Business Case Analysis

BUSI 4800

“A study on Select players in PMS industry with a special reference to DSP Merrill Lynch”

By- Aditya Kumar Singh

Study Area Profile
 The area of my study includes basically one region that is Mumbai (India).  My focus of research will be on different Investment institutions (banks) which provide Mutual Funds services and Portfolio management services in Mumbai.

.  To study the difference between investing in Portfolio Management Services and investing in Mutual Funds.Objectives of study Primary Objectives:  To make a research studying the investment in Portfolio Management Schemes/Services.  To make a detailed study of the areas in which the research would benefit Merrill Lynch.

 To study the returns and risk involvement in investment under Portfolio Management schemes.  To make a research analysis on the advantages and differences between other investments and Portfolio Management schemes. .Secondary Objectives:  To study the investment industry and understand the trends in the industry and the major players in the market.  To study the different Mutual Fund schemes and Portfolio Management schemes given by different banks and understand their usage.

  .Research Methodology  The research methodology is based on interviews with different banks (Respondents.fund houses). The research is basically concerned with the investment in Portfolio Management Services. My entire analysis is based upon the questionnaires that I prepared for a sample size of 10 and I also used secondary data like browsing through the internet. I have tried to study the Investment industry in India and tried to make a report on the same. journal articles etc.

across 23 Stock Exchanges. . India also has the third largest investor base in the world.  With the largest number of listed companies .10. on-line screen-based trading system (SBTS) and a market capital of over $450 billion.Industry Profile  India has a transparent. nationwide.000 . highly technologyenabled and well-regulated stock market defined by the most modern.

 India’s healthy banking system with a network of 70.000 branches is among the largest in the world. .  Aggregate deposits of commercial banks were about $400 billion in March 2005 (60% of the GDP) and the total bank credit stood at $250 billion (about 38% of the GDP).

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venture capital. the country’s central bank. . insurance companies. mutual funds. The Reserve Bank of India (RBI).  It has also witnessed increased private sector activity including an explosion of foreign banks.  India’s financial sector has been one of the fastest growing sectors in the economy. and investment institutions. has effectively managed the country’s monetary policy over the last five decades.

including choosing and monitoring appropriate investments and allocating funds accordingly. .  The biggest advantage of a PMS is the personalized service that it offers.Product Profile  PMS is the process of managing the assets of a mutual fund.  The target investors are high-net worth individuals.

Kotak Mahindra Securities and DSP Merrill Lynch are among the prominent players. with an investing style that is close to the investor’s risk appetite.  ICICI Prudential AMC. . Most portfolio managers aim to generate long-term returns. Motilal Oswal Securities. IL&FS Investsmart. Enam Securities.

. Most PMS offer a choice between a fixed fee structure (flat fee on portfolio value) and a profit-sharing structure (lower flat fee plus share of gains)  Each client is assigned a relationship manager who gives portfolio updates and all PMS providers offer clients an exclusive ID and password. which enables them to access their portfolios online.

Global Markets & Investment Banking and Global Wealth Management.  Merrill Lynch offers a broad range of services to private clients. small businesses. and institutions and corporations. capital markets and advisory companies. organizing its activities into two interrelated business segments .DSP Merrill Lynch  Merrill Lynch is one of the world's leading wealth management. with offices in 40 countries and territories and total client assets of almost $2 trillion. .

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DSP In India  DSP Merrill Lynch Limited (DSPML) .DSPML is a leading financial service provider in India. DSPML is the leading underwriter and broker for debt and equity securities and a leading advisor to corporations and institutions.  In India. .

Primary Research  Respondents           ABN Amro Reliance Money Reliance Mutual Fund Franklin Templeton ASK Raymond Kotak Securities HSBC JM Financials ICICI Standard Chartered .

 This service is particularly advisable for investors who cannot afford to give time or don’t have the expertise for day-to-day management of their equity portfolio.1.Need of Portfolio Management Service  Portfolio Management Service (PMS) is a product wherein a customized investment portfolio is created to suit the investment objectives of a client. .

respondent have a minimum portfolio of Rs. respondents have a minimum portfolio of Rs. 5 lakhs.2. 10 Lakhs.  . 25 Lakhs. respondent has a minimum portfolio of Rs. 1 Crore. 5 Lakhs. respondents have a minimum portfolio of Rs. the minimum size of the portfolio is Rs. 50 Lakhs. Out of 10 respondents     2 3 1 3 1 respondents have a minimum portfolio of Rs. There are many portfolio managers whose thresholds are much higher than the Sebi-mandated minimum of Rs 5 lakh.Minimum limit for investing in PMS  As per SEBI regulations.

Minimum portfolio .

Minimum Portfolio (in Rs Lakhs) Minimum Portfolio (in Rs Lakhs) 120 100 80 60 40 20 0 ABN Amro Ask Franklin Raymond Templeton HSBC ICICI JM Kotak Reliance Reliance Standard Financial Securities Money Mutual Chartered Fund 10 50 50 25 10 5 5 10 50 100 .

 Investor can invest as much as he wants. .Maximum limit for investing in PMS  There is no upper limit on the amount you can invest in the Portfolio Management Service.3.

.4.Lock-in period in PMS  The Portfolio Management Service has no lock-in period and you can make withdrawals by simply putting in a request for the desired amount.  You can exit/redeem at any point of time.

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Investment specification .5.

while FT Opportunities is aimed at investors with higher risk appetite and takes exposure in large.Franklin Templeton’s Portfolio options  FT Select is aimed at low risk investors and mostly invests in large caps with the objective of long-term wealth creation. . mid and smallcap companies.

medium and long-term capital appreciation schemes under discretionary Portfolio Management Services (PMS) .JM Financials PMS Option  JM Financial. has two . .The "Core" Scheme and the "Voyager" Scheme.

6.Requirement of PAN card .

 A Permanent Account Number (PAN) is mandatory for investment in the PMS scheme. This number is issued by the Income Tax Office. . issued to all taxpayers of India whose income is taxable. Permanent Account Number (PAN) is a national identification number.

Fees structure  Portfolio managers usually have two kinds of charges—management fee. which is variable.7. which is fixed. One can also pay a fully fixed fee. . and profit sharing.

Termination from PMS before one year .8.

.Risk  Equity Investments are subject to market risks and there is no assurance or guarantee that the objective of the portfolio management service will be achieved.9.  Past performance of the portfolios does not indicate the future performance.

 As large capital is invested in PMS there is high risk involved. aggressive investor can opt for Franklin Templeton’s FT Opportunity portfolio. Investors may choose the different PMS schemes offered by different fund houses on the basis of their preference of risk taking. Many investors are very aggressive and are moderate risk takers. Risk depends on the investor.  For e. .g.

10.Updates .

 The PMS provides almost real time access to transactions undertaken by the fund manager.  Portfolio Clients may receive the following reports on a fortnightly or monthly basis:     Performance Summary of Portfolios Holdings statement Realized gain/ loss statement Half yearly Review Report  In addition all portfolio clients will also have access to the website as where they can view their portfolios online. .

 PMS investors can expect daily or weekly newsletters.5% to 3% per annum. derivatives and other securities approved by the Securities and Exchange Board of India (Sebi). Or. preference shares.Summary  The PMS manager invests in equity shares. This is irrespective of whether the portfolio generates profit or loss. Fixed charges vary between 1. research reports and updates from the portfolio manager. part of the fees can be fixed and the remaining based on profit sharing. .  PMS can charge fixed fees. convertible stocks.

.Advantages of investing in PMS visà-vis Mutual Fund  You have greater control over the asset allocation.  The Portfolio Manager has relatively greater flexibility to move in and out of cash as and when required depending on the market view. whereas it is automatic in a Mutual Fund.  The Portfolio can be customized to suit your risk-return profile.

Thank You .

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