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7/30/2019 Saurav Mandhotra
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Analysis and Comparison of Aviva Fund
Portfolio with its competitors
Saurav Mandhotra
Section C
62/2011
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About AVIVA
Aviva is a British multinational insurance
company
Sixth-largest insurance company in the world
measured by net premium income and has
53 million customers across 28 countries
Formed by a merger of two British insurance
firms, Norwich Union and CGU plc.
Aviva name was adopted in July 2002
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Objectives of the study
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Analysis and Comparison of fund portfolio of Avivawith competitors
Creating a portfolio for Aviva
Calculating Value at Risk(VaR)
Comprises of 3 Parts
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Analysis and Comparison of fund
portfolio of Aviva with
competitors(SBI Life Insurance andICICI Prudential Life Insurance)
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Funds under Study
Bond Fund (0%-40%:Cash and Money Market,60%-100% in Government and other Debtsecurities)
Growth Fund(Cash and Money Market 0%40%,Equity:30%85%Government and other Debt Securities:0%50%)
Balanced Fund (Cash and Money Market 0%40%,Equity: 0%45%Government and other Debt Securities: 50%90%)
Index Fund(Debt Securities Incl. Money Market 0%20%,Equity:80%100%)
Enhancer Fund( Debt and Money Market:0%40%,Equity:60%100%)
Dynamic P/E(Debt and Money Market :0%100% ,Equity:0%100% )
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Bond Fund
Investment objective :Progressive capital growth
with relatively lower investment risks.
%age of fund Invested
Money Market:37%
Government Securities:19%
Corporate Bonds:44%
Aviva ICICI SBI
Returns 4.62% 10.27% 9.64%
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Investment Pattern
47.3857 61.69
14.692.5
1.69
37.93 39.75 36.62
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AVIVA SBI ICICI
Corporate Bonds Government Securites Money market
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Growth Fund
Investment objective: long-term cumulative
capital growth while managing the risk of a
relatively high exposure to equity markets.
%age of Fund Allocated: EQUITIES 67.12 %
GOVERNMENT 3.65%
CORPORATE Bond 16.15%
MONEY MARKET 13.08%
Returns: -8.57%
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Comparison
Tracking
Error
Sharpe
Ratio
Treynor
Ratio
Jensen
Alpha
Informat
ion ratio
M^2 Beta Returns
AVIVA 6.00% -3.02 -0.27 -0.21 -0.16 -0.14 0.61 -8.57%
SBI LIFE 7.93% -1.14 -0.39 -0.06 0.91 -0.01 0.47 -10.09%
ICICI
PRUDE
10.48% -1.13 -0.22 0.24 -0.03 -0.03 -13.61%
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Balanced Fund
Investment objective: Long-term cumulativecapital growth while controlling risk, by availing
opportunities in debt and equity markets
%age of Fund Allocated Equity:32%
Government Securities: 10%
Money Market:13%
Corporate Bonds:45%
Returns: -2.40%
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Returns Tracking
Error
Sharpe
Ratio
Treynor
Ratio
Jensen
Alpha
Informa
tion
ratio
M^2 Beta
AVIVA -2.40% 8.20% -3.36 -0.30 -0.13 0.64 -0.18 0.34
SBI LIFE -3.77% 12.64% -1.07 -0.38 -0.04 1.07 0.01 0.31
ICICI
PRUDE
-5.35% 15.12% -1.11 -0.14 0.71 -0.03 -0.03
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Index Fund
Investment objective :Generate returns in line
with the Stock market index - NIFTY. Subject
to exposure norms applicable under the IRDA
(Investment)Regulations.
%age of Fund Allocated Equities: 99%
Money Market:1%
Returns: -3.92%
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Top 5 Equities
Equities % amount of invested Return Given by the Equity
Infosys Ltd 8.33% -13.24%
Reliance Industries Ltd 7.90% -30.08%
ITC Ltd 7.33% 23.04%
ICICI Bank Ltd 6.34 -22.41%
HDFC BANK LTD 5.73% -5.85%
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0
5
10
15
20
25
1
AGROCHEMICALS
AUTOMOBILES
BANKINGANDFINANCIAL
SERVICESCONSUMERGOODS
ENGINEERING
HOTELS
INFORMATIONTECHNOLOGY
INFRASTRUCTURE
MEDIA
METALS&MINING
OIL&GASANDANCILLIARIES
OTHERS
PHARMACEUTICALS
POWERANDPOWER
EQUIPMENT
REALTY
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Returns Tracking
Error
Sharpe
Ratio
Treynor
Ratio
Jensen
Alpha
Informati
on ratio
M^2 Beta
AVIVA -3.92% 2.75% -1.20 -0.12 -0.19 1.35 0.04 0.99
SBI LIFE -14.99% 1.89% -1.03 -0.36 -0.07 1.23 0.02 0.64
ICICI
PRUDE
-10.87% 13.15% -0.86 -0.20 0.40 0.03 -0.06
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11.98%6.58% 8.51
27.07%
22.16%
25.83
0.64%
4.66%
2.54
11.84%
6.87%
9.84
12.83%
11.41%
14.03
1.04%
6.07%
4.95
0.91%
1.51%
4.70%
5.98%
7.39
11.18%20.92%
13.03
3.55%5.80% 4.13
6.71% 0.01%5.99
2.47%3.98%
2.921.93% 3.33%0.47
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
SBI ICICI AVIVA
AxisTitle
Pattern of Equity InvestmentOthers
Telecom
POWERANDPOWEREQUIPMENT
Pharmaceuticals
Oil&Gas
Metals
Media
Infrastructure
INFORMATIONTECHNOLOGY
FMCG
Cement
BANKINGANDFINANCIAL
SERVICES
Auto&Ancilliary
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Enhancer Fund
Investment objective: Long-term cumulative
capital growth while managing the risk of
exposure to equity markets.
%age of Fund Allocated Equities: 96%
Money Market: 4%
Return : -5.24%
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Returns Tracking
Error
Sharpe
Ratio
Treynor
Ratio
Jensen
Alpha
Informati
on ratio
M^2 Beta
AVIVA -5.24% 3.42% -1.24 -0.14 -0.20 0.70 0.03 0.96
SBI LIFE -11.52% 3.74% --0.95 -0.33 -0.05 1.55 0.03 0.59
ICICI
PRUDE
-12.18% 11.90% -1.04 -0.21 0.33 -0.01 -0.04
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Creating an Efficient Frontier for
Aviva Fund Investment
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Theory and Model used
Markowitz portfolio theory also know as
Modern portfolio theory
Black and Littermans Solution to the
Optimization Problem
Global Minimum Variance Portfolio
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Markowitz Portfolio Theory
Inputs:
The expected return for each asset
The standard deviation of each asset (a measure
of risk) The correlation matrix between these assets
Output:
The efficient frontier, i.e. the set of portfolios withexpected return greater than any other with the
same or lesser risk, and lesser risk than any other
with the same or greater return.
E Variance Volatility Experim
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E Variance Volatility
Nifty ommodit Bullion Currency ixed income Port 1 P
Nifty 0.0077 0.0035 -0.0003 -0.2% 0.000498 7.630% 0.0077 8.78% 15% 20% 17%
Commodit 0.0035 0.01075 0.0031 0.0% 0.000241 12.841% 0.01075 10.37% 20% 22% 0%
Bullion -0.00029 0.00112 0.0031 0.1% 5.17E-05 24.916% 0.00307 5.54% 12% 20% 29%
Currency -0.00158 -0.0011 4E-05 0.1% 5.17E-05 4.070% 0.00081 2.84% 17% 20% 53%
Fixed inco 0.0005 0.00032 0.0002 0.0% 0.002994 1.193% 0.00299 5.47% 36% 18% 0%
100% 100%
Risk Free r 8%
Mean 7.82% Mean 10.70% 24.92% 5.54% 3.05
Variance 0.01506 Variance 0.000528 4.07% 2.84% (1.38)
Volatility 12.27% Volatility 2.30% 1.19% 5.47% (1.24)
7.63% 8.78% (0.04)
Sigma Mean Sharpe r 12.84% 10.37% 0.47
% of portf 12.27% 7.82% Mean Sigma sharpe ratio
0% 14.17% 6.86% 0.90 4.9% 1.76% -1.8
10% 12.66% 7.50% 0.62 4.9% 1.76% -1.8
20% 12.16% 8.15% 0.51 5.8% 1.77% -1.2
30% 12.81% 8.79% 0.55 6.2% 1.79% -1.0
40% 14.43% 9.43% 0.68 6.8% 1.82% -0.7
50% 16.76% 10.08% 0.87 7.2% 1.85% -0.4
60% 19.54% 10.72% 1.08 7.7% 1.90% -0.270% 22.61% 11.36% 1.29 8.7% 2.01% 0.3
80% 25.86% 12.01% 1.49 9.7% 2.14% 0.8
90% 29.23% 12.65% 1.68 10.7% 2.30% 1.2
100% 32.69% 13.30% 1.86 11.5% 2.43% 1.4
12.5% 2.62% 1.7
13.5% 2.81% 2.0
14.5% 3.02% 2.2
15.5% 3.23% 2.3
16.5% 3.45% 2.5
Experim
mbination of portfol
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
Series1
3.0%
8.0%
13.0%
18.0%
23.0%
28.0%
Efficient Frontier
Nifty
Commodity
Bullion
Currency
Fixed income
OptimumCapital Allocation
which is 17% Nifty,0% commodity,29% in
Bullion,53% in currency and 0% in fixed
income
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Series1
Expected Return
Volatility
Var-
Covar
Matrix
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Black Litterman Model
2%Anticipated Return
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2%
1%
Hdfc icici sbi itc Infosys
Reliance
inds
119,945 93,722 124,291 182,795 132,753 265,776 919,282
13.05% 10.20% 13.52% 19.88% 14.44% 28.91%
Variance Co-variance Matrix
Hdfc icici sbi itc Infosys eliance inds
Hdfc 0.0006 0.0005 0.0004 0.0002 0.0000 0.0004 0.00% 0.034% 1.9% 1.878% 13.05% 13.05%icici 0.0005 0.0011 0.0011 0.0006 0.0002 0.0000 0.00% 0.050% 2.4% 2.445% 10.20% 10.20%
sbi 0.0004 0.0006 0.0007 0.0002 0.0000 0.0004 0.00% 0.039% 2.1% 2.059% 13.52% 13.52%
itc 0.0002 0.0002 0.0002 0.0008 0.0000 0.0002 0.00% 0.031% 1.8% 1.763% 19.88% 19.88%
Infosys 0.0000 0.0000 0.0000 0.0000 0.0005 0.0000 0.00% 0.008% 1.0% 0.958% 14.44% 14.44%
Reliance in 0.0004 0.0006 0.0004 0.0002 0.0000 0.0011 0.00% 0.053% 2.6% 2.554% 28.91% 28.91%
Expexted b- 0.037%
Expexted b- 2.0%
Hdfc icici sbi itc Infosys eliance inds
Hdfc 1.00 0.51 0.54 0.26 0.05 0.33
icici 0.96 1.00 1.45 0.77 0.53 0.01
sbi 0.70 0.56 1.00 0.27 0.03 0.39
itc 0.35 0.23 0.29 1.00 0.03 0.20Infosys 0.04 0.01 0.02 0.02 1.00 0.01
Anticipated Return
Risk Free Rate
portfolio
benchmar
k with no
opinion
Wtihout n-
factor
Wtih n-
factor
Return
adjusted
with
opinions
Optimized
benchmark
portfolio
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VaR(Value at Risk) of Funds
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VaR(Historical Method)
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%4.50%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
0 20 40 60 80 100 120 140 160 180 200
Index Fund
return
Growth Fund
Return
Balance Fund
Return
Protector Fund
return
Enhancer Fund
Return
Bond Fund
Return
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`
Index Fund
return
Growth Fund
Return
Balance Fund
Return
Protector Fund
return
Enhancer Fund
Return
Bond Fund
Return
Mean
(Yearly)
19.30% 11.27% 7.90% 6.39% 14.64% 7.23%
Volatility 23.45% 14.24% 6.64% 1.79% 19.14% 1.97%
Initial
Investment(A
ssumption)
100 100 100 100 100 100
Cut-off 80 80 80 80 80 80
Probability
that the
portfolio will
be less than
cut off
4.68% 1.40% 0.00% 0.00% 3.52% 0.00%
V R(U i M t C l
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VaR(Using Monte-Carlo
Simulation)
0.00
5.00
10.00
15.00
20.00
25.00
Mar-09 Jun-09 Oct-09 Jan-10 Apr-10 Jul-10 Nov-10 Feb-11 May-11 Sep-11 Dec-11 Mar-12 Jun-12
Monte Carlo Simulation
Index Fund return Growth Fund Return Balance Fund Return
Protector Fund return Enhancer Fund Return Bond Fund Return
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Thank You
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