29-06-2012, 04:00 PM
MUTUAL FUND COMPARISON AND ANALYSIS
MUTUAL FUND COMPARISON AND ANALYSIS.doc (Size: 573 KB / Downloads: 52)
1. Executive Summary
The topic of this project is Mutual Fund Comparison and Analysis. The mutual fund industry in India has seen dramatic improvements in quantity as well as quality of product and service offerings in recent years and hence here focus is on comparing schemes of different mutual fund companies on different performance parametrers. Along with this project also touches on the aspect of Systematic Investment Plan and Rebalancing.
Project analysis past three years data of different mutual fund schemes. Different measures like beta ,Sharpe, Treynor, Jensen etc. have been taken to analyse the performance.
An effort has been made to work on the concepts that have been taught in class along with other useful parameters so that better study can be done.
2. Company Profile
Vision Statement:
HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Back bay Reclamation, Churchgate, Mumbai - 400 020.
In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.161 crore.
Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a review of its overall strategy, had decided to divest its Asset Management business in India. The AMC had entered into an agreement with ZIC to acquire the said business, subject to necessary regulatory approvals.
Following the decision by Zurich Insurance Company (ZIC), the sponsor of Zurich India Mutual Fund, to divest its Asset Management Business in India, HDFC AMC acquired the schemes of Zurich India Mutual Fund effective from June 19, 2003.
HDFC AMC has a strong parentage – CO Sponsored by Housing Development Finance Corporation Limited (HDFC Ltd.) and Standard Life Investment Limited, the investment arm of The Standard Life Group, UK.
The present equity shareholding pattern of the AMC is as follows:
• Housing Development Finance Corporation Limited was incorporated in 1977 as the first specialized Mortgage Company in India, its activities include housing finance, and property related services (property identification, valuation etc.), training and consultancy. HDFC Ltd. contributes the 60% of the paid up equity capital of the AMC.
• Standard Life Insurance Limited is a leading Asset management company with approximately US$ 282 billion of asset under management as on June 30, 2007. The company operates in UK, Canada, Hong Kong, China, Korea, Ireland and USA to ensure it is able to form a truly global investment view. SLI Ltd. contributes the 40% of the paid up equity capital of the AMC.
The AMC is managing 24 open-ended schemes of the Mutual Fund viz. HDFC Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC Liquid Fund (HLF), HDFC Long Term Advantage Fund (HLTAF), HDFC Children's Gift Fund (HDFC CGF), HDFC Gilt Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC Index Fund, HDFC Floating Rate Income Fund (HFRIF), HDFC Equity Fund (HEF), HDFC Top 200 Fund (HT200), HDFC Capital Builder Fund (HCBF), HDFC Tax Saver (HTS), HDFC Prudence Fund (HPF), HDFC High Interest Fund (HHIF), HDFC Cash Management Fund (HCMF), HDFC MF Monthly Income Plan (HMIP), HDFC Core & Satellite Fund (HCSF), HDFC Multiple Yield Fund (HMYF), HDFC Premier Multi-Cap Fund (HPMCF), HDFC Multiple Yield Fund . Plan 2005 (HMYF-Plan 2005), HDFC Quarterly Interval Fund (HQIF) and HDFC Arbitrage Fund (HAF).The AMC is also managing 11 closed ended Schemes of the HDFC Mutual Fund viz. HDFC Long Term Equity Fund, HDFC Mid-Cap Opportunities Fund, HDFC Infrastructure Fund, HDFC Fixed Maturity Plans, HDFC Fixed Maturity Plans - Series II, HDFC Fixed Maturity Plans - Series III, HDFC Fixed Maturity Plans - Series IV, HDFC Fixed Maturity Plans - Series V, HDFC Fixed Maturity Plans - Series VI, HFDC Fixed Maturity Plans - Series VII and HFDC Fixed Maturity Plans - Series VIII.
The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the Mutual Fund. The AMC has renewed its registration from SEBI vide Registration No. - PM / INP000000506 dated December 8, 2006 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993.
3. Industry Profile
I. Introduction
The Indian mutual fund industry has witnessed significant growth in the past few years driven by several favourable economic and demographic factors such as rising income levels, and the increasing reach of Asset Management Companies and distributors. However, after several years of relentless growth ,the industry witnessed a fall of 8% in the assets under management in the financial year 2008-2009 that has impacted revenues and profitability. Whereas in 2009-10 the industry is on the road of recovery.
II. History of Mutual Funds
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases.
First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 Crores of assets under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 Crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 Crores. The Unit Trust of India with Rs.44, 541 Crores of assets under management was way ahead of other mutual funds
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 Crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund.
The graph indicates the growth of assets over the years:
Assets of the mutual fund industry touched an all-time high of Rs639,000 crore (approximately $136 billion) in May, aided by the spike in the stock market by over 50 per cent in the last one month and fresh inflows in liquid funds, data released by the Association of Mutual Funds in India (AMFI) shows yesterday.
The country's burgeoning mutual fund industry is expected to see its assets growing by 29% annually in the next five years. The total assets under management in the Indian mutual funds industry are estimated to grow at a compounded annual growth rate (CAGR) of 29 per cent in the next five years," the report by global consultancy Celent said. However, the profitability of the industry is expected to remain at its present level mainly due to increasing cost incurred to develop distribution channels and falling margins due to greater competition among fund houses, it said.