
investments and the capital appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.
Mutual funds are financial intermediaries, which collect the savings of investors and
invest them in a large and well-diversified portfolio of securities such as money market
instruments, corporate and government bonds and equity shares of joint stock companies.
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Mutual funds are conceived as institutions for providing small investors with avenues of
investments in the capital market.
Since small investors generally do not have adequate time, knowledge, experience and
resources for directly accessing the capital market, they have to rely on an intermediary,
which undertakes informed investment decisions and provides consequential benefits of
professional expertise. The raison d’être of mutual funds is their ability to bring down the
transaction costs. The advantages for the investors are reduction in risk, expert
professional management, diversified portfolios, and liquidity of investment and tax
benefits.
By pooling their assets through mutual funds, investors achieve economies of scale. The
advantage that such a investing logic offers to an individual investor is the advantage of
scale. A collected corpus can be used to procure a diversified portfolio, indicating greater
returns as also create economies of scale through cost reduction. This principle has been
effective world-wide as more and more investors are going the mutual fund way. This
portfolio diversification ensures risk minimization. The criticality of such a measure
comes in when you factor in the fluctuations that characterize stock markets. The
interests of the investors are protected by the SEBI, which acts as a watchdog. Mutual
funds are governed by the SEBI (Mutual Funds) Regulations, 1993.
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of India (SEBI) formulated the Mutual Fund (Regulation) 1993, which for the first time
established a comprehensive regulatory framework for the mutual fund industry. Since
then several mutual funds have been set up by the private and joint sectors.
Mutual funds have been a significant source of investment in both government and
corporate securities. It has been for decades the monopoly of the state with UTI being the
key player, with invested funds exceeding Rs.300 bn. (US$ 10 bn.). The state-owned
insurance companies also hold a portfolio of stocks. Presently, numerous mutual funds
exist, including private and foreign companies. Banks--- mainly state-owned too have
established Mutual Funds (MFs). Foreign participation in mutual funds and asset
management companies is permitted on a case by case basis.
UTI, the largest mutual fund in the country was set up by the government in 1964, to
encourage small investors in the equity market. UTI has an extensive marketing network
of over 35, 000 agents spread over the country. The UTI scrips have performed relatively
well in the market, as compared to the Sensex trend. However, the same cannot be said of
all mutual funds.
All MFs are allowed to apply for firm allotment in public issues. SEBI regulates the
functioning of mutual funds, and it requires that all MFs should be established as trusts
under the Indian Trusts Act. The actual fund management activity shall be conducted
from a separate asset management company (AMC). The minimum net worth of an AMC
or its affiliate must be Rs. 50 million to act as a manager in any other fund. MFs can be
penalized for defaults including non-registration and failure to observe rules set by their
AMCs. MFs dealing exclusively with money market instruments have to be registered
with RBI. All other schemes floated by MFs are required to be registered with SEBI.
In 1995, the RBI permitted private sector institutions to set up Money Market Mutual
Funds (MMMFs). They can invest in treasury bills, call and notice money, commercial
paper, commercial bills accepted/co-accepted by banks, certificates of deposit and dated
government securities having unexpired maturity up to one year.
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The end of millennium marks 36 years of existence of mutual funds in this country. The
ride through these 36 years is not been smooth. Investors opinion is still divided. While
some are for mutual funds others are against it.
UTI commenced its operation fom july 1964. The impetus
for establishing a formal institution came from the desire to increase the propensity of the
middle and lower groups to save and to invest. UTI came into existence during a period
marked by great political and economic uncertainity in India. With was on the borders
and economic turmoil that depressed the financial market, entrepreneurs were hesitant to
enter capital market. Though the growth was slow, But it accelerated from the year 1987,
when non- UTI players entered the industry.
The mutual fund industry can be broadly put into four phases according to the
development of the sector, Each phase is briefly described as under.
First Phase-1964-87
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Unit Trust of India(UTI) was established on 1963 by Act of Parliament. It was set up by
the Reserve Bank of India and functioned uned the Regulatory and admisnistrative
control of the Reserve Bank f India. In 1978 UTI was de-linked from RBI and the
Industrial Development Bank of India(IDBI) took ove the regulatory and admistrative
control in place of RBI. The first scheme launched bye UTI was Unit Scheme 1964. At te
end of 1988 UTI had Rs.6,700 crores of assets under management.
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and the regaining of investor confidence in these MF’s. As at the end of January 2003,
There were 33 mutual fund 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.
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
2000 more than Rs. 76,000 crores of AUM 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. As at
the end of September 2004, There were 29 fund, Which manage assets of Rs.
153108 crores under 421 Structure of Mutual Funds in India. At the end of
year 2006 the AUM crossed 2,50,000 crores.
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Growth of the Mutual Fund Industry in India
The mutual fund industry in India came into being in 1963 with the setting up of the Unit
Trust of India (UTI). In 1987, Public Sector Banks and Insurance Companies opened
their own mutual funds, thus starting the second phase in the growth of the mutual funds
industry. By the end of 1988, the industry's total assets under management (AUM)
reached Rs.6billion.
The industry registered a major milestone in 1993 when the first private sector player, the
erstwhile Kothari Pioneer Mutual Fund (now merged with Franklin Templeton), was set
up. Since then, several international players have also entered the fray.
The industry has also witnessed a spate of mergers and acquisitions, the most recent ones
being the acquisition of Alliance Mutual by Birla Sun Life, GIC Mutual by Canbank
Mutual, and Sun F&C by Principal Mutual.
While the Indian mutual fund industry has grown in size by about 320% from March,
1993 (Rs 470 billion) to December, 2004 (Rs 1505 billion) in terms of AUM, the AUM
of the sector excluding UTI has grown over 8 times from Rs.152 billion in March 1999 to
Rs.1295 billion as at December 2004 (See Chart 1).
The latest phase in the industry's evolution began with the bifurcation of UTI. The Indian
mutual fund industry has grown by about 4.2 times from 1993 (Rs. 470 billion) to 2005
(Rs. 1992 billion) in terms of AUM. The private sector was allowed entry to set up asset
management companies in 1993. There was a brief period of five years during which the
asset growth was slow. The AUM for the mutual fund industry started to grow rapidly
after 1998. Between 1998 and 2005 the AUM of the sector excluding UTI grew by over
15 times from Rs.114 billion in 1998 to Rs.1738 billion as at 2005. Though India is a
minor player in the global mutual funds industry, its AUM as a proportion of the global
AUM has steadily increased, doubling from 1999 levels
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MUTUAL FUND A GLOBALLY PROVEN INVESTMENT AVENUE
Worldwide, Mutual Fund or Unit Trust as it is referred to in some parts of the world, has
a long and.successful history. The popularity of Mutual Funds has increased manifold in
developed financial markets, like the United states. As at the end of March 2006, in the
US alone there were 8,002 mutual funds with total assets of over US$ 9.36 trillion
(Rs.427Iakh crores).In India, the mutual fund industry started with the setting up of the
Unit Trust of India In 1964. Public sector banks and financial institutions were allowed to
establish mutual funds in 1987. Since 1993, private sector and foreign institutions were
permitted to set up mutual funds. In February 2003, following the repeal of the Unit Trust
of India Act 1963 the erstwhile UTI was bifurcated into two separate entities viz. The
Specified Undertaking of the Unit Trust of India, representing broadly, the assets of US
64 scheme, assured returns and certain other schemes and UTI Mutual Fund conforming
to SEBI Mutual Fund Regulations. As at the end of March 2006, there were 29 mutual
funds, which managed assets of Rs. 2,31,862 crores (US$52 Billion) under 592 schemes.
This fast growing industry is regulated by the Securities and Exchange Board of
India(SEBI).
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STRUCTURE
OF THE
INDIAN
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Kotak AMC . The aggregate corpus of the assets managed by this category of AMC’s is
about Rs. 60 billion.
Organization of A Mutual Fund
There are many entities involved in organization of Mutual Fund. Diagram given below
illustrates the organization set-up of a mutual fund.
The structure of mutual fund in India is governed by SEBI (Mutual fund) Regulation,
1996.
The Sponsor These regulation make it mandatory to a mutual fund to have three-tier
structure of Sponsor-Trustees-Asset Management Company.
is promoter of the mutual fund appoints trustees, custodians and the AMC with prior
approval of SEBI. The sponsor establishes the mutual fund and registers the same with
SEBI. Sponsors must contribute at least 40% of the capital of the AMC.
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Trust/ Board of Trustees: Trustees hold a fiduciary responsibility towards unit
holders by protecting their interests. Trustees float and
market schemes, and secure necessary approvals. They check if the AMC’s investments
are within well-defined limits, whether the fund’s assets are protected, and also ensure
that unitholders get their due returns. They also review any due diligence by the AMC.
For major decisions concerning the fund, they have to take the unitholders’consent. They
submit reports every six months to SEBI; investors get an annual report. Trustees are paid
annually out of the fund’s assets – 0.5 percent of the weekly net asset value
Fund Managers/ AMC: They are the ones who manage money of the investors. An
AMC takes decisions, compensates investors through dividends, maintains proper
accounting and information for pricing of units, calculates the NAV, and provides
information on listed schemes. It also exercises due diligence on investments, and
submits quarterly reports to the trustees. A fund’s AMC can neither act for any other fund
nor undertake any business other than asset management. Its net worth should not fall
below Rs. 10 crore. And, its fee should not exceed 1.25 percent if collections are below
Rs. 100 crore and 1 percent if collections are above Rs. 100 crore. SEBI can pull up an
AMC if it deviates from its prescribed role.
approved by trustees. Trustees review and ensure that net worth of the company is
according to stipulated norms, every quarter.
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Though the trust is the mutual fund, the AMC is its operational face. The AMC is the first
functionary to be appointed , and is involved in appointment of all other functionaries.
The AMC structures the mutual fund products, markets them and mobilizes fund,
manages the funds and services the investors. It seeks the service other functionaries in
carrying out these functions.
A draft offer document is to be prepared at the time of launching the fund. Typically, it
pre specifies the investment objectives of the fund, the risk associated, the costs involved
in the process and the broad rules for entry into and exit from the fund and other areas of
operation. In India, as in most countries, these sponsors need approval from a regulator,
SEBI (Securities exchange Board of India) in our case.
A sponsor then hires an asset management company to invest the funds according to the
investment objective. It also hires another entity to be the custodian of the assets of the
fund and perhaps a third one to handle registry work for the unit holders (subscribers) of
the fund.
In the Indian context, the sponsors promote the Asset Management Company also, in
which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the
Asset Management Company (AMC). E.g. Birla Global Finance is the sponsor of the
Birla Sun Life Asset Management Company Ltd., which has floated different mutual
funds schemes and also acts as an asset manager for the funds collected under the
schemes.
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AMCs owned by the Indian private sector companies
AMCs owned jointly by Indian and foreign investors.
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Banks v/s Mutual Funds
BANKS MUTUAL FUNDS
Returns Low Better
Administrative exp. High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but improving
Liquidity At a cost Better
Quality of assets Not transparent Transparent
Interest calculation Minimum balance betweenEveryday
10th.&30th.Of every month
Guarantee Max Rs.1 lakh on deposits None
Capital flow in the economy
MFs make it possible for investors to assume risks in the expectation of the
higher returns even if the investor cannot actively manage these investments and
the associated risks. This increases the level of risk capital that is available in the
economy for funding enterprise. The MFs also add depth to the security markets
where they invest, thus contributing to liquidity and price discovery. This again
is a significant factor in channelling more money into the markets, instead of this
being locked up in unproductive physical capital like gold, real estate etc.
Schemes and Units
Investment in a company is normally represented by a certain number of shares. People
invest in a company by acquiring its shares; they disinvest by selling its shares. The total
outstanding shares of a company multiplied by the face value of each share, constitutes
the share capital of the company.
What shares are for a company, units are for a mutual fund scheme. Thus investors
invest in a scheme by buying its units. They disinvest by selling its units. The total
outstanding units of a scheme multiplied by the face value of its units, constitutes the unit
capital of the scheme.
Every scheme has an investment objective or philosophy i.e. a promise by the AMC on
how the funds would be managed. Investors in a scheme are essentially buying into this
investment objective or philosophy.
In reality, the distinction among some of the stock fund objectives discussed is not clear-
cut. The actual stocks that constitute a specific mutual fund portfolio depend on the
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analysis and perspective of the fund’s manager. Hence, a generic investment objective
(e.g. growth, income) can be interpreted and executed differently by different managers.
One company’s aggressive growth fund may look like another company’s specialty fund,
which may look like another company’s world fund. It is important to read the fund’s
prospectus and review the list of its top holdings before making your final investment
decision.
Company Profile
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STATE BANK OF INDIA
SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an enviable
track record in judicious investments and consistent wealth creation.
The fund traces its lineage to SBI - India’s largest banking enterprise. The
institution has grown immensely since its inception and today it is India's largest
bank, patronised by over 80% of the top corporate houses of the country.
SBI Mutual Fund is a joint venture between the State Bank of India and Society
General Asset Management, one of the world’s leading fund management
companies that manages over
US$ 330 Billion worldwide.
In eighteen years of operation, the fund has launched thirty-two schemes and
successfully redeemed fifteen of them. In the process it has rewarded it’s investors
handsomely with consistently high returns.
A total of over 3.5 million investors have reposed their faith in the wealth
generation expertise of the Mutual Fund.
Schemes of the Mutual fund have consistently outperformed benchmark indices and
have emerged as the preferred investment for millions of investors and HNI’s.
Today, the fund manages over Rs. 20000 crores of assets and has a diverse profile
of investors actively parking their investments across 40 active schemes.
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The fund serves this vast family of investors by reaching out to them through
network of over 100 points of acceptance, 26 investor service centers, 33 investor
service desks and 52 district organizers.
SBI Mutual is the first bank-sponsored fund to launch an offshore fund – Resurgent
India Opportunities Fund. Growth through innovation and stable investment
policies is the SBI MF credo.
KEY PERSONNEL
Mr. G. Kandasubramanian
Asst. Vice President - Customer Service
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Mr. Sanjay Sinha
Chief Investment Officer
SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an
enviable track record in judicious investments and consistent wealth creation.
The fund traces its lineage to SBI - India’s largest banking enterprise. The
institution has grown immensely since its inception and today it is India's largest
bank, patronized by over 80% of the top corporate houses of the country.
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SBI Mutual Fund is a joint venture between the State Bank of India and Society
General Asset Management, one of the world’s leading fund management
companies that manages over US$ 330 Billion worldwide.
2)
3)
4)
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5)
6)
7)
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Business Objectives.
The Primary Objective of SBI Mutual Fund is to Enhance the Investments in the
country through the Provision of Different Mutual Fund Schemes in a systematic and
Professional Manner, and to Promote the Investments In the Mutual Fund
Organizational goal
Business Focus
SBI Mutual Fund mission is to be world class Mutual Fund its Main aim is to build
Customer Franchises across distinct business So as to be the Preferred Provider of
services in the Segments
That Fund Operates in and to achieve healthy growth in profitability, and consistency
The SBI Mutual Fund is Committed to maintain the highest level of ethical standards,
professional integrity and regulatory compliance
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SBI Bank
SBI Securities
1 EQUITY SCHEMES
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The investments of these schemes will predominantly be in the stock markets and
endeavor will be to provide investors the opportunity to benefit from the higher
returns which stock markets can provide. However they are also exposed to the
volatility and attendant risks of stock markets and hence should be chosen only by
such investors who have high risk taking capacities and are willing to think long
term. Equity Funds include diversified Equity Funds, Sectoral Funds and Index
Funds. Diversified Equity Funds invest in various stocks across different sectors
while sectoral funds which are specialized Equity Funds restrict their investments
only to shares of a particular sector and hence, are riskier than Diversified Equity
Funds. Index Funds invest passively only in the stocks of a particular index and
the performance of such funds move with the movements of the index.
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2 DEBT SCHEMES
Debt Funds invest only in debt instruments such as Corporate Bonds, Government
Securities and Money Market instruments either completely avoiding any
investments in the stock markets as in Income Funds or Gilt Funds or having a
small exposure to equities as in Monthly Income Plans or Children's Plan. Hence
they are safer than equity funds. At the same time the expected returns from debt
funds would be lower. Such investments are advisable for the risk-averse investor
and as a part of the investment portfolio for other investors.
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• SDFS 90 Days Fund
• SDFS 13 Months Fund
• SDFS 18 Months Fund
• SDFS 24 Months Fund
• SDFS 60 Days Fund
• SDFS 180 Days Fund
3 BALANCED SCHEMES
Magnum Balanced Fund invest in a mix of equity and debt investments. Hence they are
less risky than equity funds, but at the same time provide commensurately lower returns.
They provide a good investment opportunity to investors who do not wish to be
completely exposed to equity markets, but is looking for higher returns than those
provided by debt funds.
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Asset Allocation
Instrument %of portfolio Risk Profile
Equity, Partly Convertible Debentures, Fully 80-100% HIGH
Convertible Debentures and Bonds
Money Market instruments 0-20% LOW
Scheme Highlights
1.An open-ended equity scheme investing in stocks from selected industries with
high growth potential.
2. Minimum Investment Rs. 2000 and in multiples of Rs. 1000 with Dividend and
Growth options available. ^ Money Market Instruments will include Commercial
Paper, Commercial Bills, Certificate of Deposit, Treasury Bills, Bills
Rediscounting, Repos, Government securities having an unexpired maturity of less
than 1 year, call or notice money, usance bills and any other such short-term
instruments as may be allowed under the regulations prevailing from time to time.
Entry Load
Investments below Rs. 5 crores - 2.25% Investments of Rs.5 crores and above –
NIL
Exit Load
Investments below Rs 5 crores <= 6 months - 1.00% and NIL thereafter.
Investments of Rs 5 crores and above - NIL
Asset Allocation
Instrument %of portfolio Risk Profile
Government of India Dated Securities 100% Sovereign
State Governments Dated Securities 100% Low
Government of India Treasury Bills 100% Sovereign
Scheme Highlights
1. Open ended Gilt Scheme.
2. The scheme will invest in government securities only with the exception of
investments made in the call money markets. Investment in Government Securities
signifies no risk of default (zero credit risk) either in payment of principal or even
interest on the investments made by the scheme. Long-Term Plan - for investors
with a long-term investment horizon. This Plan will have two options (a) Quarterly
Dividend option and (b) Growth option The Long Term Plan Dividend Plan and the
Growth Plan will each have three options for investment 1. Regular Dividend /
Growth Option : This option will be the existing option in this Plan wherein
investments in this option would be subject to a Contingent Deferred Sales Charge
(CDSC) of 0.25% for exit within 90 days from the date of investment. 2. PF
(Regular) Option : This option under both the Dividend and Growth Plans would be
a no-load option. 3. PF (Fixed Period) Option : This option under both the
Dividend and Growth Plan provides prospective investors with an option to lock-in
their investments for a period of 1 year, 2 years or 3 years from the date of their
investment Facility to reinvest dividend is available under both the Plans. Both the
Plans will have separate investment portfolios and separate NAVs. Under the Long-
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Term Plan, the funds will normally be managed to an average portfolio-maturity
longer than three years.
Exit Load: Regular Plan (Long Term) - CDSC of 0.25% for exit within 90 days
from date of investment
Investment Objective
To provide investors long term capital appreciation along with the liquidity of an
open-ended scheme by investing in a mix of debt and equity. The scheme will
invest in a diversified portfolio of equities of high growth companies and balance
the risk through investing the rest in a relatively safe portfolio of debt.
Asset Allocation
Instrument %of portfolio Risk Profile
Equities At least 50% MED-HIGH
Debt Instruments like debentures, bonds,khokhas. UP TO 40%
Securitized Debt 10% MED-HIGH
Money Market Instruments Balance Low
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Scheme Highlights
1. An open-ended scheme investing in a mix of debt and equity instruments.
Investors get the benefit of high expected-returns of equity investments with the
safety of debt investments in one scheme.
2. On an ongoing basis, magnums will be allotted at an entry load of 2.25% to the
NAV.
3. Scheme open for Resident Indians, Trusts, Indian Corporates, on a fully
repatriable basis for NRIs and, Overseas Corporate Bodies.
4. Facility to reinvest dividend proceeds into the scheme at NAV available.
5. Switchover facility to any other open-ended schemes of SBI Mutual Fund at
NAV related prices.
6. The scheme will declare NAV, Sale and repurchase price on a daily basis.
7. Nomination facility available for individuals applying on their behalf either
singly or jointly upto three.
Exit Load: Investments below Rs.5 crores < = 6 months - 1.00%, > 6 months but
< 12 months - 0.50% Investments of Rs.5 crores and above - NIL
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ICICI Prudential Mutual Fund
ICICI Prudential Asset Management Company enjoys the strong parentage of
Prudential plc, one of UK's largest players in the insurance & fund management sectors
and ICICI Bank, a well-known and trusted name in financial services in India. ICICI
Prudential Asset Management Company, in a span of just over eight years, has forged a
position of pre-eminence in the Indian Mutual Fund industry as one of the largest asset
management companies in the country with assets under management of Rs. 37,906.24
crores (as of March 31, 2007). The Company manages a comprehensive range of
schemes to meet the varying investment needs of its investors spread across 68 cities in
the country.
PRUDENTIAL
Established in London in 1848, Prudential plc, through its businesses in the UK, US and Asia,
provides retail financial services products and services to more than 21 million customers,
policyholders and unit holders worldwide with over US$400 (as of 31st December, 2005) billion
in funds under management. Prudential employs some 23,000 staff worldwide.
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In Asia, Prudential has life insurance and funds management operations across twelve countries -
China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore,
Taiwan, Thailand and Vietnam. Prudential has championed customer-centric products and
services for over 80 years, supported by an extensive network of over 145,000 staff and agents
across the region
ICICI BANK
ICICI Bank is India's second-largest bank with total assets of about Rs. 2,513.89 bn (US$ 56.3
bn) at March 31, 2006 and profit after tax of Rs. 25.40 bn (US$ 569 mn) for the year ended
March 31, 2006 (Rs. 20.05 bn (US$ 449 mn) for the year ended March 31, 2005). ICICI Bank
has a network of about 614 branches and extension counters and over 2,200 ATMs. ICICI Bank
offers a wide range of banking products and financial services to corporate and retail customers
through a variety of delivery channels and through its specialised subsidiaries and affiliates in the
areas of investment banking, life and non-life insurance, venture capital and asset management.
ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs
of clients and leverage on its domestic banking strengths to offer products internationally. ICICI
Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in
Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai International Finance Centre and
representative offices in the United States, United Arab Emirates, China, South Africa and
Bangladesh. Our UK subsidiary has established a branch in Belgium. ICICI Bank is the most
valuable bank in India in terms of market capitalisation.
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ICICI PRUDENTIAL MUTUAL FUND SCHEMES
ICICI Prudential Infrastructure Fund
ICICI Prudential Services Industries Fund
ICICI Prudential FMCG Fund
ICICI Prudential Technology Fund
ICICI Prudential Discovery Fund
ICICI Prudential Power
ICICI Prudential Dynamic Plan
ICICI Prudential Emerging S.T.A.R Fund
ICICI Prudential Tax Plan
ICICI Prudential Growth Plan
ICICI Prudential Index Fund
ICICI Prudential Spice Fund
ICICI Prudential Child Care Plan
ICICI Prudential Banlanced Fund
ICICI Prudential Income Multiplier Fund
ICICI Prudential Monthly Income Plan
ICICI Prudential Gilt Fund-Investment Option
ICICI Prudential Income Plan
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ICICI Prudential Flexible Income Plan
ICICI Prudential Long Term Floating Rate Plan
ICICI Prudential Blended Plan
ICICI Prudential Short Term Plan
ICICI Prudential Gilt Fund-Treasury Option
ICICI Prudential Short Term Floater
ICICI Prudential Liquid Plan
EQUITY SCHEME
ICICI PRUDENTIAL DYNAMIC PLAN is a diversified equity fund that
could be your ideal choice to make the most of dynamic changes in the market. It has the
agility to capture upside opportunities across value and growth , large and midcap , index
and non-index stocks. On the flip side it also has ability to move into cash as markets get
overvalued
Investment Objective
To generate capital appreciation by actively investing in equity / equity related securities.
For defensive considerations, the Scheme may invest in debt, money market instruments,
to the extent permitted under the Regulations. The AMC will have the discretion to
completely or partially invest in any of the type of securities stated above so as to
maximize the returns.
INVESTMENT PHILOSOPHY
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ICICI PRUDENTIAL DYNAMIC PLAN is a diversified equity plan that follows the
growth investment philosophy to invest in a portfolio of large, mid and small-cap stocks.
It has the ability to move gradually into cash as the market gets over-valued. It offers a
portfolio of stocks selected through rigorous bottom-up fundamental analysis across
market capitalisations on a diversified basis for long-term capital appreciation.
BENEFITS
1.Has the agility, aimed at capturing upside opportunities in the market across market
capitalizations.
2.On the flip side, in case stock markets get into an over valued position, the plan has the
ability to switch to cash thus seeking to limit the downside
PERFORMANCE
Entry Load: (i) For investments of less than Rs. 5 Crores : Entry load at 2.25% of
applicable NAV. (ii)For investments of Rs. 5 crores and Above : Nil
Investment Objective
To generate income through investment in Gilts of various maturities.
INVESTMENT PHILOSOPHY
ICICI PRUDENTIAL GILT FUND is a pure debt fund that invests in short tenure
Government securities (G-Secs). These securities are essentially liquid and carry no
credit risk. Having said that, the portfolio's exposed to some interest rate risk as the
securities are marked to market, and therefore, respond to changes in market interest
rates. The portfolio seeks to limit volatility by deploying funds in short-term G-Secs, with
an average maturity not exceeding 3 years. The objective is to closely manage the
downside risks of the portfolio arising out of changes in the market rates, by actively
managing the duration of the portfolio.
BENEFITS
2.Facilitates participation in the wholesale market for Government debt, even for smaller
ticket-size exposures.
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3.Provides the benefits of professional management of investment portfolios.
Entry Load:Nil
Exit Load: Nil
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ICICI PRUDENTIAL BALANCED FUND: Asset allocation is the key to investing
success. It helps to reduce the volatility of returns. A Balanced Fund takes care of this
asset allocation by investing in equity for capital appreciation and debt for stable returns.
It focuses on reducing volatility of returns by increasing / decreasing equity exposure
based on the market outlook and using a core debt portfolio to do the rebalancing.
Investment Objective
To seek to generate long-term capital appreciation and current income from a portfolio
that is invested in equity and equity related securities as well as in fixed income
securities.
INVESTMENT PHILOSOPHY
an open-ended fund that allocates to both equity and debt markets, reflects this wisdom.
In a bullish market equity allocation can go upto 80%. In a bearish market equity
allocation can go down to 65%. This dynamic allocation along with core debt portfolio
reduces the volatility of return.
BENEFITS
Balanced fund brings you the twin benefits of growth from equity markets and steady
income from debt markets
39
PERFORMANCE
Entry Load: (i) For investments of less than Rs. 5 Crores : 2.25% of applicable NAV.
(ii) For investments of Rs. 5 crores and Above : Nil
40
Key Information
41
CATEGORIES OF MUTUAL FUND SCHEMES
1.SCHEMES ACCORDING TO MATURITY PERIOD:
42
2.SCHEMES ACCORDING TO INVESTMENT OBJECTIVE:
A scheme can also be classified as growth scheme, income scheme, or balanced
scheme considering its investment objective. Such schemes may be open-ended or
close-ended schemes as described earlier. Such schemes may be classified mainly as
follows:
2.3BALANCED FUND
43
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.
2.5GILT FUND
These funds invest exclusively in government securities. Government securities have
no default risk. NAVs of these schemes also fluctuate due to change in interest rates
and other economic factor as is the case with income or debt oriented schemes.
2.6INDEX FUNDS
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive
index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the
44
same weightage comprising of an index. NAVs of such schemes would rise or fall in
accordance with the rise or fall in the index, though not exactly by the same
percentage due to some factors known as "tracking error" in technical terms.
Necessary disclosures in this regard are made in the offer document of the mutual
fund scheme.
There are also exchange traded index funds launched by the mutual funds, which are
traded on the stock exchanges.
Other Schemes
These schemes offer tax rebates to the investors under tax laws as prescribed from time to
time. This is made possible because the Government offers
tax incentives for investment in specified avenues. For example, Equity Linked Savings
Schemes (ELSS) and Pension Schemes. The details of such tax saving schemes are
provided in the relevant offer documents.
Special Schemes
This category includes index schemes that attempt to replicate the erformance of a
particular index such as the SSE Sensex or the NSE 50, or industry specific schemes
(which invest in specific industries) or sectoral schemes (which invest exclusively in
segments such as 'IXGroup shares or initial public offerings).
Index fund schemes are ideal for investors who are satisfied with a return
approximately equal to that of an index.
Sectoral fund schemes are ideal for investors who have already decided to invest in a
particular sector or segment. Keep in mind that anyone scheme may not meet all your
requirements for all time. You need to place your money judiciously in different schemes
to be able to get the combination of growth, income and stability that is right for you.
45
Remember, as always, higher the return you seek higher the risk you should be prepared
to take.
A few frequently used terms are explained here
Sale Price
Is the price you pay when you invest in a scheme or NAV a unit
holder is charged while investing in an open-ended scheme is sale price. Also called
Offer Price. It may include a Sale load, if applicable.
Repurchase Price
Is the price at which a close-ended scheme repurchases its units
and it may include a back-end load. This is also called Bid Price.
Redemption Price
46
Is the price at which open-ended schemes repurchase their units
and close-ended schemes redeem their units on maturity. Such prices are NAV related.
Sales load
Is a charge collected by a scheme when it sells when it sells the
units also called, ‘Front-end’ load. A Load is one that charges a percentage of NAV for
entry or exit. That is, each time one buys or sells units in the fund, a charge will be
payable. This charge is used by the mutual fund for marketing and distribution expenses.
Suppose the NAV per unit is Rs. 10. If the entry as well as exit load charged were 1%,
then the investors who buy would be required to pay Rs. 10.10 and those who offer their
unit for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors
should take the loads into consideration while making investment as these affect their
yields/returns
“Whether a mutual fund impose fresh load or increase the load beyond the
level mentioned in the offer documents”
Mutual funds cannot increase the load beyond the leel mentioned
in the offer document. Any change in the load will be applicable only to prospective
investments and not to the original investments. In case of imposition of fresh loads or
increase in existing loads, the mutual funds are required to amend their offer documents
so that the new investors are aware of loads at the time of investments.
No load
Schemes that do not charge a load are called ‘No Load’ schemes.
A no load fund is one that does not charge for entry or exit. It means the investors can
enter the fund/scheme at NAV and not additional charges are payable on purchase or sale
of units.
47
BENEFITS OF MUTUAL FUNDS
PROFESSIONAL MANAGEMENT:
Mutual Funds are backed by experienced and skilled professionals, a dedicated
investment research team that analyses the performance and prospects of companies and
selects investments.
CONVENIENT ADMINISTRATION:
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such
as bad deliveries, delayed payments and follow up with brokers and companies. This is
important when you want to have a diversified portfolio through direct equity
investments.
DIVERSIFICATION :
Mutual Funds always have an investment mix. The diversity in this mix spreads out the
probability of profits and losses, reducing the risk of a substantial fall in the money you
have invested.
RETURN POTENTIAL :
Over a medium to long-term, Mutual Funds have the potential to provide a higher net
return as they invest in a diversified basket of selected securities.
ECONOMIES:
Mutual Funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage, custodial and
other fees translate into lower costs for investors.
LIQUIDITY:
48
In open-end schemes, the investor gets the money back promptly at net NAV pegged
prices. In closed-end schemes, the units can be sold on a stock exchange at the prevailing
market price. The fund also repurchases from the investors at NAV pegged prices. There
is scope to speedily disinvest assets and obtain disinvestments proceeds.
FLEXIBILITY:
Through features such as regular investment plans, regular withdrawal plans and
dividend reinvestment plans, you can systematically invest or withdraw funds according
to your needs and convenience.
TRANSPARENCY:
You get regular information on the value of your investment in addition to disclosure on
the specific investments made by your scheme, the proportion invested in each class of
assets and the fund manager's investment strategy and outlook.
AFFORDABILITY:
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual
fund because of its large corpus allows even a small investor to take the benefit of its
investment strategy.
OPTIONS:
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
INVESTOR SAFETY:
All Mutual Funds are registered with SEBI and they function within the provisions of
strict regulations designed to protect the interests of investors. The operations of Mutual
Funds are regularly monitored by SEBI.
49
LIMITATIONS OF MUTUAL FUND
No Guarantee:
No investment is risk free. If the entire stock market declines in value, the value of
mutual fund shares will go down as well, no matter how balanced the portfolio. Investors
encounter fewer risks when they invest in mutual funds than when they buy and sell
stocks on their own. However, anyone who invests through a mutual fund runs the risk
of losing money.
Taxes:
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you
will pay taxes on the income you receive, even if you reinvest the money you made.
Management Risk:
When you invest in a mutual fund, you depend on the fund manager to make the right
decisions regarding the fund’s portfolio. If the manager does not perform as well as you
had hoped, you might not make as much money on your investments as you expected. Of
course, if you invest in Index Funds, you forego management risk, because these funds
do not employ managers.
1.2 From the beginning, UTI and other mutual funds have relied extensively on
intermediaries to market their schemes to investors. It would be accurate to say that
without intermediaries, the mutual fund industry would not have achieved the depth
and breadth of coverage amongst investors that it enjoys today. Intermediaries have
played a pivotal and valuable role in popularizing the concept of mutual funds
across India. They make the forms available to clients, explain the schemes and
provide administrative and paperwork support to investors, making it easy and
convenient for the clients to invest.
1.3 Intermediation itself has undergone a change over the past few decades.
While individual agents provided the foundation for growth in the early years,
institutional agents, distribution companies and national brokers soon started to play
an active role in promoting mutual funds. Recently, banks, finance companies,
secondary market brokers and even post offices have also begun to market mutual
funds to their existing and potential client bases.
1.4 It is, thus clear that all types of intermediaries are required for the growth of the
industry, and their wellbeing, quality orientation and ways of doing business
will have a significant impact on how the mutual fund industry in India
evolves in the future.
Don’t put all the eggs in one basket: This old age adage is of utmost importance. No
matter what the risk profile of a person is, it is always advisable to diversify the risks
associated. So putting one’s money in different asset classes is generally the best option
as it averages the risks in each category. Thus, even investors of equity should be
judicious and invest some portion of the investment in debt. Diversification even in any
particular asset class (such as equity, debt) is good. Not all fund managers have the same
acumen of fund management and with identification of the best man being a tough task, it
is good to place money in the hands of several fund managers. This might reduce the
maximum return possible, but will also reduce the risks.
Be regular: Investing should be a habit and not an exercise undertaken at one’s wishes, if
one has to really benefit from them. As we said earlier, since it is extremely difficult to
know when to enter or exit the market, it is important to beat the market by being
systematic.
The basic philosophy of Rupee cost averaging would suggest that if one invests regularly
through the ups and downs of the market, he would stand a better chance of generating
53
more returns than the market for the entire duration. The SIPs (Systematic Investment
Plans) offered by all funds helps in being systematic. All that one needs to do is to give
post-dated cheques to the fund and thereafter one will not be harried later. The Automatic
investment Plans offered by some funds goes a step further, as the amount can be
directly/electronically transferred from the account of the investor.
Do your homework:
It is important for all investors to research the avenues available to them irrespective of
the investor category they belong to. This is important because an informed investor is in
a better decision to make right decisions. Having identified the risks associated with the
investment is important and so one should try to know all aspects associated with it.
Asking the intermediaries is one of the ways to take care of the problem.
Find the right funds
Finding funds that do not charge much fees is of importance, as the fee charged
ultimately goes from the pocket of the investor. This is even more important for debt
funds as the returns from these funds are not much. Funds that charge more will reduce
the yield to the investor
Some of the Risk to which Mutual Funds are exposed to is given below:
Market risk
54
If the overall stock or bond markets fall on account of overall economic factors,
the value of stock or bond holdings in the fund's portfolio can drop, thereby impacting the
fund performance.
Non-market risk
Bad news about an individual company can pull down its stock price, which can
negatively affect fund holdings. This risk can be reduced by having a diversified portfolio
that consists of a wide variety of stocks drawn from different industries.
Credit risk
Bonds are debt obligations. So when the funds invest in corporate bonds, they run the risk
of the corporate defaulting on their interest and principal payment obligations and when
that risk crystallizes, it leads to a fall in the value of the bond causing the NAV of the
fund to take a beating.
55
must be held accountable for their selection of stocks. In other words, there must be some
performance indicator that will reveal the quality of stock selection of various AMCs.
Return alone should not be considered as the basis of measurement of the performance of
a mutual fund scheme, it should also include the risk taken by the fund manager because
different funds will have different levels of risk attached to them. Risk associated with a
fund, in a general, can be defined as variability or fluctuations in the returns generated by
it. The higher the fluctuations in the returns of a fund during a given period, higher will
be the risk associated with it. These fluctuations in the returns generated by a fund are
resultant of two guiding forces. First, general market fluctuations, which affect all the
securities present in the market, called market risk or systematic risk and second,
fluctuations due to specific securities present in the portfolio of the fund, called
unsystematic risk. The Total Risk of a given fund is sum of these two and is measured in
terms of standard deviation of returns of the fund. Systematic risk, on the other hand, is
measured in terms of Beta, which represents fluctuations in the NAV of the fund vis-à-
vis market. The more responsive the NAV of a mutual fund is to the changes in the
market; higher will be its beta. Beta is calculated by relating the returns on a mutual fund
with the returns in the market. While unsystematic risk can be diversified through
investments in a number of instruments, systematic risk can not. By using the risk return
relationship, we try to assess the competitive strength of the mutual funds vis-à-vis one
another in a better way.
In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class.
The most important and widely used measures of performance are:
Ø The Treynor Measure
Ø The Sharpe Measure
Ø Jenson Model
Ø Fama Model
The Treynor Measure
56
Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above risk
free rate of return (generally taken to be the return on securities backed by the
government, as there is
no credit risk associated), during a given period and systematic risk associated with it
(beta). Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where, Ri represents return on fund, Rf is risk free rate of return and Bi is
beta of the fund.
All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative
Treynor's Index is an indication of unfavorable performance.
Jenson Model
Jenson's model proposes another risk adjusted performance measure. This measure was
developed by Michael Jenson and is sometimes referred to as the Differential Return
Method. This measure involves evaluation of the returns that the fund has generated vs.
the returns actually expected out of the fund given the level of its systematic risk. The
surplus between the two returns is called Alpha, which measures the performance of a
fund compared with the actual returns over the period. Required return of a fund at
agiven level of risk (Bi) can be calculated as:
Ri = Rf + Bi (Rm - Rf)
Where, Rm is average market return during the given period. After calculating it, alpha
can be obtained by subtracting required return from
the actual return of the fund.
Higher alpha represents superior performance of the fund and vice versa. Limitation of
this model is that it considers only systematic risk not the entire risk associated with the
fund and an ordinary investor can not mitigate unsystematic risk, as his knowledge of
market is primitive.
Fama Model
The Eugene Fama model is an extension of Jenson model. This model compares the
performance, measured in terms of returns, of a fund with the required return
58
commensurate with the total risk associated with it. The difference between these two is
taken as a measure of the performance of the fund and is called net selectivity.
The net selectivity represents the stock selection skill of the fund manager, as it is the
excess return over and above the return required to compensate for the total risk taken by
the fund manager. Higher value of which indicates that fund manager has earned returns
well above the return commensurate with the level of risk taken by him.
Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)
Where, Sm is standard deviation of market returns. The net selectivity is then calculated
by subtracting this required return from the actual return of the fund.
Among the above performance measures, two models namely, Treynor measure and
Jenson model use systematic risk based on the premise that the unsystematic risk is
diversifiable. These models are suitable for large investors like institutional investors
with high risk taking capacities as they do not face paucity of funds and can invest in a
number of options to dilute some risks. For them, a portfolio can be spread across a
number of
stocks and sectors. However, Sharpe measure and Fama model that consider the entire
risk associated with fund are suitable for small investors, as the ordinary investor lacks
the necessary skill and resources to diversified. Moreover, the selection of the fund on the
basis of superior stock selection ability of the fund manager will also help in safeguarding
the money invested to a great extent. The investment in funds that have generated big
returns at higher levels of risks leaves the money all the more prone to risks of all kinds
that may exceed the individual investors' risk appetite
59
Project
Details
60
Main Objective
To make Comparative performance analysis of SBI Mutual Fund with ICICI Prudential
Mutual Fund.
Sub-objectives
1. To study the different kinds of schemes provided by each of Mutual funds.
2. Comparative performance analysis of SBI Equity - Diversified with ICICI
Prudential Equity – Diversified Fund.
3. Comparative performance analysis of SBI Gilt Fund with ICICI Prudential Gilt
Fund
4. Comparative performance analysis of SBI Balance Fund with ICICI Prudential
Balance Fund.
1. Comparative analysis of Returns from SBI Mutual Fund and ICICI Prudential
Mutual fund.
2. Comparative analysis of Risk associated with SBI and ICICI Prudential fund, with
the use of Sharpe ratio, Expense ratio, Beta, Treynor Ratio and Standard
deviation..
3. To compare Mutual Fund Average Return with NIFTY Average Return
4. Comparative analysis of corpus of the funds.
61
METHODOLOGY
o Information is collected from the managers of Selected firms who deal in mutual
funds.
o Information is also collected from the secondary sources like the offer documents,
fact sheets, key information memorandum, web sites, magazines, newspapers etc.
o In case of corpus size, lock in period, entry and exit load the information is
collected from SBI & ICICI Prudential the offer documents.
o Extensive use of Mutual Fund Related magazines like “ Mutual Fund Review”,
“Mutual Fund Insight by value researchers” is being made.
62
Analysis of
the Data
63
SOURCES OF INFORMATION
The analysis is done on the basis of past performance of the funds. But the past
performance may not be an indicator of future performance.
64
GILT FUND ANALYSIS
ABSOLUTE RETURNS
2ND
1ST YEAR YEAR 3RD YEAR
NIFTY 9.715344 85.20646 125.8813
SBI 5.36 8.88 13.07
ICICI PRU 8.09 11.34 16.65
ABSOLUTE RETURNS
140
120
100
80 NIFTY
SBI
60 ICICI PRU
40
20
0
1ST YEAR 2ND YEAR 3RD YEAR
The above diagram exhibits he absolute return from Gilts funds. These are the funds,
which are known for their high consistency. The consistent appraisal is assured in this
type of funds. This type of fund is suitable for retired people, dependants on income from
fund invested.
It is clear from the diagram that the performance of ICICI Prudential is marginally higher
than SBI Mutual fund at different point of time Gilt Fund.
65
ICICI
SBI PRU
BETA 0.0004 0.00035
1ST
YEAR -0.0001 0.00003
2ND
RISK PREMIUM YEAR -0.0002 -0.002
3RD
YEAR -0.0002 -0.001
0.2
0
-0.2
-0.4
-0.6 1ST YEA R
-0.8 2N D YEA R
-1 3R D YEA R
-1.2 A verag e Sharp R atio
-1.4
-1.6
SB I IC IC I PR U
Sharpe Ratio, which measures risk free return from the fund, is favorable in case of
ICICI Prudential Fund when compared to SBI.Higher the Sharpe Ratio indicates higher
safety. So depending on Sharpe Ratio SBI is safer than SBI.
Standard Deviation of SBI is lower than ICICI Prudential. It indicates lower risk profile
of SBI when compared to ICICI Prudential.
66
Beta, which measures impact of market condition on funds, is lower in case of ICICI
Prudential when compared to SBI. It indicates lower risk profile of ICICI Prudential than
SBI.
ICICI
SBI PRU
1ST YEAR -2.64 0.09
2ND YEAR -4.66 -4.99
3RD YEAR -4.15 -3.23
AVERAGE -3.82 -2.71
1
0
-1 1ST YEAR
-2 2ND YEAR
3RD YEAR
-3
Average Treynor Ratio
-4
-5
SBI ICICI PRU
A measure of a portfolio's excess return per unit of risk, equal to the portfolio's
rate of return minus the risk-free rate of return, divided by the portfolio's beta.
ICICI Prudential Mutual Fund is having a higher Treynor ratio of -2.71% as compared to
SBI Mutual Fund which is having a Treynor Ratio of -3.82%. A high Treynor Index
indicates that we're getting a good deal in terms of the return-to-risk ratio.
The above Diagram exhibits the absolute return of SBI and ICICI Prudential Balance
Funds. Both the funds are fluctuating. But in many a point of time returns from SBI
Balance Fund are higher than ICICI Prudential Balance Fund
Balance funds are known for their consistent return and are suitable for the investors who
can bear moderate risk and investors seeking consistent return.
ICICI
SBI PRU
BETA 0.003 -0.0003
1ST YEAR 0.05 -0.004
RISK
PREMIUM 2ND YEAR 0.23 -0.009
68
3RD YEAR 0.09 -0.008
ICICI
SHARPE RATIO SBI PRU
1ST YEAR 0.91 1.01
2ND YEAR 4.23 2.42
3RD YEAR 1.72 2.13
AVG 2.29 1.85
4
1ST YEAR
3
2ND YEAR
2 3RD YEAR
Average Sharp Ratio
1
0
SBI ICICI PRU
Sharpe Ratio, which measures risk free return from the fund, is favorable in case of SBI
Mutual Fund when compared to ICICI Prudential Fund. Higher the Sharpe Ratio
indicates higher safety. So depending on Sharpe Ratio SBI Magnum Balanced Fund is
safer than ICICI Prudential Balanced Fund.
Standard Deviation of SBI Mutual Fund is higher than ICICI Prudential . It indicates
lower risk profile of ICICI Prudential Fund when compared to SBI Mutual Fund
Beta, which measures impact of market condition on funds on funds, is higher in case of
SBI Mutual Fund when compared to ICICI Prudential. It indicates lower risk profile of
ICICI Prudential Balanced Fund than SBI Magnum Balanced Fund.
69
TREYNOR INDEX RANKING
ICICI
SBI PRU
1ST YEAR 17.96 15.16
2ND YEAR 83.85 36.27
3RD YEAR 34.04 31.8
AVERAGE 34.95 27.74
90
80
70
60 1ST YEAR
50 2ND YEAR
40
3RD YEAR
30
20 Average Treynor Ratio
10
0
SBI ICICI PRU
A measure of a portfolio's excess return per unit of risk, equal to the portfolio's
rate of return minus the risk-free rate of return, divided by the portfolio's beta.
SBI Balanced Fund is having a higher Treynor ratio of 34.95%. As Compared to ICICI
Prudential Balanced Fund having a Treynor Ratio of 27.74%. A high Treynor Index
indicates that we're getting a good deal in terms of the return-to-risk ratio.
1.ABSOLUTE RETURNS
1ST 2ND 3RD
AVERAGE RETURN YEAR YEAR YEAR
NIFTY 9.72 85.21 125.88
SBI MAGNUM GLOBAL
FUND 17.93 130.42 320.76
ICICI PRUDENTIAL
DYNAMIC 43.56 148.63 319.79
70
ABSOLUTE RETURNS
400.00
RETURNS
300.00 NIFTY
200.00 SBI MAGNUM GLOBAL
100.00 ICICI PRU DYNAMIC
0.00
1 2 3
YEAR
The above diagram exhibits the absolute return from Equity Funds for different point of
time. It is clear from the diagram that the returns from Equity Funds are very fluctuating.
Only moderate risk takers invest in this fund. ICICI Prudential Magnum Global Fund
comparatively has given more return compared to SBI Magnum Global Equity Fund.
ICICI
SBI PRU
BETA 0.08 0.01
1ST
YEAR 0.81 0.37
2ND
RISK PREMIUM YEAR 7.16 0.68
3RD
YEAR 6.33 0.63
71
SHARPE RATIO
SBI ICICI
GLOBAL PRU
1ST YEAR 0.07 1.4
2ND YEAR 0.58 2.58
3RD YEAR 0.51 2.4
AVG SHARPE
RATIO 0.387 2.127
3
2.5
2 1ST Y EAR
1.5 2ND Y EAR
1 3RD Y EAR
Average S harp Ratio
0.5
0
SBI ICICI PRU
Sharpe Ratio, which measures risk free return from the fund, is favorable in case of
ICICI Prudential Dynamic Fund when compared to SBI Magnum Global Fund. Higher
the Sharpe Ratio indicates higher safety. So depending on Sharpe Ratio ICICI Prudential
Dynamic Fund is safer than SBI Magnum Global Fund.
Standard Deviation of SBI Mangnum Global Fund is higher than ICICI Prudential . It
indicates lower risk profile of ICICI Prudential Dynamic Fund when compared to SBI
Mutual Fund
Beta, which measures impact of market condition on funds on funds, is higher in case of
SBI Magnum Global Fund when compared to ICICI Prudential Dynamic Fund. It
indicates lower risk profile of ICICI Prudential Balanced Fund than SBI Magnum
Balanced Fund.
TREYNOR RATIO
SBI ICICI
72
PRU
1ST YEAR 9.93 35.56
2ND YEAR 87.39 65.19
3RD YEAR 77.21 60.84
AVG 58.177 53.87
90
80
70 1ST YEAR
60
2ND YEAR
50
40
3RD YEAR
30
20 Average Treynor
10 Ratio
0
SBI ICICI PRU
A measure of a portfolio's excess return per unit of risk, equal to the portfolio's
rate of return minus the risk-free rate of return, divided by the portfolio's beta.
SBI Balanced Fund is having a higher Treynor ratio of 58.17%. As Compared to ICICI
Prudential Balanced Fund having a Treynor Ratio of 53.87%. A high Treynor Index
indicates that we're getting a good deal in terms of the return-to-risk ratio.
73
PORTFOLIO COMPOSITION OF BALANCED FUND
74
75
Findings&
Recommendations
Balanced Funds
Returns from ICICI Prudential Balanced Fund for the past one year period is 23.16% and
returns from SBI Magnum Balanced Fund is higher at 25.96% for the same period
SBI Magnum Balance Fund is more consistently increasing than ICICI Balanced Funds
and it’s standard deviation is higher than ICICI Prudential Balanced Fund. SBI Magnum
Balanced Fun has standard deviation of 0.20% and ICICI Prudential Balanced Fund has
standard deviation of 0.15%.
Sharpe Ratio is comparatively favorable in case of ICICI Prudential Balance Fund.
Treynor ratio is comparatively favourable in case of SBI Magnum Balance Fund.Sharpe
Ratio and Treynor Ratio of SBI Magnum Balanced fund are 0.91, 34.95 respectively.
Sharpe Ratio and Treynor Ratio of ICICI Prudential Balanced Fund are 1.01, and 27.74%
respectively.
76
Beta coefficient of ICICI Prudential Balanced Fund is -0.0003, which is lower than SBI
Magnum Balance Fund’s Beta coefficient of 0.003.
GILT FUNDS
The present NAV of SBI Magnum Gilt and ICICI Prudential are Rs. Rs.17.26 and
Rs.22.62 respectively. Returns for the past one-year period for SBI Magnum Gilt Fund is
5.36%, which is lower than ICICI Prudential Gilt Fund Returns 8.09%.
SBI Magnum Gilt Fund’s NAV is more consistently increasing than ICICI Prudential
Gilt Fund. Standard Deviation of SBI Magnum Gilt Fund and ICICI Prudential Gilt Fund
is 0.35 and 0.31 respectively.
Sharpe Ratio is comparatively favorable in case of SBI Magnum Gilt Fund. ICICI
Prudential is having a good treynor ratio compared to SBI Magnum Fund. Sharpe Ratio
and Treynor Ratio of SBI Magnum Gilt Fund are -0.45, and -3.82. Sharpe Ratio and
Treynor Ratio of ICICI Prudential are -0.76 and -2.71 respectively.
Beta coefficient of SBI Magnum Gilt Fund 0.0004 which is lower than ICICI Prudential
Gilt Fund Beta coefficient of 0.00035
77
EQUITY FUND
NAV of SBI Magnum global Fund is Rs.48.48, and NAV of ICICI Prudential Dynamic
Fund is Rs.67.18.
Returns from SBI Magnum global Fund Fund are 17.93% and ICICI Prudential
Dynamic Fund returns are 43.56% for the past one year.
Returns and NAV of both the funds are very much fluctuating.
Sharpe Ratio and Treynor Ratio are comparatively favorable in case of ICICI Prudential
Dynamic Fund. Sharpe ratio and treynor ratio of SBI Mutual fund are 0.066 and 9.93
respectively. Sharpe ratio and treynor ratio of ICICI Prudential Dynamic fund are 1.40
and 35.5 respectively
Standard deviation of SBI Magnum Global Fund is 1.51 and ICICI Prudential has
standard deviation of 0.25
SUGGESTIONS
BALANCED FUNDS
It is favorable for the SBI Mutual fund to promote more of SBI Magnum Balanced Fund
over ICICI Prudential Balance Fund, because SBI Magnum balanced fund is giving
consistent returns since inception.
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standard deviation of 0.15. It shows justified returns against risk in case of SBI Magnum
Balance Fund, the high fluctuation, higher the returns for SBI Magnum Balance Fund.
The Treynor ratio of SBI Magnum Balanced Fund is also high as compared to ICICI
Prudential Balanced Fund. The Treynor Ratio of SBI Magnum Balanced Fund and ICICI
Prudential Balanced Fund are 34.95 and 27.74 respectively.
GILT FUNDS
Its better to invest more in High yield Government Securities than investing in short term
Deposits with lower rate of interest
EQUITY FUND
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As the Portfolio of the SBI Magnum Global is holding More of cash balance, The cash
balance should be reduced and invest same in Mid Cap and Small Cap.
BIBLIOGRAPHY
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