Presentation on Fund Manangement

8/14/2019 Presentation on Fund Manangement

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PRESENTATION ONFUND MANANGEMENT


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Risk Return of differentschemes


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PENSION FUND

A pension fund is a pool of assetsforming an independent legal entity

that are bought with the contributionsto a pension plan for the exclusivepurpose of financing pension planbenefits.


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Classifications

1 . Open vs. closed pension funds 2 . Public vs. private pension funds


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Examples

Australia:Public Sector Supperannuation Scheme(for

federal civil servants)Commonwealth Supperannuation Scheme

The Retail Employees Superannuation Trust


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Canada

GovernmentCanada Pension PlanAlberta Investment Management

PrivateHospitals of Ontario Pension Plan (HOOPP)OMERS Administration Corporation

(OMERS)


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NPS

New Pension Scheme (NPS) is a definedcontribution based pension system launchedby Government of India with effect from 1January, 2004.

NPS has defined contribution and individualscan decide where to invest their money. Thescheme is structured into two tiers:

Tier-I account: This NPS account doesnt

allow premature withdrawal and is availablefrom 1 May, 2009 Tier-II account: The tier-II NPS account

permits withdrawal, however is likely to befunctional by about 2009 end.


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Regulator

Pension Fund Regulatory andDevelopment Authority (PFRDA) is theprudential regulator for the NPS. PFRDA

was established by the Government ofIndia on 23 August 2003 to promote oldage income security by establishing,developing and regulating pension

funds.


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Coverage & Eligibility

NPS would be available to all citizens of Indiaon voluntary basis and mandatory foremployees of central government (exceptarmed forces) appointed on or after 1

January 2004. All Indian citizens betweenthe age of 18 and 55 can join the NPS.

Tier-I is mandatory for all Govt. servantsjoining Govt. service on or after 1.1.2004.

In Tier I, Govt. servants will have to make acontribution of 10% of his Basic Pay, DPand DA which will be deducted from hissalary bill every month. The Govt. willmake an equal matching contribution.


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Investment Options

Under the investment guidelines finalized for the NPS, pension fundmanagers will manage three separate schemes, each investingin a different asset class. The three asset classes are equity,government securities and credit risk-bearing fixed incomeinstruments. The subscriber will have the option to activelydecide as to how the NPS pension wealth is to be invested inthree asset classes:

E Class: Investment would primarily in Equity market instruments. Itwould invest in Index funds that replicate the portfolio of eitherBSE Sensitive index or NSE Nifty 50 index.

G Class: Investment would be in Government securities like GOIbonds and State Govt. bonds

C Class: Investment would be in fixed income securities other than

Government Securities Liquid Funds of AMCs regulated by SEBI Fixed Deposits of scheduled commercial banks with filters Credit Rated Public Financial Institutions/PSU BondsCredit Rated Municipal Bonds/Infrastructure Bonds


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Auto choice option

Till the of age35 years

At age 55 Years

E Class 50% 10%

C Class 30% 10%G Class 20% 80%


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Hedge fund

Legally, hedge funds are most often setup as private investment partnershipsthat are open to a limited number of

investors and require a verylarge initial minimuminvestment. Investments in hedge fundsare illiquid as they often require

investors keep their money in the fundfor at least one year.


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Hedge fund

For the most part, hedge funds (unlike mutualfunds) are unregulated because they cater tosophisticated investors.

In the U.S., laws require that the majority of

investors in the fund be accredited. That is, they must earn a minimum amount of

money annually and have a net worth of morethan $1 million, along with a significantamount of investment knowledge. You canthink of hedge funds as mutual funds for thesuper rich. They are similar to mutual funds inthat investments are pooled and professionallymanaged, but differ in that the fund has far

more flexibility in its investment strategies.


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Hedge fund

It is important to note that hedging isactually the practice of attempting toreduce risk, but the goal of most hedgefunds is to maximize return on investment.

The name is mostly historical, as the firsthedge funds tried to hedge against thedownside risk of a bear market by shortingthe market (mutual funds generally can'tenter into short positions as one of their

primary goals). Nowadays, hedge funds use dozens ofdifferent strategies, so it isn't accurate tosay that hedge funds just "hedge risk". Infact, because hedge fund managers make

speculative investments, these funds cancarr more risk than the overall market.


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Performance of many hedge fund strategies,particularly relative value strategies, is notdependent on the direction of the bond or equitymarkets -- unlike conventional equity or mutual funds(unit trusts), which are generally 100% exposed tomarket risk.

Hedge fund managers are generally highlyprofessional, disciplined and diligent.

Their returns over a sustained period of time haveoutperformed standard equity and bond indexes withless volatility and less risk of loss than equities.

Investing in hedge funds tends to be favored by moresophisticated investors, including many Swiss andother private banks, who have lived through, andunderstand the consequences of, major stock marketcorrections. Many endowments and pension fundsallocate assets to hedge funds.


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Hedge fund strategy

Aggressive Growth.

Distressed Securities.

Emerging Markets.

Fund of Funds. Income:

Macro.

Special Situations. Short selling.

Opportunistic:


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Aggressive Growth

Invests in equities expected to experienceacceleration in growth of earnings pershare.

Generally high P/E ratios, low or nodividends; often smaller and micro capstocks which are expected toexperience rapid growth.


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Distressed Securities.

Buys equity, debt, or trade claims at deepdiscounts of companies in or facingbankruptcy or reorganization


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Emerging Markets

Invests in equity or debt of emerging (lessmature) markets which tend to havehigher inflation and volatile growth.


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Income:

Invests with primary focus on yield orcurrent income rather than solely oncapital gains.


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MACRO

Aims to profit from changes in globaleconomies, typically brought about byshifts in government policy which

impact interest rates, in turn affectingcurrency, stock, and bond markets.Participates in all major markets --equities, bonds, currencies and

commodities -- though not always at thesame time.


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Special Situations


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Short Selling.


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Opportunistic:

Investment theme changes from strategyto strategy as opportunities arise toprofit from events such as IPOs, sudden

price changes often caused by aninterim earnings disappointment, hostilebids, and other event-drivenopportunities.


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MONEY MARKET OVERVEW.


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T bills

Treasury Bills, one of the safest moneymarket instruments, are short termborrowing instruments of the Central

Government of the Country issuedthrough the Central Bank (RBI in India).


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T bills

At present, the Government of Indiaissues three types of treasury billsthrough auctions, namely, 91-day, 182-day and 364-day.

Treasury bills are available for a minimumamount of Rs.25K and in its multiples.

While 91-day T-bills are auctioned every

week on Wednesdays, 182-day and 364-day T-bills are auctioned every alternateweek on Wednesdays.

RBI issues these instruments to absorb

liquidity from the market by contractingthe mone su l .


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Repurchase agreements.

Repurchase transactions, called Repo orReverse Repo are transactions or shortterm loans in which two parties agree to

sell and repurchase the same security. Repo/Reverse Repo transactions can be

done only between the parties approvedby RBI and in RBI approved securities

viz. GOI and State Govt Securities, T-Bills, PSU Bonds, FI Bonds, CorporateBonds


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Commercial Papers:

Commercial paper is a low-costalternative to bank loans.

It is a short term unsecured promissory

note issued by corporate and financialinstitutions at a discounted value onface value.

They are usually issued with fixed

maturity between one to 270 days andfor financing of accounts receivables,inventories and meeting short term

liabilities.


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CDs

The certificates of deposit are basicallytime deposits that are issued by thecommercial banks with maturity periods

ranging from 3 months to five years.The return on the certificate of depositis higher than the Treasury Bills becauseit assumes a higher level of risk.


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Banker's Acceptance

A banker's acceptance is also a short-terminvestment plan that comes from acompany or a firm backed by a guaranteefrom the bank. This guarantee states that

the buyer will pay the seller at a futuredate.

One who draws the bill should have a soundcredit rating.

90 days is the usual term for theseinstruments. The term for theseinstruments can also vary between 30 and

180 days. It is used as time draft to finance


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INVESTMENT PRODUCTS.

EQUTY DEBT COMMODITY DERIVATIVE


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IPO Book building QIP QIB


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equity

The third biggest after China and HongKong in the Asian region.

According to the latest report by ADB, it

has a market capitalization of nearly$600 billion. As of March 2009, the market

capitalization was around $598.3 billion

(Rs 30.13 lakh crore) which is one-tenthof the combined valuation of the Asiaregion.


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RECENT IPOs

COMPANY LISTINGDATE

ISSUEPRICE

PREVIOUSCLOSEEDSERVE

SOFTSYSTEMS LTDMar 02, 2009 60 289.1

Thinksoft global servicesltd

Oct 26, 2009 125 461.75

Cox and king (India) ltd Dec 11, 2009 330 421.4

DB corp. ltd Jan 06, 2010 212 255.3

Oil India ltd Sep 30, 2009 1050 1193.45

Jsw energy ltd Jan 04, 2010 100 111.5

Adani power ltd Aug 20, 2009 100 100.7Godrej properties ltd Jan 05, 2010 490 491.6

NHPC ltd Sep 01, 2009 36 33.85

Indiabulls power ltd Oct 30, 2009 45 33.6


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BSE

SENSEX MDCAP SMLCAP

BSE-100 BSE-200 BSE-500

BSE-IPO


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BSE(SECTOR)

FMCG PSU POWER AUTO OIL&GAS METAL CD TECK HC CG BANKEX IT REALTY


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SSE

Listed Companies 873

Listed Securities 1355

Total Share Capital(100million shares)

16736.72

Total Share CapitalTradable(100 million shares)

11799.66

Total MarketCapitalization(RMB100million)

177076.62

Total Free-floatCapitalization(RMB100million)

115460.3

Average P/E Ratio 27.43


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Events should know

1929 1987 2007to 2009

Indian stock market(election)


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Major indices of world


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DEBT

CORPORATE BOND


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The Wholesale Debt Market (WDM)segment of the Exchange commencedoperations on June 30, 1994. This

provided the first formal screen-basedtrading facility for the debt market inthe country.


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This segment provides trading facilities for avariety of debt instruments includingGovernment Securities, Treasury Bills andBonds issued by

Public Sector Undertakings/ Corporates/Banks like Floating Rate Bonds, Zero Coupon Bonds,

Commercial Papers, Certificate of Deposits,Corporate Debentures, State Government

loans, SLR and Non-SLR Bonds issued by Financial Institutions, Units of Mutual Funds

and Securitized debt by banks, financialinstitutions, corporate bodies, trusts andothers.


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Debt Market Update for the week

On a weekly basis, G-Sec bond yieldsended flat. The 10-year benchmarkbond yield was down by 3bps at 7.64%.

However, one-year G-Sec yield endedhigher at 4.37% vis--vis 4.31% lastweek,..
http://www.indiainfoline.com/Research/Recommendations/Others-Debt-Market-Weekly/Debt-Market-Update-for-the-week-ended-January-15-2010/7551467http://www.indiainfoline.com/Research/Recommendations/Others-Debt-Market-Weekly/Debt-Market-Update-for-the-week-ended-January-15-2010/7551467


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Almond (NonPariel), Aluminium ,Aviation Turbine Fuel,

Barley,

Carbon Credit , CardamomCastor Seed Chana CoalCopper Coriander Cotton

CottonSeed Crude OilCrude Palm Oil Electricity

Electrolytic Copper Cathode
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MaizeMelted Menthol FlakesMenthol OilMustard Seed Mustard Seed Oil

Natural Gas Nickel

Pepper Platinum Poly Vinyl ChloridePolypropylene Potato RedChilli Refined Soy Oil Rubber Silver Soya Bean SteelTinTurmeric Wheat Zinc
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MCX

The exchange started operations inNovember 2003.

MCX offers futures trading in more than40 commodities from various marketsegments including bullion, energy,ferrous and non-ferrous metals, oil andoil seeds, cereal, pulses, plantation,spices, plastic and fibre


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Commodity MCX

Aluminium 102.15

Copper 341.25

Crude Oil 3444

Gold 16490

Lead 102.65

Nickel 848.5

Silver 26748

Zinc 107.3


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Tokyo Commodity Exchange, Chicago Climate Exchange, London Metal Exchange,

New York Mercantile Exchange,


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DERIVATIVES

A derivative is a financial instrumentwhose value depend on the underlyingasset.

Derivatives can be used by investors tospeculate and to make a profit if thevalue of the underlying asset moves theway they expect.

Traders can use derivatives to hedge ormitigate risk in the underlying, byentering into a derivative contractwhose value moves in the oppositedirection to their underl in osition


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Types

Forward Future Options

Swaps

F d


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Forward

A forward contract or simply a forwardis an agreement between two parties tobuy or sell an asset at a certain futuretime for a certain price agreed today.

It costs nothing to enter a forwardcontract.

F


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Futures

A futures contract is a standardizedcontract to buy or sell a specifiedcommodity of standardized quality at acertain date in the future and at amarket-determined price.

F = S+S (R-Y)


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2. Futures contracts have clearing housesthat guarantee the transactions, whichdrastically lowers the probabilityof default to almost never. forward

contracts are private agreements, there isalways a chance that a party may defaulton its side of the agreement.

3. In future contract the specific details

concerning settlement and deliveryare quite distinct. For forward contracts,settlement of the contract occurs at theend of the contract.


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4. Futures contracts are marked-to-marketdaily, which means that daily changes aresettled day by day until the end of thecontract. Forward contracts possess onesettlement date.

5. Futures contracts are quite frequentlyemployed by speculators, who bet

on the direction in which an asset'sprice will move. Forward contractsare mostly used by hedgers that wantto eliminate the volatility of an asset's

price.

O ti


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Options

Options are those contracts which provide theholder the right to buy or sell a specifiedquantity of an underlying asset at a fixed priceon or before the expiration of the option type.

Call Option Put Option

S


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Swaps

In swap one party agrees to exchange his set ofpredetermined cash flow with the predeterminedset of cash flows of the other party.

Currency Swaps

Interest rate Swaps

Documents

Presentation on Fund Manangement