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http://birlamutual.com/index.htm8/8/2019 An Indepth Analysis of Mutual Fund Industry
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UNDERTAKING
I hereby declare that this project written by me in the second semester of
Post Graduate Diploma is the result of my own efforts and this project
has not been provided to any other Institute and the work done is original
and authentic.
ROOPESH KUMAR SHARMA Attested by-
Roll No. 2K-F-148
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ACKNOWLEDGEMENT
I would like to thank all the people of Birla, Alliance and Pioneer ITI
Mutual Funds for providing me with valuable information about their
products and their kind support. A special thanks to Ms. Neena Madhura
for giving an opportunity to enhance our knowledge about Mutul Fund
Sector and also for her kind support for showing the right track.
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OBJECTIVES
1. To study the growth and profitability of Mutual Fund sector for the
past 3 years.
2. To enhance out knowledge about the subject.
3. To have a vivid pictures of major players in Mutul Fund sectors in
India
4. How effectively they are reaching their customers.
5. To give comprehensive analysis of Mutul Fund sectors.
6. To study the consumer awareness regarding Mutul Fund.
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EXECUTIVE SUMMERY OF THE
PROJECT
The project was done on Mutual funds in Birla Mutual Fund, Alliance
capital, and Pioneer ITI
The tern mutual fund itself gives its meaning. It means the fund,
which is collected and invested mutually or collectively. It acts as
investment conduit, which pools the savings of the community and
invests large funds in a fairly large and well-diversified portfolio of
sound investments. In India presently 36 mutual funds are working.
It includes public, private and foreign companies.
Trusts
Asset management company
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Custodian
Sponsor
Mutual funds can be classified on the parameter of investment
objective in four main cetegories. These categories are
Equity funds
Debt/Income funds
Balanced funs
Liquid funds/ Money market funds
MUTUAL : AN INTRODUCTION
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. A mutual fund is a pool
of commingle funds invested by different investors, who have no contact
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with each other. 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 dtre 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, liquidity of
investment and tax benefits. By pooling their assets through mutual funds,
investors achieve economies of scale. 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.
MUTUAL FUNDS FOR WHOM? These funds can survive and thrive
only if they can live upto the hopes and trusts of their individual members.
These hopes and trusts echo the peculiarities which support the emergence
and growth of such insrescue of such investors who come to the rescue of
such investors who face following constraints while making direct
investments:
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(a) Limited resources in the hands of investors quite often take them away
from stock market transactions.
(b) Lack of funds forbids investors to have a balanced and diversified
portfolio.
(c) Lack of professional knowledge associated with investment business
unables investors to operate gainfully in the market. Small investors can
hardly afford to have ex-pensive investment consultations.
(d) To buy shares, investors have to engage share brokers who are the
members of stock exchange and have to pay their brokerage.
(e) They hardly have access to price sensitive information in time.
(f) It is difficult for them to know the development taking place in share
market and corporate sector.
(g) Firm allotments are not possible for small investors on when there is a
trend of over subscription to public issues.
WHY MUTUAL FUNDS? Mutual Funds are becoming a very popular
form of investment characterised by many advantages that they share with
other forms of investment characterised by many advantages that they
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share with other forms of investments and what they possess uniquely
themselves. The primary objectives of an investment proposal would fit
into one or combination of the two broad categories, i.e., Income and
Capital gains. How mutual fund is expected to be over and above an
individual in achieving the two said objectives, is what attracts investors to
opt for mutual funds. Mutual fund route offers several important
advantages.
i. Diversification: A proven principle of sound investment is that of
diversification which is the idea of not putting all your eggs in one basket.
By investing in many companies the mutual funds can protect themselves
from unexpected drop in values of some shares. The small investors can
achieve wide diversification on his own because of many reasons, mainly
funds at his disposal. Mutual funds on the other hand, pool funds of lakhs
of investors and thus can participate in a large basket of shares of many
different companies. Majority of people consider diversification as the
major strength of mutual funds.
ii. Expertise Supervision: Making investments is not a full time
assignment of investors. So they hardly have a professional attitude
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towards their investment. When investors buy mutual fund scheme, an
essential benefit one acquires is expert management of the money he puts
in the fund. The professional fund managers who supervise funds portfolio
take desirable decisions viz., what scrips are to be bought, what
investments are to be sold and more appropriate decision as to timings of
such buy and sell. They have extensive research facilities at their disposal,
can spend full time to investigate and can give the fund a constant
supervision. The performance of mutual fund schemes, of course, depends
on the quality of fund managers employed.
iii. Liquidity of Investment: A distinct advantage of a mutual fund over
other investments is that there is always a market for its unit/ shares.
Moreover, Securities and Exchange Board of India (SEBI) requires the
mutual funds in India have to ensure liquidity. Mutual funds units can
either be sold in the share market as SEBI has made it obligatory for
closed-ended schemes to list themselves on stock exchanges. For open-
ended schemes investors can always approach the fund for repurchase at
net asset value (NAV) of the scheme. Such repurchase price and NAV is
advertised in newspaper for the convenience of investors.
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iv. Reduced risks: Risk in investment is as to recovery of the principal
amount and as to return on it. Mutual fund investments on both fronts
provide a comfortable situation for investors. The expert supervision,
diversification and liquidity of units ensured in mutual funds minimise the
risks. Investors are no longer expected to come to grief by falling prey to
misleading and motivating headline leads and tips, if they invest in
mutual funds.
v. Safety of Investment: Besides depending on the expert supervision of
fund managers, the legislation in a country (like SEBI in India) also
provides for the safety of investments. Mutual funds have to broadly follow
the laid down provisions for their regulations, SEBI acts as a watchdog and
attempts whole heartedly to safeguard investors interests.
vi. Tax Shelter: Depending on the scheme of mutual funds, tax shelter is
also available. As per the union budget-99, income earned through
dividends from mutual funds is 100% tax-free.
vii. Minimise Operating Costs: Mutual funds having large investible
funds at their disposal avail economies of scale. The brokerage fee or
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trading commission may be reduced substantially. The reduced operating
costs obviously increases the income available for investors.
Investing in securities through mutual funds has many advantages like
option to reinvest dividends, strong possibility of capital appreciation,
regular returns, etc. Mutual funds are also relevant in national interest. The
test of their economic efficiency as financial intermediary lies in the extent
to which they are able to mobilise additional savings and channelising to
more productive sectors of the economy.
CLASSIFICATION OF MUTUAL FUND SCHEMES
Any mutual fund has an objective of earning income for the investors and/
or getting increased value of their investments. To achieve these objectives
mutual funds adopt different strategies and accordingly offer different
schemes of investments. On these basis the simplest way to categorise
schemes would be to group these into two broad classifications:
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Operational Classification and Portfolio Classification.
Operational classification highlights the two main types of schemes, i.e.,
open-ended and close-ended which are offered by the mutual funds.
Portfolio classification projects the combination of investment instruments
and investment avenues available to mutual funds to manage their funds.
Any portfolio scheme can be either open ended or close ended.
A. Operational Classification
(a) Open Ended Schemes: As the name implies the size of the scheme
(Fund) is open i.e., not specified or pre-determined. Entry to the fund is
always open to the investor who can subscribe at any time. Such fund
stands ready to buy or sell its securities at any time. It implies that the
capitalisation of the fund is constantly changing as investors sell or buy
their shares. Further, the shares or units are normally not traded on the
stock exchange but are repurchased by the fund at announced rates. Open-
ended schemes have comparatively better liquidity despite the fact that
these are not listed. The reason is that investor can any time approach
mutual fund for sale of such units. No intermediaries are required.
Moreover, the realizable amount is certain since repurchase is at a price
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based on declared net asset value (NAV). No minute to minute fluctuations
in rates haunt the investors. The portfolio mix of such schemes has to be
investments, which are actively traded in the market. Otherwise, it will not
be possible to calculate NAV. This is the reason that generally open-ended
schemes are equity based. Moreover, desiring frequently traded securities,
open-ended schemes hardly have in their portfolio shares of comparatively
new and smaller companies since these are not generally traded. In such
funds, option to reinvest its dividend is also available. Since there is always
a possibility of withdrawals, the management of such funds becomes more
tedious as managers have to work from crisis to crisis. Crisis may be on
two fronts, one is, that unexpected withdrawals require funds to maintain a
high level of cash available every time implying thereby idle cash. Fund
managers have to face questions like what to sell. He could very well
have to sell his most liquid assets. Second, by virtue of this situation such
funds may fail to grab favourable opportunities. Further, to match quick
cash payments, funds cannot have matching realisation from their portfolio
due to intricacies of the stock market. Thus, success of the open-ended
schemes to a great extent depends on the efficiency of the capital market.
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(b) Close Ended Schemes: Such schemes have a definite period after
which their shares/ units are redeemed. Unlike open-ended funds, these
funds have fixed capitalisation, i.e., their corpus normally does not change
throughout its life period. Close ended fund units trade among the investors
in the secondary market since these are to be quoted on the stock
exchanges. Their price is determined on the basis of demand and supply in
the market. Their liquidity depends on the efficiency and understanding of
the engaged broker. Their price is free to deviate from NAV, i.e., there is
every possibility that the market price may be above or below its NAV. If
one takes into account the issue expenses, conceptually close ended fund
units cannot be traded at a premium or over NAV because the price of a
package of investments, i.e., cannot exceed the sum of the prices of the
investments constituting the package. Whatever premium exists that may
exist only on account of speculative activities. In India as per SEBI (MF)
Regulations every mutual fund is free to launch any or both types of
schemes.
A. Portfolio Classification of Funds:
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Following are the portfolio classification of funds, which may be offered.
This classification may be on the basis of (a) Return, (b) Investment
Pattern, (c) Specialised sector of investment, (d) Leverage and (e) Others.
(a)Return based classification:
To meet the diversified needs of the investors, the mutual fund schemes are
made to enjoy a good return. Returns expected are in form of regular
dividends or capital appreciation or a combination of these two.
i.Income Funds: For investors who are more curious for returns, Income
funds are floated. Their objective is to maximise current income. Such
funds distribute periodically the income earned by them. These funds can
further be splitted up into categories: those that stress constant income at
relatively low risk and those that attempt to achieve maximum income
possible, even with the use of leverage. Obviously, the higher the expected
returns, the higher the potential risk of the investment.
ii. Growth Funds: Such funds aim to achieve increase in the value of the
underlying investments through capital appreciation. Such funds invest in
growth oriented securities which can appreciate through the expansion
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production facilities in long run. An investor who selects such funds should
be able to assume a higher than normal degree of risk.
iii. Conservative Funds: The fund with a philosophy of all things to all
issue offer document announcing objectives as: (i) To provide a reasonable
rate of return, (ii) To protect the value of investment and, (iii) To achieve
capital appreciation consistent with the fulfillment of the first two
objectives. Such funds which offer a blend of immediate average return and
reasonable capital appreciation are known as middle of the road funds.
Such funds divide their portfolio in common stocks and bonds in a way to
achieve the desired objectives. Such funds have been most popular and
appeal to the investors who want both growth and income.
(b)Investment Based Classification:
Mutual funds may also be classified on the basis of securities in which they
invest. Basically, it is renaming the subcategories of return based
classification.
i. Equity Fund: Such funds, as the name implies, invest most of their
investible shares in equity shares of companies and undertake the risk
associated with the investment in equity shares. Such funds are clearly
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expected to outdo other funds in rising market, because these have almost
all their capital in equity. Equity funds again can be of different categories
varying from those that invest exclusively in high quality blue
chipcompanies to those that invest solely in the new, unestablished
companies. The strength of these funds is the expected capital appreciation.
Naturally, they have a higher degree of risk.
ii. Bond Funds: such funds have their portfolio consisted of bonds,
debentures, etc. this type of fund is expected to be very secure with a
steady income and little or no chance of capital appreciation. Obviously
risk is low in such funds. In this category we may come across the funds
called Liquid Fundswhich specialise in investing short-term money
market instruments. The emphasis is on liquidity and is associated with
lower risks and low returns.
iii.Balanced Fund: The funds, which have in their portfolio a reasonable
mix of equity and bonds, are known as balanced funds. Such funds will put
more emphasis on equity share investments when the outlook is bright and
will tend to switch to debentures when the future is expected to be poor for
shares.
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(c) Sector Based Funds:
There are number of funds that invest in a specified sector of economy.
While such funds do have the disadvantage of low diversification by
putting all their all eggs in one basket, the policy of specialising has the
advantage of developing in the fund managers an intensive knowledge of
the specific sector in which they are investing. Sector based funds are
aggressive growth funds which make investments on the basis of assessed
bright future for a particular sector. These funds are characterised by high
viability, hence more risky.
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MUTUAL FUND CONSTITUENTS
All mutual funds comprise four constituents Sponsors, Trustees, Asset
Management Company (AMC) and Custodians.
Sponsors: The sponsors initiate the idea to set up a mutual fund. It could
be a registered company, scheduled bank or financial institution. A sponsor
has to satisfy certain conditions, such as capital, record (at least five
yearsoperation in financial services), de-fault free dealings and general
reputation of fairness. The sponsors appoint the Trustee, AMC and
Custodian. Once the AMC is formed, the sponsor is just a stakeholder.
Trust/ Board of Trustees:
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Trustees hold a fiduciary responsibility towards unitholders by protecting
their interests. Trustees float and market schemes, and secure necessary
approvals. They check if the AMCs investments are within well-defined
limits, whether the funds 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
unitholdersconsent. They submit reports every six months to SEBI;
investors get an annual report. Trustees are paid annually out of the funds
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 funds 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
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Rs. 100 crore. SEBI can pull up an AMC if it deviates from its prescribed
role.
Custodian: Often an independent organisation, it takes custody of
securities and other assets of mutual fund. Its responsibilities include
receipt and delivery of securities, collecting income-distributing dividends,
safekeeping of the units and segregating assets and settlements between
schemes. Their charges range between 0.15-0.2 percent of the net value of
the holding. Custodians can service more than one fund.
MUTUAL FUND: RELATIONSHIP AMONGSTTHE ENTITIES
INVOLVED
SPONSOR REGISTRAR
SETS UP
MAINTIANRECORDS OF
AND SERVICESOF
APPOINTS
TRUSTEECOMPANY
ACT ASTRUSTEE TO
THEUNITHOLDERS
OF
ASSETMANAFEME
NT
COMPANY
SUBSCRIBETHE UNITS OF
MANGES
THEINVESTMENT OF
SAFE KEEPS
THE ASSETSOF
CUSTODIAN
INVESTO
RS
MUTUA
L FUND(AS ATRUST)
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SEBI GUIDELINES
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The SEBI issued a set of regulations and code of conduct of
20 January. 1993 for the smooth conduct and regulation of
Mutual fund. The silent features of these guidelines are a s
follows:
Mutual Fund cannot deal in Option trading, short selling
or carrying forward transactions in securities.
Mutual fund should be formed as trusts and managed by
AMC
Restriction to ensure those investments under all
schemes do not exceed 15% of the funds in the shares
and debentures of a single company.
SEBI will grant registration to only those Mutual Fund
which can prove an efficient and orderly conduct of
business.
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The Mutual fund should have a custodian, not associated
in any way with the AMC and registered with the board.
The minimum amount to be raised with each closed
ended scheme should be Rs. 20 crore and for the open-
ended scheme Rs. 50 crore.
The Mutual Fund are obliged to maintain books of
account.
The minimum net worth of AMC is Rs. 5 crore of which
the minimum contribution of the sponsor should be 40%.
The Mutual Fund should ensure adequate disclosures to
the investors
SEBI can impose suspension of registration in case of
violation of the provision of the SEBI act 1992, to the
regulations.
Restrictions to ensure the investments under an
individual scheme do not exceed 5% of the corpus of any
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companies shares and investments under all schemes do
not exceed 10% of the funds in the shares, debentures
or securities of a single company.
STRUCTURE OF INDIAN MUTUAL FUND
INDUSTRY
The Indian Mutual Fund industry is dominated by the Unit Trust of India
which has a total corpus of 700 Billion collected from over 20 million
investors. The UTI has many funds/ schemes in all categories i.e. Equity,
balanced, income etc. With some being open ended and some being closed
ended. The Unit scheme 1964 commonly referred to as US 64, which is a
balanced fund, is the biggest scheme with a corpus of about 200 billion.
UTI was floated by financial institutions and is governed by a special act of
Parliament. Most of its investors believe that the UTI is government owned
and controlled, which, while legally incorrect, is true for all practical
purposes.
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The second largest category of mutual funds are the ones floated by
nationalized banks. Canbank asset management floated by Canara Bank
and SBI Funds Management floated by State Bank of India are the largest
of these. GIC AMC floated by General Insurance Corporation and Jeevan
Bima Sahayog AMC floated by the LIC are some of the other prominent
ones. The aggregate corpus of the funds managed by this category of
AMCs is around Rs. 150 billion.
The third largest category of mutual funds are the ones floated by the
private sector and by foreign asset management companies. The largest of
these are Birla Capital AMC and Prudential ICICI AMC . The aggregate
corpus of the assets managed by this category of AMCs is about Rs. 60
billion.
Recent Trends in the Mutual Funds Industry
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The most important trend in the mutual fund industry is the aggressive
explosion of the foreign owned mutual funds companies and the decline of
the companies floated by nationalized banks and small private sector
players.
Many nationalized banks got into the mutual funds business in the early
nineties and got of to a good start due to the stock market boom prevailing
then. These banks did not really understand the mutual funds business and
they viewed it as another kind of banking activity. Few hired specialized
staff and generally chose to transfer staff from parent organisations. The
performance of most of the schemes floated by these organisations was not
good. Some schemes had offered guaranteed returns and there parent
organisations had to bail out these AMCs by paying large amount of
money as the difference between the guaranteed and actual returns. The
service levels were also very bad. Most of these AMCs have not been able
to retain staff, float new schemes etc. And it is doubtful whether, barring a
few exceptions, they have serious plans of continuing the activity in a
major way.
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The experience of some of the AMCs floated by the private sector Indian
companies was also very similar. They quickly realized that the AMC
business is a business, which makes money in the long term and requires
deep- pocketed support in the intermediate years. Some have sold out to
foreign owned companies, some have merged with others and there is a
general restructuring going on.
The foreign owned companies have deep pockets and have come here with
the expectations of a long haul. They can be credited with the introduction
of many new practices such as new product innovation, sharp improvement
in the service standards and disclosure, usage of technology , broker
education and support etc. In fact, they have forced the industry to upgrade
itself and service levels of organisations like UTI have improved
dramatically in the in the last few years in response to the competition
provided by these.
For instance, collection figures for April-February 1998-99 show that the
net outflow from UTI has been Rs. 20 billion, while private sector funds
have managed to collect RS. 10 billion.
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Rs. Billion Private Public UTI Total
Mobilized 61 13 121 195Repurchases 12 8 85 106
Redemptions 39 6 56 101
Net 10 -2 -21 -12
Name of the AMC Nature of Ownership
Alliance Capital Private Foreign
Anagram Wellington Private Indian
Apple Private Indian
Birla Capital International Private Indian
Bank of Baroda Banks
Bank of India Banks
Canbank Investment Banks
Cholamandalam Cazenove Private Foreign
Dundee Private Foreign
DSP Merrill Lynch Private Foreign
Escorts Private Indian
First India Private Indian
GIC Institutions
IDBI Investment Institutions
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Indfund Management Ltd. Banks
ING Investment Private ForeignITC Threadneedle Private Foreign
JM Capital Management Ltd. Private Indian
Jardine Fleming Private Foreign
Kotak Mahindra Private Indian
Kothari Pioneer Private Indian
Jeevan Bima Sahayog Institutions
Morgan Stanley Private Foreign
Punjab National Bank Banks
Reliance Capital Private Indian
State Bank of India Banks
Shriram Private Indian
Sun F&C Private Foreign
Sundaram Newton Private Foreign
Tata Private Indian
Credit Capital Private Indian
Templeton Private Foreign
UTI Institutions
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The present marketing strategies of mutual funds can be divided into two
main headings:
Direct marketing
Selling through intermediaries.
Joint Calls
Direct Marketing:
This constitutes 20 percent of the total sales of mutual funds. Some of the
important tools used in this type of selling are:
Personal Selling: In this case the customer support officer of the fund at a
particular branch takes appointment from the potential prospect. Once the
appointment is fixed, the branch officer also called Business Development
Associate (BDA) in some funds then meets the prospect and gives him all
details about the various schemes being offered by his fund. The
conversion rate in this mode of selling is in between 30% - 40%.
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Telemarketing: In this case the emphasis is to inform the people about the
fund. The names and phone numbers of the people are picked at random
from telephone directory. Sometimes people belonging to a particular
profession are also contacted through phone and are then informed about
the fund. Generally the conversion rate in this form of marketing is 15% -
20%.
Direct mail: This one of the most common method followed by all mutual
funds. Addresses of people are picked at random from telephone directory.
The customer support officer (CSO) then mails the literature of the
schemes offered by the fund. The follow up starts after 3 4 days of
mailing the literature. The CSO calls on the people to whom the literature
was mailed. Answers their queries and is generally successful in taking
appointments with those people. It is then the job of BDA to try his best to
convert that prospect into a customer.
Advertisements in newspapers and magazines: The funds regularly
advertise in business newspapers and magazines besides in leading national
dailies. The purpose to keep investors aware about the schemes offered by
the fund and the their performance in recent past.
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Hoardings and Banners: In this case the hoardings and banners of the
fund are put at important locations of the city where the movement of the
people is very high. Generally such hoardings are put near UTI offices in
order to tap people who are at present investing in UTI schemes. The
hoarding and banner generally contains information either about one
particular scheme or brief information about all schemes of fund.
Selling through intermediaries:
Intermediaries contribute towards 80% of the total sales of mutual funds.
These are the people/ distributors who are in direct touch with the
investors. They perform an important role in attracting new customers.
Most of these intermediaries are also involved in selling shares and other
investment instruments. They do a commendable job in convincing
investors to invest in mutual funds. A lot depends on the after sale services
offered by the intermediary to the customer. Customers prefer to work with
those intermediaries who give them right information about the fund and
keep them abreast with the latest changes taking place in the market
especially if they have any bearing on the fund in which they have
invested.
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Regular Meetings with distributors: Most of the funds conduct
monthly/bi-monthly meetings with their distributors. The objective is to
hear their complaints regarding service aspects from funds side and other
queries related to the market situation. Sometimes, special training
programmes are also conducted for the new agents/ distributors. Training
involves giving details about the products of the fund, their present
performance in the market, what the competitors are doing and what they
can do to increase the sales of the fund.
Joint Calls:
This is generally done when the prospect seems to be a high net worth
investor. The BDA and the agent (who is located close to the HNIs
residence or area of operation) together visit the prospect and brief him
about the fund. The conversion rate is very high in this situation, generally,
around 60%. Both the fund and the agent provide even after sale services in
this particular case.
Meetings with HNIs: This is a special feature of all the funds. Whenever
a top official visits a particular branch office, he devotes atleast one to two
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hours in meting with the HNIs of that particular area. This generally
develops a faith among the HNIs towards the fund.
MARKETING OF FUNDS: CHALLENGES AND OPPORTUNITIES
When we consider marketing, we have to see the issues in totality, because
we cannot judge an elephant by its trunk or by its tail but we have to see it
in its totality. When we say marketing of mutual funds, it means, includes
and encompasses the following aspects:
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Assessing of investors needs and market research;
Responding to investors needs;
Product designing;
Studying the macro environment;
Timing of the launch of the product;
Choosing the distribution network;
Finalising strategies for publicity and advertisement;
Preparing offer documents and other literature;
Getting feedback about sales;
Studying performance indicators about fund performance like NAV;
Sending certificates in time and other after sales activities;
Honouring the commitments made for redemptions and repurchase;
Paying dividends and other entitlements;
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Creating positive image about the fund and changing the nature of the
market itself.
The above are the aspects of marketing of mutual funds, in totality. Even if
there is a single weak-link among the factors which are mentioned above,
no mutual fund can successfully market its funds.
Widening, Broadening and Deepening the Markets
There are certain issues that are directly linked with the marketing of
mutual funds, the first of which is widening, broadening and deepening of
the market for the mutual fund products. Consider the geographical spread
of the investors in the mutual fund industry. Almost 80% of the funds are
mobilised from less than 10 centres in the country. In fact there are only
around 35 centres in the country, which account for almost 95% of the
funds mobilised. Considering the vast nature of this country, the first
priority is that the geographic spread has to be widened and the market has
to be deepened. Secondly, the mutual funds must try to spread their wings
not only within the country, but also outside the country.
A. Markets in Rural and Semi-Urban Areas
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There exists a large investor base in rural and semi-urban areas, having a
population of about one lakh, which normally has access to only post office
savings and bank deposits. This is the single largest untapped market for
mutual funds in India.
Rural marketing, unlike the marketing of mutual funds in the metros and
urban areas, would require a completely different strategy, and different
means of communication to the target customer. Typically, investors in the
rural and semi-urban areas are not well educated and are inadequately
exposed to the capital market mechanisms. Therefore, more emphasis has
to be given to the electronic media and other forms of publicity such as
wall paintings, hoardings, and educational films. It is also important to
utilise the services of local intermediaries like gram sevaks, postmasters,
school teachers, agricultural co-operative societies and rural banks. It
would therefore be more expensive to market mutual funds in such markets
than marketing in the cities.
The mutual fund industry can collectively undertake this job of creating
awareness among the rural population about the mutual funds as a new
form of savings , translate that awareness into increased fund mobilsation.
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The retail distribution network, comprising of the district representatives
and the collection centres can be best utilised to create such awareness and
expand the market. Simplification of literature in regional languages, group
meetings in these semi-urban and rural areas, visits by mobile vans with
some audio visual aids and the like, should help develop these markets. In
other words, the untapped markets in the country should ideally be the first
thing that the mutual funds in India should endeavour to tap, not entirely
relying upon the investors in the 35 odd cities of the country. By
concentrating on these areas, the investor base will get more broad based.
Once the semi0urban population gets acquainted with the concept of
mutual funds, it will naturally give the much needed stability to the market.
B. Overseas Markets
The second aspect with respect to the widening and deepening the market
is expanding the overseas investor base. A target group with large
potential, which can be tapped is non-resident Indians. If offered after sales
services of international standard, reasonable return and easy access to
information, NRIs are willing to invest in Indian mutual funds. The
expansion of the distribution network and quick dissemination of
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information, coupled with prompt and timely service, efficient collection
and remittance mechanism, will play an important role in mobilising and
retaining these funds. NRIs will also require a continuous presence in their
market, because that generates trust and confidence, which translates into
sustained mobilisation of funds.
PRODUCT INNOVATION AND VARIETY
A. Investor Preferences
The challenge for the mutual funds is in the tailoring the right products that
will help mobilising savings by targeting investors needs. It is necessary
that the common investor understands very clearly and loudly the salient
features of funds, and distinguishes one fund from the another. The funds
that are being launched today are more or less look-alikes, or plain vanilla
funds, and not necessarily designed to take into account the investors
varying needs.
The Indian investor is essentially risk averse and is more passive than
active. He is not interested in frequently changing his portfolio, but is
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satisfied with safety and reasonable returns. Importantly, he understands
more by emotions and sentiments rather than a quantitative comparison of
funds performance with respect to an index. Mere growth prospects, in an
uncertain market, are not attractive to him. He prefers one bird in the hand
to two in bush, and is happy if assured a rate of reasonable return that he
will get on his investment. The expectations of a typical investor, in order
of preference are the safety of funds, reasonable return and liquidity.
The investor is ready to invest his money over a long periods, provided
there is a purpose attached to it which is linked to his social needs and
therefore appeals to his sentiments and emotions. That purpose may be his
childs education and career development, medical expenses, health care
after retirement, or the need for steady and sure income after retirement. In
a country where social security and social insurance are conspicuous more
by their absence, mutual funds can pool their resources together and try to
mobilise funds to meet some of the social needs of the society.
B. Product Innovations
With the debt market now getting developed, mutual funds are tapping the
investors who require steady income with safety, by floating funds that are
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designed to primarily have debt instruments in their portfolio. The other
area where mutual funds are concentrating is the money market mutual
funds, sectoral funds, index funds, gilt funds besides equity funds.
The industry can also design separate funds to attract semi-urban and rural
investors, keeping their seasonal requirements in mind for harvest seasons,
festival seasons, sowing seasons, etc.
DISTRIBUTION NETWORK
Among the competitors to the mutual fund industry, Life Insurance
Corporation with its dedicated sales force is offering insurance products;
banks with their friendly neighbourhood presence offer the advantage of
extensive network; finance companies with their hefty upfront incentives
offer higher returns; shares provided the market is moving favourably
also attract direct investments from retail investors. It is against this
background that the merits and demerits of the alternative methods of
distribution have to be studied.
Retail through agents
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The alternative distribution channels that are available are selling, or using
lead managers and brokers along with sub-brokers, for selling units. The
experience of UTI has been that, if necessary motivation and incentive is
provided to the retailer agents, they are likely to be more successful than
the lead managers. This is because, there is a sense of loyalty amongst
agents, in anticipation of getting continuous business throughout the year,
and the trust and credibility that has been generated or will be generated by
being loyal to one institution. Statistics reveal that the wastage ratio of
application forms in the lead manager concept, is much higher than in the
retail agency system. Savings in advertisement and publicity expenses is
also affected, as the target of communication is restricted to a few group of
individuals, since the agent will function as a facilitator, informer and
educator. The reduced cost benefit will ultimately accrue to the investor in
the form of higher returns.
In such a system, one achieves brand loyalty through continuous
interaction between agents and investors. Building a team of agents and
other distribution network such as distribution and collecting agents and
franchise offices, will provide the investor the opportunity of having
continuous interaction and contact with the mutual fund. Therefore, retail
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distribution through the agents is a preferred alternative for distributing
mutual fund products.
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ADVERTISING AND SALES PROMOTION
By their very nature, mutual funds require higher advertisement and sales
promotion expenses than any consumer product offering measurable
performance. Different kinds of advertising and sales promotion exercises
are required to serve the needs of different classes of investors. For
instance, an aggressive pushmarketing strategy is required for retail
markets, where investors are not adequately aware of the product and do
not have specialised skill in financial market, in contrast with
pullmarketing strategies for the wholesale market.
There are certain issues with reference to advertisement, publicity literature
and offer documents, which deserve attention. Most of the mutual fund
advertisements look similar, focussing on scheme features, returns and
incentives. An investor exposed to the increasing number of mutual fund
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products finds that all the available brands are rather identical, and cannot
appreciate any distinction.
The present form of application, brochures and other literature is generally
lengthy, cumbersome and at times complicated leading to higher emphasis
on advertisement. One of the limiting factors is the regulatory framework
governing advertisements of mutual fund products. For instance, in the
offer documents, mutual funds are required to mention the fund objectives
in clear terms. Immediately thereafter, the first risk factor that has to be
mentioned is that there is no certainity whether the objectives of the fund
will be achieved or not. Some more relaxations in these may facilitate
bringing more novelty in advertisements, within a broad framework,
without luring investors through false promises, and will certainly improve
the situation.
Another hurdle is the statutory disclaimer required to be carried along with
every advertisement. Mutual funds have to provide risk factors.
Under the present mutual fund regulations, a prior approval by SEBI is a
must before a mutual fund can launch its fund. In the regulation itself, a
period of one month has been provided. But in a months time, perhaps the
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situation may so change, that the timing of launch gets affected. The
requirement for getting approval, which normally takes about 2 months
time, defeats the purpose for which the fund was designed also.
QUALITY OF SERVICE This industry primarily sells quality of services,
given that the performance cannot be promised. It is with this attribute
along with procedural simplicity, that the fund gradually builds its brand
and its class of loyal investors. The quality of services are broadly
categorised as:
Timely services after the sale of the units; and
Continuous reporting of investment performance.
Mutual fund managers must give due attention and evaluate their
performance on each front. They may also consider an option of
conducting a service audit for controlling and improving the quality of
service.
MARKET RESEARCH Investment in mutual fund is not a one-time
activity. It is a continuous activity. The same investor, if satisfied, will
come to the fund again and again. When the investor sends his application,
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it is not only an application, but it also contains vital information. Most of
this information if tabulated and analysed, would provide important
insights into investor needs, preferences and behaviour and enables us to
target customers need more accurately, to achieve better penetration,
deeper loyalty and reduced costs. It is in this context that direct marketing
will assume increased importance. Knowing the customer thoroughly is of
utmost importance. Unlike the consumer goods industry, it is not possible
for mutual fund industry to test market and have pilot projects before
launch. At the same time, focusing and concentrating on a particular
geographic area where the fund has a strong presence and proven
marketing network, can help reduce network, can help reduce issue
expenses and ultimately translate into higher returns for the investor. Very
little research on investor preference is available, but the industry can
collectively have a data bank, and share the information for appropriate
use.
Market Segmentation Different segments of the market have different risk-
return criteria, on the basis of which they take investment decisions. Not
only that, in a particular segment also there could be different sub-segments
asking for yet different risk-return attributes, and differential preference for
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various investment attributes of financial product. different investment
attributes an investor expects in a financial product are:
Liquidity,
Capital appreciation,
Safety of principal,
Tax treatment,
Dividend or interest income,
Regulatory restrictions,
Time period for investment, etc.
On the basis of these attributes the mutual fund market may be broadly
segmented into five main segments as under.
1) Retail Segment
This segment characterizes large number of participants but low individual
volumes. It consists of individuals, Hindu Undivided Families, and firms. It
may be further sub-divided into:
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i. Salaried class people;
ii. Retired people;
iii. Businessmen and firms having occasional surpluses;
iv. HUFs for long term investment purpose.
These may be further classified on the basis of their income levels. It has
been observed that prospects in different classes of income levels have
different patterns of preferences of investment. Similarly, the investment
preferences for urban and rural prospects would differ and therefore the
strategies for tapping this segment would differ on the basis of differential
life style, value and ethics, social environment, media habits, and nature of
work. Broadly, this class requires security of the principal, liquidity, and
regular income more than capital appreciation. It lacks specialised
investment skills in financial markets and highly susceptible to mob
behaviour. The marketing strategy involving indirect selling through
agency network and creating awareness through appropriate media would
be more effective in this segment.
2) Institutional Segment
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This segment characterises less number of participants, and large individual
volumes. It consists of banks, public sector units, financial institutions,
foreign institutional investors, insurance corporations, provident and
pension funds. This class normally looks for more specialised professional
investment skills of the fund managers and expects a structured product
than a ready-made product. The tax features and regulatory restrictions are
the vital considerations in their investment decisions. Each class of
participants, such as banks, provides a niche to the fund managers in this
segment.It requires more of a personalised and direct marketing to sustain
and increase volumes.
3) Trusts
This is a highly regulated, high volumes segment. It consists of various
types of trusts, namely, charitable trusts, religious trust, educational trust,
family trust, social trust, etc. each with different objectives. Its basic
investment need would be safety of the principal, regular income and hedge
against inflation rather than liquidity and capital appreciation. This class
offers vast potential to the fund managers, if the regulators relax guidelines
and allow the trusts to invest freely in mutual funds.
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4) Non-Resident Indians
This segment consists of very risk sensitive participants, at times referred
as fair weather friends. They need the highest cover against political and
exchange risk. They normally prefer easy exit with repatriation of income
and principal. They also hold a strategic importance as they bring in crucial
foreign exchange a crucial input for developing country like ours.
Marketing to this segment requires special kind of products for groups of
foreign countries depending upon the provisions of tax treaties. The range
of suitable products are required to design to divert the funds flowing into
bank accounts.
5) Corporates
Generally, the investment need of this segment is to park their occasional
surplus funds that earn returns more than what they have to pay on account
of holding them. Alternatively, they also get surplus fund due to the
seasonality of the business, which typically become due for the payment
within a year or quarter or even a month. They need short term parking
place for their fund,. This segment offers a vast potential to specialised
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money market managers. Given the relaxation in the regulatory guidelines,
fund managers are expected design products to this segment.
Thus, each segment and sub-segment have their own risk return
preferences forming niches in the market. Mutual funds managers have to
analyse in detail the intrinsic needs of the prospects and design a variety of
suitable products for them. Not only that, the products are also required to
be marketed through appropriately different marketing strategies.
ADS THE WAYIncreasing sales have given mutual fund promoters the
budget to spend more on advertising, which has further boosted sales
The Atheists are turning believers. Mutual funds, private sector ones in
particular, who had written off advertising as the ultimate waste of
money have nearly tripled their press media spend from Rs.12.20 crore in
the period January to April 1998 to Rs. 31.6 crore in January to April 1999,
according to data supplied by Prudential ICICI AMC (PIAMC) and
sourced from ORG-MARG.
Whats interesting is that in this period the share of the private sector
mutual funds in the categorys total media spending has surged from 20
percent to 52 percent. This can be attributed to private sector funds (given
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the data available with the Association of Mutual Funds of India) seeing an
increase share of net inflows relative to the bank-sponsored counterparts in
the public sector.
For proof, take a look at some figures. PIAMC which spent Rs. 3 crore
on advertising in the entire fiscal year 1998-99 has spent the same amount
during the first four months of the current fiscal itself. Kothari Pioneer
Mutual Fund which spent a negligible amount on advertising in 1997-98
and Rs.50 lakhs in 1998-99 has already spent Rs. 50 lakhs in the first
quarter.
Birla Mutual fund, which spent Rs. 1 crore on advertising in the year 1998-
99 plans to double that amount.
Clearly advertising types have something to cheer about. But whats caused
this sudden attitudinal shift towards advertising? According to experts,
funds are being pushed into advertising more by intermediaries like banks
who are reluctant to sell a product whose name is unfamiliar to investor.
Besides, since more open-ended schemes are now available, some form of
ongoing support to keep sales booming has been deemed necessary by the
funds.
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In the words of Mr. Rajiv Vij, vice president marketing, Templeton Asset
Management (India) Pvt. Ltd., The industry has discovered that
advertising in the changed climate today, when investors are most receptive
to mutual funds, can perk up sales by anywhere between 20-40
percent.PIAMC managing director Ajay Srinivasan gives his rationale for
stepping up marketing spends: we believe that the brand is an important
part of the consumers decision to invest in a category that is not yet clearly
understood by people. According to the mutual fund marketers,
advertising helps bring recall when consumers are looking at investment
opportunities. Srinivasan says that tactical advertising has raised PIAMCs
brand awareness from five percent in June 1993 to 34 percent now, as per a
recent IMRB survey.
Advertising backed by an integrated marketing and communication
campaign designed to attract investors with long term prospective has
helped the fund post a redemption-to-sales ratio of just about five percent
as compared to 20-30 percent for the industry on an average.
But what mode of advertising do these funds choose? To sell the
category, avers VIJ, mass media is more effective because one needs to
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target a large segment of the population. Mutual Fund marketers feel that
since the category is information centric, press is the best medium to get
across ones message. Within the print media, most marketers feel that a
combination of leading mainline and financial newspapers complemented
by finance/ business magazines, with relevant thematic appeal and editorial
content are the perfect mix.
Direct mail is another medium, which some funds have successfully used.
But rather than sending out mailers to all and sundry, there is a need for
appropriate targeting.
Educational seminars are the final leg in the marketing and communication
process. In these, investors conditioned by advertising and hooked by an
interesting mailer can have lingering doubts clarified.
Attractive point of purchase (POP) material can also help.
Another very successful media niche, which has been exploited to the hilt
by funds, is intermediary magazines and newsletters. Besides the low costs
of advertising in these newsletters, these publications circulate to those
who are looking for investment opportunities and thus represent an
extremely lucrative target segment.
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Advertising content by most of the funds too has undergone a marked
change from concept-selling ads dispelling myths, to selling specific
schemes that meet defined objectives/ goals.
But why is advertising suddenly working for mutual funds when it doesnt
seem to have made a difference earlier? A sustained marketing strategy
instead of a few, scrappy ads is now seen to be the key to investor demand.
According to Birla Sun Life AMC chief market development officer
N.K.Sharma, advertising serves as a reminder complementing a sales push
by the distributor. Since the distributor wasnt ready in earlier years,
advertising then, didnt work,he says. Brand building, is a long-term
exercise. Just like mutual funds advocate that investors take a long-term
approach to investing, similarly funds need to take a long-term approach to
brand building.
Fund marketers and industry observers however, caution against the danger
of selling the product for the wrong reasons. Funds need to focus on
sustainable communication. They need to build brands that strike a chord
with investors by relating to their concerns rather than selling flavour-of-
the-month style. The winning formula as industry watchers put it is the
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troika of performance, service and trust for meeting long term needs or
goals.
Inspired Marketing will help Mutual Funds walk away with the bank
Deposits
Bankers better watch out! The Indian mutual fund industry will soon start
relieving the banking system of its prized deposits.
Innovative distribution, marketing and aggressive concept selling will drive
savings into the lap of the Indian Mutual Fund industry in the next
millenium, fund managers predicted at the Second Economic Times
Roundtable on mutual funds held last week.
Fund chiefs predicted that ease of transactions, thanks to technology and
increased awareness, would lead to more investors putting their money into
mutual funds. The day was not far , they said , when small savings account
s too began moving into mutual funds.
Significantly, fund chiefs were unanimous that the credibility gap which
the industry suffered for the past few years did not exist any more. All the
fund chiefs were unanimous that performance, service and support were all
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imperative for growth. Performance, transparency and after sales service
and genuine retail investor interest as opposed to hot corporate money, an
important contributor to many mutual fund schemes, will drive the industry
growth. Performance, transparency, after sales customer service and
genuine retail investor interest are opposed to hot corporate money, an
important contributor to many mutual fund schemes, will drive the industry
growth, Tata Mutual Fund chief K.N. Atmaramani said. On the state of
market in general, fund chiefs attempted to allay fears that an overvalued
market may pose hurdles to stock picking.
According to them, while investors may feel that information technology,
pharmaceuticals and consumer goods stocks - or the BSE Sensex for that
matter might have peaked, new opportunities are opening up in areas like
retail, healthcare and even in internet business.
Fund chiefs also made a case for the code to prevent mutual funds from
projecting short-term gains in an attempt to attract investors into their
schemes. They were of the view that, Mutual Funds have to agree to
present performances in an annualised fashion, over a longer period. The
industry as a whole should standardise its performance.
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HEAR WHAT THE CZARS TELL: DISTRIBUTE WELL & ALLS
WELL 1. M.M. Kapur ( Executive Director, UTI)
The MF industry is gradually breaking the walls of the banking industry.
It is trying to make products like government securities available in the
retail market, via government securities or gilt funds. Even savings bank
accounts, where investors earns 3-4 percent, have been converted into a
retail product via money market MFs the best part is that even confidence
levels of investors in MFs has been gradually improving.
2. Ajay Kaul ( President, Alliance Capital )
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Not all funds in the bank time deposits or post office belong to individuals.
However , even if you assume that the in the next four-five years MFs can
tap 10 percent of these, the assets under management will double. Second,
MFs could be a good substitute for all other financial instruments available
in the market. Funds are quite safe because of the present regulations and
are transparent. If you consider all the features of competing instruments,
MF product would easily be a substitute for all this. When one combines all
these characteristics, one can definitely sell the product. What one requires
is Concept Selling.
3. Ravi Malhotra ( Chief Investment Officer, Kothari Pioneer )
The professional distributors are keeping a check on the fund houses and
are setting client expectations at the right level. This augurs well for the
industry. Fund selling has improved considerably from earlier where
nobody could distinguish between an equity and fixed income fund.
Technology is going to make a big difference down the road both in
terms of servicing as well as a fundamental change in the business
model. There is a whole new distribution channel opened up over the last
two to three years where most international banks, private sector banks
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have started distributing funds. That can give you an idea of what the
trends are and what the potentials.
The US mutual fund industry in 1997 was about $50 billion, we are talking
about $18-19 Billion in India. In 22 odd years in the U.S.A, the industry
has crossed $4 trillion and has overtaken banking assets.
4. K.N.Atmaramani ( Managing Director, Tata Mutual Fund )
There are three important points: (a) Performance Comparison, (b)
Internet marketing and (c) Gone are the days big names would sell.
Competition and competitive edge of getting closer to the investor and
attracting large volumes of retail investors will be the key determinants.
5. Gul Teckchandani ( Chief Investment Officer, Sun F&C Mutual
Fund )
Service standards will become critical. Performance obviously is one of
the legs of the package. I dont think people are willing to leave their
money where they cant really take it out.
6. Dileep Madgavkar ( Sr. VP Investments, Prudential ICICI )
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While we have got increasing professionalism in distribution business,
we have to guard as the geographical reach increases against distributors
themselves in their enthusiasm to sell over-committing and over-
promising.
7. Bharat Shah ( Chief Investment Officer, Birla Mutual Fund )
The question is who has the ability to provide competitive solutions to
fulfill the needs of the customer and the investor. In terms of range and
depth of solution providing capability and transparency and ability to
package products, funds are far superior than banks. The number of people
transacting has gone up five, six times .And even if people are pulling out
the money, it is not a bad thing because the investor tests the efficiency of
the system.
How do we incentivise and motivate the distribution channel to make it
more productive. The non traditional channels like e-commerce or internet
driven models will need to be tested for robustness.
Analytics of the customer is again very important and today we have some
idea. Using psychographics and data mining techniques to provide
customised and targeted solutions to customer needs.
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How do we reach the more mofusssil areas? Costing for such an exercise
needs to be worked out as nobody is a good Samaritan to do it for you .
This is why fund delivery today is largely at the upper retail segment.
Handling thousands and thousands of customers: The cost of handling
these customers and providing services doesnt warrants your trying to
address those needs . Hoe do we ensu1`re that we have the capability to
deal with them if it is proved worthwhile.
BIRLA MUTUAL FUND
Birla Mutual Fund offers Investment Schemes, which aim to provide
superior returns. The funds offered are:
Birla Advantage Fund The Fund is a growth scheme and aims primarily at
capital appreciation. Given the expectation of substantial growth of the
Indian economy (and hence, for Indian capital markets as well), normally
at least 70% of the funds will be invested in equities or related instruments.
The balance would be invested in debt and money market instruments,
encompassing both short-term and long-term considerations. In a situation
of extreme volatility in equity markets, the equity allocation may be
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reduced below 70%, in favour of debt instruments, money market
instruments or cash.
Short-term debt considerations for this open-end scheme include
maintaining an adequate float to meet anticipated levels of redemptions,
expenses, and other liquidity needs. A portion of funds may also be kept in
cash or cash equivalents.
Investments will be in listed securities from all Indian Stock Exchange
including the National Stock Exchange and the OTC Exchange of India.
Investments may also be made in unlisted transferable securities. The
securities would cover secondary market purchases, Initial Public Offers,
(IPOs), other public offers, placements, rights offers, negotiated deals, etc.
Investment policies of the Fund shall reflect restrictions for mutual fund
investments established by SEBI. In addition, certain investment
parameters (such as limits on portfolio exposure to sectors, industries,
business houses, etc.) may be adopted internally by BCIAMC, and
amended from time to time, to ensure appropriate diversification of the
Fund.
Birla Income Plus
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The Scheme is an income scheme and aims primarily of the steady
generation of income. Considering this, normally about 70% of the funds
will be invested in fixed-income securities that encompass both short-term
and long-term considerations. In the current scenario such debt
instruments, rated investment grade by Credit rating agencies, are giving a
yield of about 18 percent per annum. Since long-term reasonable growth of
capital is also desired, the balance in excess of the fixed-income allocation
would be invested in equities or related instruments. In a situation of
extreme uncertainty in any of the markets, the respective fixed income or
equity allocations may be varied significantly.
Under normal circumstances, it is expected that investing in long-term debt
instruments of good quality will enable the Fund to earn competitively high
yields for a sustained period. Short-term debt considerations for this open-
end Scheme include maintaining an adequate float to meet anticipated
levels of redemptions, expenses, and other liquidity needs. A portion of
funds may also be kept in cash or cash equivalents.
Fixed-income investments may be in listed or unlisted instruments, as per
SEBI guidelines, investments will be in listed securities from any of the
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Indian Stock Exchange including the National Stock Exchange and the
OTC Exchange of India. Investments may also be made in unlisted
transferable securities. The securities, both fixed-income and equities,
would cover secondary market purchases, Initial Public Offers (IPOs),
other public offers, placements, rights offers, negotiated deals, etc.
Investment policies of the Fund shall reflect restrictions for mutual fund
investments established by SEBI. In addition, certain investment
parameters (such as limits on portfolio exposure to sectors, industries,
business houses, etc.) may be adopted internally by BCIAMC, and
amended from time to time, to ensure appropriate diversification of the
portfolio.
Birla Cash Plus
The objective of the scheme is to provide reasonable returns, at a high level
of safety and liquidity through judicious investments in high-quality debt
and money market instruments.
The Scheme will invest the entire net assets in fixed income and money
market securities with flexibility to invest in the whole spectrum of debt
and money market instruments. Depending upon liquidity needs and other
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considerations, the Scheme may also hold cash or cash equivalents
including call money.
The endeavour will be to optimise returns while providing liquidity and
safety.
The investments shall be made in various securities including treasury bills
and other Government securities, PSU bonds, listed, and unlisted corporate
papers including non-convertible debentures and bonds, commercial paper,
commercial bills arising out of genuine trade/ commercial transactions and
accepted/ co-accepted by banks, certificates of deposit and other such
instruments, permitted by SEBI from time to time.
India Advantage Fund
This is an Offshore India Fund. The Fund's principal investment objective
is to achieve long-term growth of capital through a diversified, research-
based approach to investment in Indian securities. The majority of the
Fund's assets will normally be invested in listed equities or equity-based
instruments. A smaller proportion will be invested in unlisted equities,
listed or unlisted debentures or bonds issued by private or public sector
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corporations, and in inter-bank money market instruments, cash and cash
equivalents.
Birla Taxplan '98
An attractive equity linked saving scheme (ELSS) from Birla Mutual Fund.
Get a rebate u/s 88 of the Income Tax Act, 1961 @ 20% of any investment
upto Rs. 10,000/- Minimum amount Rs. 500/- and in multiple thereof. Also
available is full exemption from capital gain tax u/s 54 EA & EB of the
Income Tax Act. Now is the best time for the scheme since blue chip
equities are available at attractive valuations.
Birla Taxplan
Following the sterling performance of Birla Taxplan '98, Birla Mutual
Fund, has launched India's first open-end, equity linked (ELSS), tax saving
scheme, Birla Taxplan. This is the first scheme launched under revised
notification from the Central Board of Direct Taxes, which has permitted
the ELSS scheme to be launched as an open-end scheme. The scheme had
its Initial Public Offer on Saturday, the 13th February 1999 and has re-
opened for subscriptions from Monday, the 15th February 1999. The
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minimum investment is Rs.500 and in multiples thereof without any limit
on maximum investment.
Birla Mutual Fund offers two types of plans:
Systematic Investment Plan
Systematic Investment Plan is a way to a good savings habit. Post-dated
cheques are invested in Birla Income Plus/Birla Advantage Fund on
monthly or quarterly basis. You can invest in monthly installment as per
your convenience, like in a recurring deposit scheme.
Regular Withdrawal Plan
It's an ideal way to get regular returns Post dated cheques are issued to the
Birla Income Plus (BIP) investors on monthly, bi-monthly or quarterly
basis. You can have the monthly withdrawals as per your requirements.
KOTHARI PIONEER MUTUAL FUND
KP Blue-chip
Fund Type: Steady Growth, Open-end fund
Options: Growth and Dividend Plans
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Blue-chip Fund is a steady growth scheme that aims at providing growth of
capital through investments in large cap blue-chip shares.
Launched in December 93 as a 3-year closed end fund, Blue-chip Fund is
now continued as an open end fund from January 97,when a dividend of
20% was declared. Blue-chip Fund has recently declared a tax-free
dividend of 35% in July 99 in its dividend plan. Ever since its inception,
Blue-chip Fund has been ranked consistently among Indias top performing
fund.
Fund Suitability: For investors seeking steady growth in the medium to
long term through investments in shares of large well established blue-chip
companies. Ideal for a time horizon of 3 to 5 years.
K.P. Prima
Fund Type: Aggressive, open-end fund
Options: Growth and Dividend Plan
Prima Fund has the distinction of being Indias first truly authentic
open-end fund. Launched in October 1993, the fund seeks to provide
aggressive growth through investments in mid and small cap shares.
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a portfolio of debt and money market instruments. Ideal for a timehorizon
of 6 months to 3 years.
K.P.Infotech
Fund Type: Open-end fund investing primarily in Infotech sector. Infotech
Fund is India's first fund dedicated to the fast growing information
technology sector. Launched in August 22, 1998 the fund has already given
a return of over 249.34 since inception. Infotech Fund has been ranked as
the best performing open end equity scheme in the country by
Micropal.The fund has also declared a 40% tax-free dividend (highest ever
by a mutual fund in India) in October 1999.
Fund Suitability: For investors seeking above normal capital appreciation
through investments in high quality, fast growing companies in the
Infotech sector.
SUN F&C MUTUAL FUND
SUN F&C Value Fund
Fund appreciated by 43.96% from 01/01/99 30/06/99
FUND MANAGERS REVIEW
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The quarter that went by proved a mixed bag for the markets. The quarter
started with the government falling and in turn pulling down the markets
15%. The healthy economic numbers, however, helped the markets recover
smartly and gain almost 30% in less than two months. However, the gains
were limited by the escalating tensions on the border that overshadowed
the fundamentals. Since then the markets have remained in a trading zone
and fluctuated with the news/rumours about the ongoing conflict on the
Kashmir front. We believe that the markets will remain range-bound till the
time the Indo-Pak stand off reaches some decisive conclusion.
Once again the results declared for the full year by the three sectors -
information technology (IT), pharmaceuticals and fast moving consumer
goods (FMCG) - where we remain over-weight, have been above
expectations. The IT sector has not participated in the recent rally despite
the excellent results. This is largely due to concerns that the industry is too
dependent on Year 2000 business. We believe this is unfounded and the
IT companies will continue to log a healthy growth during the next couple
of years. Thus we continue to remain overweight in this sector.
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Due to above reason, Value Funds NAV lost 8.55% and under performed
the benchmark BSE SENSEX and BSE-200 by 19.27% and 16.33%
respectively, during the last quarter. However, for the calendar year to date,
the Fund has appreciated by 43.96% and has outperformed the BSE
SENSEX and BSE-200 by 8.66% and 13.73%, respectively
SUN F&C MONEY VALUE FUND
DEBT FUND: SUN F&C Money Value Fund
Returns in Bond Option: 13% per annum (from 10/01/99 30/06/99)
Fund Managers Review
Interest rates remained depressed throughout the quarter despite the
government repeatedly tapping the money markets to meet its huge
borrowing requirement. Some large corporate borrowers also tapped the
wholesale primary debt market. The major reason for the dip in interest
rates could be attributed to the sluggish credit off-take from the banking
system. The excess liquidity in the system and the low inflation rate of 3%
on the back of a good agricultural crop reduced the difference between the
interest rates on government and corporate debt securities. The foreign
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exchange market was stable despite a steady depreciation in the rupee as a
fall-out of the border conflict at Kargil.
The fund continued its focus on safety and liquidity. The investment has
been done in high quality corporate debentures and institutional bonds. In
the last quarter, the fund has done well with 13.45% p.a. return in the Bond
Option and 8.71% p.a. return in the Liquid option.
Alliance Capital Asset Management (I)Pvt. Ltd.
Brief Introduction
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Alliance Capital Asset Management (India) Pvt. Ltd. (ACAM) isan affiliate of Alliance Capital Management L.P., a leading globalinvestment adviser based in New York, USA. Since 1993, AllianceCapital has maintained a presence in India when it was registeredas a Foreign Institutional Investor (FII). As an FII, Alliance Capitallaunched an "off-shore" fund, the India Liberalization Fund inDecember 1993. The Indian Asset Management Company, ACAM,has launched ten open-ended schemes, each designed to meet aspecific investment objective. ACAM is headquartered in Mumbaiand has sales offices in New Delhi, Pune, Bangalore, Chennai,
Calcutta, Hyderabad and Ahmedabad. The company has built areputation as a professional asset manager, focussed on providinginvestors superior investment performance and quality servicing.Besides the offering and management of collective investmentschemes the Asset Management Company may undertake activitiesin the nature of management and advisory services to offshorefunds, pension funds, provident funds, venture capital funds,management of insurance funds and financial consultancy andexchange of research on commercial basis.
No. of schemes 11
No. of schemes including options 32
Equity Schemes 9
Debt Schemes 15
Short term debt Schemes 2
Equity & Debt 2
Gilt Fund 4
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Key Personnel
Dave William (Chairman), John DCarifa (President), Karan Trehan, Ajay
Piramal, James J. Posch, Prakash Shah,Vineet Udeshie, Sameer C. Arora(CIO), Nikhil Johri (CEO)
Corpus under
management2881.446 Crs. as on Sep 28 , 2001
Fund Managers Samir Arora, Vineet Udeshie .
Open Ended Schemes
Scheme Name Date30Days
91Days
1 Year 3 YearFundSize( in Cr.)
FundSize Date
Alliance 95- Dividend10/12/01
-5.91 -11.49 -24.35 28270.3245788
9/28/01
Alliance 95- Growth10/12/01
-5.89 -11.51 -27.99 22.78270.3245788
9/28/01
Alliance Basic Industries- Dividend
10/12/01
-3.03 -9.9 -6.23 NA21.4846953
9/28/01
Alliance Basic Industries 10/12/ -3.15 -9.9 -6.23 NA 21.4846 9/28/01
http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC001http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC006http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC019http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC019http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC016http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC001http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC006http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC019http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC019http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC0168/8/2019 An Indepth Analysis of Mutual Fund Industry
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- Growth 01 953
Alliance Buy India Fund- Dividend
10/12/01
-6.21 -5.23 -22.43 NA41.851253
9/28/01
Alliance Buy India Fund- Growth
10/12/01
-6.21 -5.23 -22.56 NA41.851253
9/28/01
Alliance Capital TaxRelief 96
10/12/01
-5.94 -12.97 -36.23 51.5911.7230717
9/28/01
Alliance Cash Manager -Dividend
NA NA NA NA615.0818644
9/28/01
Alliance Cash Manager -Growth
10/12/01
0.61 1.95 8.62 9.23 615.0818644
9/28/01
Alliance Equity Fund -Dividend
10/12/01
-9.46 -18.82 -41.03 36.16269.3476143
9/28/01
Alliance Equity Fund -Growth 10/12/01 -9.12 -18.5 -42.1 22.69 269.3476143 9/28/01
Alliance GovtSecurities Fund LT -
10/12/01
0.12 1.96 14.72 NA 12.176968
9/28/01
http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC016http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC017http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC017http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC021http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC021http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC007http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC007http://opt/scribd/conversion/tmp/scratch2434/fund_facts_rpt.asp?scheme=AC022http://opt/scribd/conversion/tmp/scrat