My Project Report Final Copy

8/14/2019 My Project Report Final Copy

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PROJECT REPORT

ON

Wealth Management ServicesA Catering Tool for Investor

An Analysis of Existing

And

Potential Market

At

Centre for management TechnologyKnowledge Park-1 Gr. Noida

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TABLE OF CONTENTS

Seria

l No.

1

2

3

4

5

6

7

8

9

10

11

12

13

Particulars

Preface

Acknowledgement

Objective of training

Executive Summary

My Project Objective

Company Profile

About Wealth Management Service

Market Segmentation

Core Element of Wealth Management Services

Key Functional Area of Wealth Management Services

Key Challenge Areas

Solution Frame Work

Consumer Point of View: Wealth Management

Page No.

3

4

5

6

7

8

12

19

21

23

27

30

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14

15

16

17

18

19

20

21

22

23

24

Wealth Management Practice Orientation Overview

Expanding the wealth management canvas

Revenue drivers

Concept of Assets Classes

Reliance Money Wealth Management Service

Advantage & Limitation

Research Methodology

Data Analysis & Interpretation

Findings & Suggestion

Conclusion

Annexure(Questionnaire)

35

39

41

42

47

65

75

77

81

103

104

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Preface

Private sector is one of the fastest growing sectors in the country. After

the Liberalization the Private industry still holds vast opportunities for

young and experienced professionals. After Privatization, the PSU has

been making efforts to improve efficiency and customer services. Among

the private Brokage House player Reliance Money is the key player.

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It is a matter of great satisfaction and pleasure to present this report on

Analysis of Wealth Management taking Reliance Money as basis. I take this

opportunity to owe my thanks to all those involved in my training.

We owe a debt of gratitude to many people who helped us to complete this

thesis. We would like to acknowledge the help of all. First of all we would like to

express our deepest Acknowledgement to our supervisor, Professor Mr. Rajnish

Mallick for his invaluable advice and recommendations and also to Mr. Anrudh

Ghosh (Faculty of Finance), for her preparedness to answer any pressing question.

This project report could not have been completed without the guidance & their

support to provide such opportunity as to do training with that organization. I

express my gratitude to my esteemed guide,Mr. Annant Joyti

(COORDINATORPGDM),

Their timely help & encouragement helped me to complete this project successfully.

I thank Mrs. Rachana Dubey(Centre Manager House Hold) for giving me

opportunity to work atReliance Money, as a FINANCE TRAINEE.

I am also expressing my gratitude towards my friends, those who have helped me

directly or indirectly in completing the training.

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Objective of training

Frankly speaking, any job or the task, have the specific objective i.e. what is

need and what is the requirement of the particular work. In the same way my

objective is also to learn something from the summer internship program. It means

that the training program in any reputed company give the market knowledge of its

subject matter of study. The right choice of the company in which a student has to do

the training is also the part of the learning and what he/she wants to learn in the

summer training.

Reliance money began exploring new areas; it introduced modern products,

like Unit linked Product where returns are linked to the market performance of the

underlying assets.

Reliance Money a growing reputed company gives the good Platform in selling of

the product like insurance, Equity & commodities, derivative, IPOs, offshore

investment, mutual fund, gold coins etc.

So the objective of study is to see in the basket of product and satisfaction ofcustomers with the company through research work in NCR.

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3. Key Challenge Areas.

4. Core Elements of Wealth Management Services.

My Project Objectives

1. To define the Wealth Management Market.

2. To provide an idea of its size and recent growth

3. Examine the key drivers of the wealth management Industry.

4. Expanding wealth management canvas

5. Assets allocation or segmentation of your investment into multiple assets

classes and strategies.

6. Understanding companys procedure in wealth management department.

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COMPANY PROFILE

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Reliance Capital

Reliance Life Reliance General Reliance RelianceRelianceInsurance Insurance Money ConsumerMutual fund

Finance

Reliance money is a part of the reliance Anil Dhirubai Ambani Group and is

promoted by Reliance capital, the fastest growing private sector financial services

company in India, ranked amongst the top 3 private sector financial companies in

terms of net worth. Reliance money is a comprehensive financial solution provider

that enables you to carry out trading and investment activities in a secure, cost-

effective and convenient manner.

Through reliance money, you can invest in a wide range of asset classes from

Equity, Equity and commodity Derivatives, Mutual Funds, insurance products, IPOs

to availing services of Money

Transfer & Money changing. Reliance Money offers the convenience of on-line and

offline transactions through a variety of means, including its Portal, Call & Transact,

Transaction Kiosks and at its network of affiliates.

Some key steps of the company that are as..

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Success is a journey, not a destination. If we look for examples to prove this

quote then we can find many but there is none like that of Reliance Money. The

company which is today known as the largest financial service provider of India.

Success sutras of Reliance Money:

The success story of the company is driven by 8 success sutras adopted

by it namely

Trust, Integrity, Dedication, Commitment, Enterprise, Hard work and team play,

Learning and innovation, Empathy and Humility. These are the values that bind

success with Reliance Money.

Vision of Reliance Money:

To achieve & sustain market leadership, Reliance Money shall aim for complete

customer satisfaction, by combining its human and technological resources, to

provide world class quality services. In the process Reliance Money shall strive to

meet and exceed customer's satisfaction and set industry standards.

Mission statement:

Our mission is to be a leading and preferred service provider to our customers, and

we aim to achieve this leadership position by building an innovative, enterprising ,

and technology driven organization which will set the highest standards of service

and business ethics.

Business Overview:

Reliance Moneyis the largest brokerage and distributor of financial products in

India with more than 2.5 million customers and the largest distribution network.

Reliance Capital ranks among top 3 private sector financial services companies, in

terms of net worth. Reliance Consumer finance has a loan book of over Rs. 8,000

crore at the end of June 2008.

Reliance Capital has a net worth of Rs.6,862 crore (US$ 1.6 billion) and total

assets of Rs. 19,940 crore (US$ 4.6 billion) as of June 30, 2008 and over 26,000

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employees. Money has increased its market share among private financial

companies to nearly Convenient & effective Anytime & anywhere financial

transaction capability. Launched in April 2007. It provides the Flat fees system. It

has 2.2 million customers in 1 year of official launch. It has over 5,000 outlets

across 700 towns/cities. Average daily turnover in excess of Rs 2,000 crore.

In fact, this scenario has led some analysts to wonder if the company is not a trifle

too aggressive. But others say this has more to do with the companies customer-

centric 14 focus, its pan-India presence and superior risk management andinvestment strategies Reliance Money is not, however, resting on its laurels.

Companys customer centric approach will be studied during the training period and

the finding of the research work will definitely focus on the present condition & future

requirement (if any) relating to products of company.

Product of the Company:

Reliance Capital has interests in Asset Management, Mutual Funds, Life &

General Insurance, Broking & Distribution, Credit Cards, Loans and other financial

products and services.

Reliance Money currently offers its services in Broking and Distribution of

Financial Services and Products. Reliance Money offers a single window facility,

enabling you to transact (Buy, Sell or Trade) in :

Equity

Credit Card & LoansEquity & Commodity Derivatives

Mutual Funds

Money Transfer & Changing

Life & General Insurance

Offshore Investment

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Wealth Management Services

Portfolio Management Services

Theoretical Background

INTRODUCTION:

The term Wealth management also now a days having very importance. So

many Banking companies are engaged in the business of Wealth management. The

premier insurance industry is now booming because so many bankers are also

adopting and playing safe in the business of insurance the term called is

Bancassurance. Now days Wealth Management has very craze in the business

world. In a survey it was found that India had 123,000 milliner day end of year 2007

is now grow up by 22.7% from a year earlier (Asia pacific Wealth report).

Wealth management services area in financial sector has been witnessing

more attention during last couple of years. Capgemini Merrill Lynch Wealth

Report 2008 cites number of HNWIs globally to be around 10.1 million with wealth

held by them totaling to US$40.7 trillion in the year 2007. Value of wealth held by

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HNWIs represents 14.5% an increase of around 10.4% since 2006. India, China

and Brazil had the highest HNWI population growth at the country level.

Considering long-term high value business proposition, number of banks and niche

players has started offering full range of wealth management services targeted to

HNWIs and emerging affluent.

While growing volume of premium services to affluent clients becomes the key driver

for most of the service provider firms, many unique elements inherent to wealth

management services requires completely different service offering model than the

existing model for transactional services. Greatly accustomed in

Offering commoditized financial services so far, demand of unconventional form of

service model poses a big challenge in charting growth path for these wealth

management firms.

What is wealth?

Most of us associate wealth with money, our savings, our investments, our homes

or other forms of financial capital.

But did you know that the word wealth comes from the Old English words weal

(well-being) and th (condition) which taken together means the condition of

well-being?

Did you also know that the word economic comes from the Greek

oikonomia meaning the management of the household. When have you

heard a report from economists or business analysts talk about conditions of

household living and management? Instead we have become immune to strong

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language like the word mortgage which literally means in French a pledge unto

death or what I call a grip of death! How we have twisted the meaning of words.

Did you know that the father of accounting Lucca Paciolli, a 16th century

Fransiscan monk and mathematician, never defined the word wealth nor did he

provide a definition ofprofit. To this day accountants have no clear definition of

either word.

If real wealth is not just about financial possessions and if accountants have no

real understanding of how to either define or measure or account for wealth then we

have a wonderful opportunity to both redefine and rediscover our real or wealth.

With that opportunity to redefine wealth Robert Kennedy have Developed, the

things that make life worthwhile.

The wealth system I have developed attempts to align our values and principles as

a community with the actual conditions of our wellbeing (personal, professional,

spiritual, environmental and financial).

Moreover, the wealth system is a tool and process for measuring or assessing

the actual physical and qualitative conditions of all the things that make life

worthwhile.

CONCEPT OF WEALTH MANAGEMENT:

The term Wealth management formed with two words Wealth & Management.

The Meaning of Management They have already seen in the steering introduction.

The meaning of Wealth is Funds, Assets, investments and cash it means the term

Wealth management deft with funds Asset, instrument, cash and any other item of

similar nature. While defining Wealth Management They have to think in planned

manner. Wealth Management is an all inclusive set of strategies that aims to grow,

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manage, protect and distribute assets in a much planned systematic and integrated

manner.

Wealth Management Process at Reliance Money:

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In a bid to expand its gamut of financial services, broking and distribution house

major Reliance Money has announced its foray into wealth management. This was

announced by Sudip Bandyopadhyay, director & CEO of Reliance Money.

So far, wealth management services in India mainly include investment in equity-

linked portfolio management services, structured products, insurance and

mutual funds. We aim to widen this definition by including tax planning &

assessment, real estate, art advisory and estate planning, among others, within the

ambit of wealth management. The idea is to provide clients a comprehensive range

of cradle to grave services in the financial arena, said Bandyopadhyay.

Each investor will be assigned a dedicated wealth manager having access to

dedicated and experienced advisory resources that allows them to design optimal

asset allocation strategies customized solutions), and provide ongoing reviews of

investment performance.

With the help of its wealth managers and in-house research team, Reliance Money,

part of the $100 billion Reliance Anil Dhirubhai Ambani Group, will target high net

worth individuals and aims to create a wealth management process that extends

beyond mere investments. The company already serves the needs oflower income

group through mutual funds and insurance products, and the middle income group

with portfolio management services for as low as Rs 5 lakh.

Under its wealth management services, Reliance Money also plans to have aseparate module to exclusively concentrate and cater to the financial planning needs

of senior citizens. The company will launch its wealth management services across

India with a focus on retail clients, through its network of over 10,000 plus retail

outlets across 5,000 plus towns and cities. The wealth management market in India

is growing faster. We plan to expand the overall pie by also concentrating on tier II

and tier III cities, added,Bandyopadhyay.

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http://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Finance/Reliance_Money_forays_into_wealth_management/rssarticleshow/3184862.cmshttp://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Finance/Reliance_Money_forays_into_wealth_management/rssarticleshow/3184862.cmshttp://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Finance/Reliance_Money_forays_into_wealth_management/rssarticleshow/3184862.cmshttp://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Finance/Reliance_Money_forays_into_wealth_management/rssarticleshow/3184862.cmshttp://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Finance/Reliance_Money_forays_into_wealth_management/rssarticleshow/3184862.cmshttp://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Finance/Reliance_Money_forays_into_wealth_management/rssarticleshow/3184862.cmshttp://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Finance/Reliance_Money_forays_into_wealth_management/rssarticleshow/3184862.cmshttp://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Finance/Reliance_Money_forays_into_wealth_management/rssarticleshow/3184862.cmshttp://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Finance/Reliance_Money_forays_into_wealth_management/rssarticleshow/3184862.cmshttp://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/Finance/Reliance_Money_forays_into_wealth_management/rssarticleshow/3184862.cms


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The wealth management services of Reliance Money will also be available to the 25

million NRIs and PIOs (person of Indian origins) through its overseas offices in the

UAE, Oman and Hong Kong. The company plans to expand its operations in over 15

countries spread across Europe (London), North Africa, the Middle East and South

East Asiaby2009.

Industry studies indicate that there will be two million wealthy individuals in India,

holding over $510 billion in liquid assets, by 2011.

Investment Process at Reliance Money

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Identifying Companies withGrowth Dynamics (Earning &

Evaluation by Qualitative &Quantitative Method &Selection of Stock

Evaluation by Qualitative &Quantitative Method &Selection of Stock

Understanding Customers`Investment Requirements

Identifying Companies withGrowth Dynamics (Earning &


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Dynamic PortfolioConstruction FollowingPortfolio Objectives

Investments & ContinuousReview Process

ContinuouslyIdentifying


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Wealth Management Range

The Indian market has been segmented by Wealth management service providers

into five categories, namely:

Ultra-high net worth, or Ultra-HNW (in excess of US$30

million), will have a total population of 10,500 households

by 2012.

Super high net worth (between US$10 and $30 million) will

have a total population of 42,000 households by 2012.

High net worth (between US$1 million and $10 million) will

have a total population of 320,000 by 2012.

Super affluent (between US$125,000 and $1 million) will

have a total population of 350,000 households by 2012.

Mass affluent (between US$25,000 and $125,000) will have

a total population of 1.8 million households by 2012.

Mass market (between US$5,000 and $25,000) will have a total population of 39

million households by 2012.

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Core Elements of Wealth Management Services

Wealth management services involve fiduciary responsibilities in providing

professional investment advice and investment management services to a client.Depending on the mandate of the services given to the Wealth Manager, wealth

management services could be packaged at various levels:

Advisory:

Wealth mangers role is limited to the extent of providing guidance on

investment / financial planning and tax advisory, based on client profile.

Investment decisions are solely taken by the client, as per his /her own judgment.

Investment processing (transaction oriented):

Client engages wealth manager to execute specific transaction or set of

transactions. Investment planning, decision and further management remain

vested with the client.

Custody, Safekeeping and Asset Servicing:

Client is responsible for investment planning, decision and execution. Wealth

manager is entrusted with management, administration and oversight of

investment process.

End-to-end Investment Lifecycle Management:

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Wealth manager owns the whole gamut of investment planning, decision, execution

and management, on behalf of the client. He is mandated to make financial planning,

implement investment decisions and manage the investment throughout its life.

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Wealth Management An Emerging Sector

Wealth management services area in financial sector, hitherto used to be the

preserve of some top multinational banks and financial firms- offering exclusive

services to a select few, has been witnessing more attention during last couple of

years.

A booming economy, rising stock prices and an increase in income and spending

power have brought sharp focus on this sector. With an increasing population of

High Net worth Individuals (HNWIs), the unsaid tagline of earlier days - Dont call

us. Well call you (if you are that wealthy!) seems to be completed altered in

recent times. Considering long-term high value business proposition, number of

banks, financial firms and niche players has started offering full range of wealth

management services targeted to HNWIs and emerging affluent.

As per recently published Capgemini Merrill Lynch Wealth Report 2008, number of

HNWIs around the world and value of their assets has been continuously rising.

Number of HNWIs globally is estimated to be around 10.1 million in year 2007, an

increase of over 10.4% over 2005-2007 (CAGR) year. HNWI wealth totals US$40.7

trillion, representing 14.5%. As per report, number of HNWIs in India is increasingly

growing at a rate higher than other region of world. Number of HNWIs in India is

estimated to be around 123,000 in year 2007 - an increase of over 22.7% over

previous year. Though, in absolute terms the above number appears pretty

miniscule (if we compare that with the number of retail investors in India), however,

in terms of value it really makes a really huge sum of serviceable investment.

While growing volume of premium services to affluent clients becomes the key driver

for most of the service provider firms, many unique elements inherent to wealth

management services requires completely different service offering model than the

existing model for transactional services. To meet the client service expectations

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accurately, servicing model and framework has to be deeply oriented with high level

of client satisfaction. It is not a surprise that many of successful firms in wealth

management sector draw lessons from successful service leaders from hospitality,

entertainment and retailing industries, to learn the trick of enhanced client

satisfaction.

Greatly accustomed in offering commoditized financial services so far, demand of

unconventional form of service model poses a big challenge in charting growth path

for these wealth management firms.

Number of WealthyIndividuals (000's) 2003 2004 2005 2006 2007 2008 20092010 2011 2012$60K-$100K 218.5 264.4 274.5 324.6 391.2 399.8 424.9 460.7 501.0 546.4

$100K-$200K 427.7 472.9 552.5 649.4 771.8 768.6 808.5 869.6 937.1 1,012.8

$200K-$300K 142.2 165.8 197.2 233.9 287.9 300.7 324.1 349.5 379.4 412.6

$300K-$400K 58.4 56.6 63.8 75.9 92.9 96.3 103.0 111.1 120.7 131.4

$400K-

$500K

20.6 25.0 29.8 35.4 43.9 46.0 49.6 53.8 58.6 64.1

$500K-

$600K

10.8 8.7 11.4 13.9 17.3 18.1 19.5 21.5 23.8 26.5

$600K-

$700K

12.2 11.1 13.1 16.0 19.8 20.7 22.1 24.3 26.9 29.7

$700K-

$800K

9.3 7.1 7.7 9.6 11.9 12.5 13.6 15.2 17.0 19.1

$800K-$1m 9.5 9.9 11.7 14.1 17.6 18.4 19.8 21.8 24.0 26.5

$1m-$1.5m 4.5 6.3 7.1 8.5 10.6 11.2 12.1 13.2 14.4 15.7

$1.5m-$2m 4.3 3.5 4.5 5.4 6.6 6.9 7.3 8.0 8.7 9.6

$2m-$3m 3.0 1.7 2.4 2.9 3.5 3.7 4.0 4.3 4.7 5.2

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$3m-$4m 2.5 2.9 3.2 3.8 4.7 4.9 5.2 5.6 6.1 6.7

$4m-$10m 2.5 2.9 3.2 3.8 4.7 4.9 5.2 5.6 6.1 6.7

$10m+ 0.9 0.8 0.9 1.1 1.4 1.5 1.6 1.7 1.9 2.0

Total 921.6 1,036.7 1,179.9 1,394.5 1,681.1 1,709.2 1,815.2 1,960.3 2,124.4 2,308.5

Number of wealthy individuals in India, 2003-12

(Asia Pacific WealthMarket Review) 2008

Wealth management services comprises of following key function

areas of:

(a) Financial Planning

Client Profiling

Client profiling takes in account multitude of behavioral, demographic and

investment characteristics of a client that would determine each clients wealth

management requirements. Some of key characteristics to be evaluated for defining

clients investment objective are:

Current and future Income level

Family and life events

Risk appetite / tolerance

Taxability status

Investment horizon

Asset Preference /restriction

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Cash flow expectations

Religious belief (non investment in sin sector like - alcohol, tobacco, gambling

firms, or compliant with Sharia laws)

Behavioral History (Pattern of past investment decisions)

Level of clients engagement in investment management (active / passive)

Present investment holding and asset mix

Investment Objective

Based on the client profile, investment expectations and financial goals of the client

could be clearly outlined. Defining investment objectives helps to identify investment

options to be considered for evaluation. Investment objective for most of the

investors could be generally considered amongst the following:

Current Income

Growth (Capital Appreciation)

Tax Efficiency (Tax Harvesting)Capital Preservation (often preferred by elderly people to make sure they

dont outlive their money).

Portfolio Strategy Definition / Asset Allocation:

Defining Portfolio Strategies and Portfolio Modeling:

After establishing investment objectives, a broad framework for harnessing

possible investment opportunities is formulated. This framework would factor

for risk-return trade-off of considered options, investment horizon and provide

a clear blueprint for investment direction.

Investment strategy helps in forming broad level envisioning of asset class

(Securities, Forex, Commodity, Real State, Reference and Indices,

Art/Antique and Lifestyle Assets (Car, Boat, and Aircraft)), market, geography,

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sector and industry. Each of these asset classes is to be comprehensively

evaluated for inclusion in portfolio model, in view of defined investment

Objective:

While defining the strategy, consideration of client preference or avoidance for

specific asset class, risk tolerance, religious beliefs is the key element, which

would come into picture. Thus, for a client with a belief of avoidance of

investment in sin industries (alcohol, tobacco, gambling etc.) is to be duly

taken care of. Likewise, for a client looking for Sharia- compliant investment,

strategy formulation should consider investment options meeting with the

client expectations.

Determination of Portfolio Constituents and Allocation of Assets:

Guided with the investment strategy, constituents in portfolio model are determined,

which would directly and efficiently contribute towards clients investment objectives.

Thus, a broad level investment guidance of investment in fixed income in

emerging market would further determine classification within Fixed Income such as

Govt. or corporate bonds, fixed or variable rate bonds, Long or short maturity bonds,

Deep discounted or Par bonds, Asset backed or other debt variants. Return profile,

risk sensitivity and co-relation of constituents within portfolio model would help to

determine the size (weightage) of each individual constituent in the portfolio.

Strategy Implementation:

Having decided the portfolio constituents and its composition, transactions to acquire

specific instruments and identified asset class is initiated. As acquisition cost would

be having bearing on overall performance of the portfolio, many times process of

asset acquisition may be spread over a period of time to take care of market

movement and acquire the asset at favourable price range.

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Portfolio Management:

Portfolio Administration:

Portfolio Administration involves handling of investment processes and asset

servicing. This would also require tax management, portfolio accounting, fee

administration, client reporting, document management and general administration

relating with portfolio and client. This function would involve back office

administration and custodial services to manage transaction processes (trading and

settlement) - interfacing with brokers/dealers/agents, Fund managers, Custodians,

Cash Agent and many other market intermediaries.

Performance Evaluation and Analytics:

Performance evaluation of the portfolio is an ongoing process. Portfolio return is

continuously monitored and analyzed with respect to defined portfolio objectives.

Analysis dimension could be varied simple and complex. These may include -

absolute return, relative return (in comparison to chosen benchmark), trend, pattern,

cost impact, tax impact, concentration, lost opportunity and other form of sensitivity

and what-if analysis. Any deviation of portfolio performance observed during

performance evaluation would lead to strategy review and any possible alignment of

portfolio strategy.

Strategy Review and Alignment:

Recalibration of Portfolio Strategy:

Based on performance evaluation and future outlook of the investment, portfolio

strategy is evaluated on periodic basis. To keep it aligned with the defined

investment objectives, portfolio strategy is suitably re-calibrated from time to time.

Many times, review of portfolio strategy would be necessitated due to change in

client profile or expectations.

Rebalancing, Reallocation and Divestment of Assets:

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Any re-calibration of strategy and consequent change in portfolio model would

require rebalancing of the assets in portfolio. This would be achieved through

rebalancing the asset (divesting over-allocated part and acquiring under allocated),

relocation (from one sector the other or from one instrument to other instrument in

the same class) or complete divestment.

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Key Challenge Areas

While immense business potentiality of this emerging sector is a driving point for

most of the firms, they face many challenges in formulating winning services offering

meeting the client needs. In the following section, we would briefly take a look on the

key challenges area in the present context.

Highly Personalized and Customized Services:

Unlike other stream of financial services, mostly being transactional / commoditized

in nature, wealth management services require client specific solution and service

offering. No one solution exactly meets the needs of other client. In a situation of

highly personalized and customized nature of service offering, developing any form

of generic service model does not support growth of the business.

Personal relationship driving the business:

To meet client expectation of personal attention, mode of communication in wealth

management services tends to be highly personalized. Thus, the conventional grids

of communication, such as call centre, data centre does not fit well. Success of

wealth management services heavily draws on personal interaction with the

dedicated relationship manager, who takes care of whole investment management

lifecycle for bunch of clients on one-to-one basis. This essentially requires service

firm to invest heavily in human processes to groom and retain a team on competent

relationship managers with cross functional skills.

Evolving Client Profile:The biggest challenge in providing wealth management service offering is to factor

and reckon the evolving nature of client profile, in terms of investment objective, time

horizon, risk appetite and so on. Thus, a service model developed for a particular

client cannot remain static over a period of time. Any service model has to be flexible

enough to consider the dynamic nature of client profile and expectations arising out

of it.

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Client Involvement Level:

The conventional adage the more money you have, more effort is needed to

manage it proves to be otherwise in case of HNWIs. Generally, client involvement

in managing the finance remains on the lower side. This brings onus of managing

the whole gamut of investment and due performance single-handedly on the

shoulders of investment manager.

Passion Investment (Philanthropy and Social

Responsibility):

In the recent years a trend has been observed that bulk of investments by HNWIs

has been directed towards passion investments (art, antique, jewellery, coins,

unique assets, luxury), philanthropy and social/community causes.

As per World Wealth report, 11% of HNW investors worldwide contributed to

philanthropic causes with a contribution over 7% of their wealth in year 2006. Ultra-

HNWIs contribution was even more - 17% of Ultra-HNW investors that gave to

philanthropy contributed over 10% of their wealth. In total, this equates to more than

US$285 billion globally. Against this backdrop, new breed of HNWIs expect to

strategically manage the wealth and personal resources allocated to philanthropy

purpose, in order to maximize its impact. This demands a Relationship manager not

just to be a passive financial advisor rather a passionate partner sharing interest and

inclination of the associated client.

Limited Leveraging Capabilities of Technology (as an

enabler):In the recent times, we have witnessed technology a key enabler to help business to

expand its market reach with reduced cost of services offering. Online banking and

online trading/brokerage services are the best examples in this regard. Technology

leveraging has helped services firm to achieve universal proliferation of market with

substantially reducing transaction cost. As business rules and service definitions to

guide the applications tends to be quite composite in wealth management services,

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leveraging the capabilities of technology to meet the business requirement may not

be highly feasible in the initial years.

Technical Architecture and Technology Investment:

As business architecture is still evolving, a proven basis of resilient technical

architecture and framework to support the emerging business greatly remains

missing. In absence of this framework, any investment commitment towards

application development / system implementation would be fraught with severe risk.

Intricate Knowledge of Cross-functional Domain:By very nature of wealth management, it not just involves matters of plain vanilla

finance but has intricate relationship with many elements of domestic / international

law, taxation and regulatory norms. In order to provide sound investment guidance, a

relationship manager is required to have intricate knowledge of domestic/cross-

border finance, accounting, legal and taxation subjects.

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Solution Framework

Generic services offering model is going to draw big blank in case of wealth

management services. A HNWI client expects exclusiveness in services in a normal

manner. In highly competitive market, key to success for a firm lies in offering

exclusiveness in services delivery (high quality services on most personalized

basis), going beyond the client expectations.

A solution framework with considered inclusion of following key elements would help

firms in meeting and exceeding client needs towards sustainable business growth.

Quality of Service Level:

Quality of service level provided by the service provider firm would the key

determinant of growth and success in client acquisition, client satisfaction and client

retention aspects.

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In a sense, service offering could be developed in the form of partnership with the

client based on trust and integrity, where the relationship manager remains highly

responsive to client sensitivities and expectations.

Without over-emphasizing, a satisfied client would provide multitude of opportunities

of growth of business through deepening the relationship, direct / indirect

referencing as well as cross selling of products. In the other situation of deficiency in

service level, he would not hesitate to move the business

to another firm. This keeps strong emphasis on continued engagement with the

client on the aspects of client expectation and servicing, rather than showing extra

attention only during the period of client acquisition. Focused around client needs, a

broad framework of service offering during whole lifecycle of client investment

management would be revolving around: Anticipate Analyze, Advice, Act and

Monitor cycle.

Universal Service Offering:

To meet the client needs in holistic manner, product and service offering range of the

firm should be wide enough to cover the investment spectrum across its lifecycle. In

an ideal situation, a client would expect to deal with a single firm to get completerange of investment management services. However, for various business

considerations of the service provider firm, in many situations it may not be a viable

proposition to offer those services. While universal service offering with assortment

of services under single umbrella is not attainable in house, it could be achieved

through active partnership and affiliation. But, due consideration is required that

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quality of service level provided by partners/affiliates does not get compromised in

any manner. Any shortcoming in service quality, even if caused by partner/affiliates

services, would be ultimately impairing client satisfaction towards the firm.

Investment in People Processes:

As relationship manager remains the face of the firm to a client, success of the firm

would be greatly dependent on the skills, drive and enthusiasm of relationship

managers (to take an extra mile), while bonding and dealing with any of client

issues. This aspect is more challenging than as it appears. This necessitates

transformation of organizational philosophy towards its people and people processes

contributing to business success. Firms would be required to invest heavily in human

processes to attract, groom and retain a motivated team of relationship managers,

who will make the real difference between winning and losing the game.

Price not a True Differentiator:

Pricing as a key differentiator to distinct the service offering from one firm to other

may not be highly relevant in case of wealth management services. Focused on

performance and quality of service, pricing in isolation will not make much meaning

to service seeking clients. Client would always value the pricing from the quality of

services received. He will certainly not mind paying extra, if he finds services offered

to him meeting and exceeding his expectations.

Unconventional Delivery Channel and Communication:

Delivery channel for service content and mode of communication has to be greatly

customized aligned with the client-desired vehicles. This would require a process

of continuous re-inventing and re-defining the grid of delivery and communication

channels to meet client expectations. Impact of technological advancements and its

interplay on service delivery and communication method would certainly be an

equally challenging aspect to be factored in, while designing such strategies.

Flexibility of Technical Architecture

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While business potential appears to be quite high, existing business architecture still

does not provide any sound basis to formulate technical roadmap. Added to that,

dynamic characteristics of client profile bring an increased challenge in drawing a

firm implementation blueprint.

In the given situation, any big-bang commitment towards technical implementation

plan would not be a wise idea. A prudent approach would be to get started on

modular basis with progressive integration of functional components in order of its

functional significance. Gaining insight and confidence around the business

processes, this could be gradually scaled over the period of time.

To meet the information technology requirements, a firm has several alternatives (or

combination of Alternatives) to consider:

Integrated solution approach: Developing in-house applications to meet

end-to-end new business requirements. These applications are based on

existing technology architecture of the firm and are closely integrated with

the existing service models. It would be a least preferred choice in thecurrent situation, on count of cost, time, lack of clarity and complexity of

solution.

Service Bureau /ASP Model: A recent trend has been witnessed in the

solution providers landscape. Many of information techno service providers

have come out with novel solution for investment management / investment

processing platform in the form of service bureau / ASP. This platform

provides integrated end-to-end processing infrastructure and servicesincluding core of business processes of wealth management. On the part of

a wealth management firm, paying agreed charges to service bureau

provider, option of service bureau completely eliminates the requirement of

ongoing resource commitment and cost of maintaining information

technology infrastructure. While total cost of owning may be the key

motivating point for a wealth management firm to adopt service bureau

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model, the key consideration of providing high quality of service level with

enhanced responsiveness may not be adequately answered.

Stand-alone commercial software product/solutions: Pre-packaged

solutions that can be focused to specific part of services or provide

comprehensive end-to-end processing. These can be deployed

independently or could be integrated with existing systems. Cost,

customization and integration difficulties would be the challenging points. A

loosely oriented technical architecture with optionality and mix of Build Buy

Integrate components would be considered as a good beginning point. To

provide enough resilience and high business relevance, any of the

considered option and associated structure should keep due provisions for

the following key elements:

Considering the complexity of business processes and involved

business rules, rule based processing would be the core of

processing.

Client profile acquires many new dimensions with plethora of

attributes. Client data is required to be appropriately managed

(aggregate / segregate) to build a profile driven solution offering.

Decision support and client oriented analytics acquire more

importance.

Applications should provide adequate flexibility to incorporate manual

processing interfaces.

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Consumer Point of View: Wealth Management

Technically, PMS can be defined as hybrid service provided by portfolio managers,

which includes customized stock and mutual fund investing. Portfolio managers canbe of two kinds, discretionary or non-discretionary. Discretionary portfolio managers

manage the funds of clients independently on their own accord, while the latter

manage the funds according to their clients direction. Any person who is registered

with Securities and Exchange Board of India (Sebi) as a portfolio manager is allowed

to offer PMS. A list of these entities can be found at www.sebi.gov.in.

PMS vs Wealth manager and fund manager:

PMS is completely different from priority banking and Wealth management. Prioritybanking or Wealth management is the umbrella of products while PMS is a product.

So if priority banking and Wealth management is a grocery shop then PMS is a

specific grocery. Priority banking is usually offered to premiere customers who have

a relationship manager appointed, who would advice you on your investments

across the products offered by the bank like insurance, and investment linked

products (mutual funds, bonds and unit linked insurance plan).

Mutual funds and PMS differ on the degree of customization, minimum investmentand on the fee structure. Minimum investment required for PMS is more than mutual

fund. Unlike PMS, there is no concept of profit sharing in mutual funds. Also, the

level of customization of your investments is higher in PMS.

Is PMS for you?

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PMS is for those people who dont have the time or the expertise to do enough

research to take informed investment decisions. If you have the required time and

expertise, then you dont need these services. Also, SEBI has prescribed a minimum

of Rs 5 lakh investment for PMS, which means the service, is not for small and

medium investors.

Risks involved, though PMS is a good option for managing your Wealth, it is not

entirely without risk or pain. Though the relationship manager did no promise any

cut-off or absolute number when asked about returns. The market was moving up

when I invested and my money grew to about one and half times. But when the

market tumbled suddenly, my earnings fell substantially. The Company churned

the portfolio frequently, which gave them two-way profit on each transaction, as

brokerage and profit sharing. consumer now feels it is better to understand the

market and invest on your own. He withdrew his investments after 14 months, even

though he got returns of 25 per cent. Outlook Money tried unsuccessfully to get a

response from Kotak Securities on this episode.

How to choose a PMS?

Investment philosophy: Akhilesh Singh, business head, Emkay Wealth, says, The

most important factor is to understand the fund managers investment philosophy

and strategy, which must align with the investors objectives. Singh adds, Some

portfolio managers structure long-term portfolios, while some prefer to actively churn

the portfolio for higher short-term returns, which adds to the overall cost and tax

liability.

HSBC, for instance, has a product called Strategic, which is for the long term, while

Angels Bluechip is for medium to long-term investors.

Scheme benchmarks: Make sure that the portfolio is benchmarked to an

appropriate index. This helps measure the performance of the scheme and the

portfolio manager. Benchmarks are important also as profit-sharing is linked to the

performance of the portfolio above the benchmark. So, an aggressive portfolio

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benchmarked to a low-return index will mean higher over-the-benchmark returns.

This means that you will have to share a larger portion of your profit. The wrong

benchmark distorts the performance of the fund.

Minimum investment: There are many portfolio managers whose thresholds aremuch higher than the Sebi-mandated minimum of Rs 5 lakh. Choose a scheme that

fits the size of your portfolio.

Returns: It is difficult to judge a schemes performance based on returns, as it may

vary from the returns of an investor. Also, depending on the time of entry, an

investors returns may vary from that of others. Before signing the contract, make

sure your portfolio manager has a fair record of surpassing the returns from the

benchmark index for numerous years.

I.V. Subramaniam, CEO and chief investment officer, Quantum Advisors, says: The

performance should be judged over long periods of time during both high and low

market levels. There should not be any survivor bias. This happens when an investor

withdraws a portfolio due to bad performance, or a portfolio manager removes a

portfolio to show the performance numbers of only good portfolios.

Cost structure

Portfolio managers usually have two kinds of chargesmanagement fee, which is

fixed, and profit sharing, which is variable. You can also pay a fully fixed fee. Further,

if the portfolio is churned frequently, it adds to the cost due to higher tax and

brokerage. On each transaction you pay brokerage and short-term gains tax of 20

per cent. Management fee ranges from scheme to scheme. You could opt for a

higher performance-linked charge as it puts pressure on the fund manager to

perform better as he has a share in the profits.

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Frequency of disclosure:

This varies from firm to firm, and largely depends on the agreement between theinvestor and the company. Most NAVs are disclosed daily, but you can opt for a

company that also discloses portfolios daily.

Broking house: If the broker is internal, it may be possible that your portfolio is

churned frequently. Usually, asset management companies have external brokers,

while some, such as Religare, have both external as Well as internal broking.

Assets under management (AUM): Though higher AUMs do not guarantee higher

returns, it remains an important factor. A low AUM could be an indicator of poor

performance. They believe that Rs 100 core AUM is a healthy floor.

SERVICES PROVIDED BY WEALTH MANAGEMENT INSTITUTIONS

Custodian Services

(A) Securities Safekeeping

(B) Income collection from Securities

(C) Settlement of Securities trades as directed

(D) Payment of fund when directed

(E) Timely settlement delivery

Trust Services

(A) Charitable Trust

(B) Revocable Trust

(C) Irrevocable life Insurance Trust

(D) Special Need Trust

(E) Institutional Trust

Retirement Plan Services

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(A) Trustee

(B) Defined Benefit Plans

(C) Defined Contribution Plans

Wealth Management Practice Orientation Overview

Transactors:

Product Expert: Handles high-volume transactions involving sophisticated

products or asset classes, such as foreign exchange derivatives.

Investment Broker: Handles transactions involving basic asset classes, such

as equities, fixed income and options.

Investment Managers:

Investment Advisor: Offers strategic investment planning, as well as

playing a hands-on role in constructing, reviewing and rebalancing client

portfolios.

Relationship Manager: Establishes and nurtures client relationships,

delegating portfolio management to internal or external managers.

Wealth Planners:

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Wealth Planner: Offers holistic advice in accordance with clients finances

and short-/long-term goals, such as real estate, retirement and

generational wealth transfer.

Personal CFO: Aspires to provide quasi family-office services, often acting

in a lead discretionary role coordinating with the clients other trusted

advisors.

The significance of these practice-model categories is that each reflects a different

advisory approach, borne of a different perspective. While some firms claim to have

a single practice orientation, many actually use multiple models in and across

regionsand often leverage different models within their core markets to capitalize

on the strengths of individual advisors. As they move into new markets, firms can

create or exacerbate friction among the different advisory approaches they use.

Importantly, practice orientations need not be mutually exclusive, but the mix of intra-

firm practice models does need to be consciously managed.

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Strict adherence: Financial regulation, compliance and other

country-specific mandates

Secure and trusted environment: Data storage

Revenue drivers

Retail banks are establishing themselves in a space traditionally dominated by

private banks and niche service providers, in order to handle the booming mass

affluent segment and the lower end of the high net worth segment. The typical model

on view is the distribution model with end-to-end services across the banking and

investment domains. Banks have identified key revenue drivers as:

Revenue from distribution (third party products)

Commission on transaction-based revenue (from execution broker)

Revenue from advisory services

Cross-sell opportunities to existing customers

Product manufacturing and revenue based on assets under management and ROI

(Discretionary PMS) would be the way forward for banks.

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Wealth Management Model

Wealth management platforms are integrating front-office with the middle- and back-

office components to leverage an end-to-end solution. Platforms provide the

technical infrastructure for wealth management services. Designed with open

architecture, these platforms offer the ability to integrate with third party solutions,

adding a broad range of features and functionalities.

Service-oriented Architecture (SOA)

The wealth management process is dynamic and factors in change at a rapid

pace, primarily to incorporate new products, new processes, and regulatory

requirements and address ever-changing customer demands. Service providers

must respond quickly to business changes and leverage existing investments in

applications and the application infrastructure to address new business

requirements, while supporting new channels of interactions with customers,

partners and market data vendors.

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Wealth management providers and private banks must focus on open standards

for communication with external entities. Service-oriented Architecture and web

service standards will be the key components of current and future wealth

management systems as it will help technology vendors deliver flexible and cost

effective solutions. Wealth management is a complex process and to support this

the system needs to embed, incorporate and interface with multiple systems for

customer information, market data, transaction data and accounting.

Account aggregation, one of the critical components in the wealth management

process will be served well by the SOA trend as it will enable service providers to

share, integrate and mine data across multiple systems and entities.

One system or multiple systems?

The ideal wealth management system should provide a complete front-to-back

functionality for all asset classes, product types and related processes. It must

facilitate Straight Through Processing (STP) for all transactions, account

aggregation and, portfolio planning, monitoring and reporting. Wealth

management essentially runs across various product types in the investment and

banking domains. There are one system vendors and niche area vendors

currently servicing the ever increasing technology requirements in this domain.

In recent times, there has been a growing trend of adoption of the one system

approach which offers an integrated platform for traditional banking and wealth

management products

and processes. Retail banks entrenched, expanding or venturing into the wealth

management space are increasingly seeking integrated platforms to service

customers.

The typical one system provides the necessary infrastructure to support various

asset classes and provide banks with a consolidated view of customers portfolio

across banking and investment products. With a topping of SOA, web service

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standards and robust work flow engine, it would provide the ideal one system

solution for banks to service their customers. However, going by the business

domain it caters to, wealth management systems inevitably need to interface with

niche area systems and external entities.

The shortcomings of the one system approach are in terms of depth of

functionality and infrastructure changes that have to be optimally countered

across the system. This could entail higher costs and migration related issues.

ASP model

A wealth management platform in the ASP model is another emerging trend. The

platform provides for an integrated front-to-back office system serving the entire

gamut of client management and advisory services, transaction processing and

reporting.

The application is hosted by a service provider. Banks, brokers and investment

houses which offer wealth management solutions can opt for this standard

application by paying charges either annually or based on transactions or assetsunder management. The model may seem attractive to relatively smaller players

in this space who would want to effectively eliminate technology infrastructure

maintenance but it has not attracted much success due to the same infrastructure

for all providers model.

It is critical that banks evolve their IT infrastructure in line with their service

delivery model.

The future lies in the current trends:

Mass affluent and high net worth client segments will continue to grow

their wealth but at the same time look at more risk-mitigated strategies

Acquiring and retaining clients and their assets with robust client

servicing are the key challenges for service providers

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Service providers have determined the criteria for success but believe

that adequate technology tools are still not available

Service providers are convinced that they need flexible service delivery

models

IT strategy should evolve around the service delivery models

Service providers are taking a holistic view of their technology

infrastructure moving away from the product silo approach

Ultimately, the greatest success will be realized by those banks that

comprehensively understand their clients. They will be able to leverage existing

strengths to transform and adapt their service delivery and technology to cater

effectively to client needs in theirS target growth markets.

Without doubt, technology is an important enabler in delivering efficient actionable

advice, but it is only a supporting tool in the client-to-advisor relationship, which

plays a key role in managing the institutions customers.

Other factors contributing to the success of a wealth management strategy include

the quality of advisors, the business model, organizational structure, customer

segmentation and diversity of offerings.

Most effective revenue drivers for wealth managers over the nextTwo years:

Regional average

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CLiENT

acquisition

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CONCEPT of ASSET CLASSES

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Asset Mix

Asset mix is the allocation of a portfolio between asset classes, it balances return

and risk. Returns are a combination of the income from an investment and the price

appreciation over the period. Risk is usually proxies by the standard deviation of

returns, how much the return change about the long-term average.

List of Different Asset Class

1. Fixed deposit

2. Mutual Fund

3. Equity

4 Commodities

5. Art Fund

6. Real-Estate Fund

7. Insurance product

8. Structured product

9. Gold

10.Currency

11.Oil

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monthly or quarterly according to the investors choice. So if you invest Rs 3 lakhs in

a one year fixed deposit which pays 8 per cent you can earn Rs 2,000 of interest

every month or Rs 6,000 of interest every quarter.

Interest rates on FDs

The rate of interest on FDs varies according to the maturity with longer deposits

generally earning a higher interest rate. Here are the interest rates offered by ICICI

Bank on their FDs. Note that FDs vary quite a bit from bank to bank so you should

search around before investing.

Interest paid on a fixed deposit is paid either monthly or quarterly according to the

investors choice. So if you invest Rs 3 lakhs in a one year fixed deposit which pays

8 per cent you can earn Rs 2,000 of interest every month or Rs 6,000 of interest

every quarter.

Effective Return

Before you invest in FDs you need to understand the concept of effective return

which is higher than the rate of interest on the FD. Effective return is relevant if you

choose to reinvest your interest every year which means that you will be earning

compound interest.

Mutual Fund

A mutual fund is a professionally managed firm ofcollective investments that collects

money from many investors and puts it in stocks, bonds, short-term money market

instruments, and/or other securities.[1] The fund manager, also known as portfolio

manager, invests and trades the funds underlying securities, realizing capital gains

or losses and passing any proceeds to the individual investors. Currently, the

worldwide value of all mutual funds totals more than $26 trillion. [2]

Since 1940, there have been three basic types of investment companies in the

United States: open-end funds, also known in the US as mutual funds; unit

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investment trusts (UITs); and closed-end funds. Similar funds also operate in

Canada. However, in the rest of the world, mutual fund is used as a generic term for

various types of collective investment vehicles, such as unit trusts, open-ended

investment companies (OEICs), unitized insurance funds, and undertakings for

collective investments in transferable securities (UCITS).

Types of mutual funds

Open-end fund

The term mutual fund is the common name for what is classified as an open-end

investment company by the SEC. Being open-ended means that, at the end of every

day, the fund issues new shares to investors and buys back shares from investors

wishing to leave the fund.

Mutual funds must be structured as corporations or trusts, such as business trusts,

and any corporation or trust will be classified by the SEC as an investment companyif it issues securities and primarily invest in non-government securities. An

investment company will be classified by the SEC as an open-end investment

company if they do not issue undivided interests in specified securities (the defining

characteristic of unit investment trusts or UITs) and if they issue redeemable

securities. Registered investment companies that are not UITs or open-end

investment companies are closed-end funds. Neither UITs nor closed-end funds are

mutual funds (as that term is used in the US).

Exchange-traded funds

A relatively recent innovation, the exchange-traded fund or ETF, is often structured

as an open-end investment company. ETFs combine characteristics of both mutual

funds and closed-end funds. ETFs are traded throughout the day on a stock

exchange, just like closed-end funds, but at prices generally approximating the

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ETFs net asset value. Most ETFs are index funds and track stock market indexes.

Shares are issued or redeemed by institutional investors in large blocks (typically of

50,000). Most investors purchase and sell shares through brokers in market

transactions. Because the institutional investors normally purchase and redeem in in

kind transactions, ETFs are more efficient than traditional mutual funds (which are

continuously issuing and redeeming securities and, to effect such transactions,

continually buying and selling securities and maintaining liquidity positions) and

therefore tend to have loTheyr expenses.

Equity funds

Equity funds, which consist mainly of stock investments, are the most common type

of mutual fund. Equity funds hold 50 percent of all amounts invested in mutual funds

in the United States.Often equity funds focus investments on particular strategies

and certain types of issuers.Capitalization

Fund managers and other investment professionals have varying definitions ofmid-

cap, and large-cap ranges. The following ranges are used by Indian Indexes:

Large-cap stock - These are shares issued by large companies with a

market capitalizationgenerally greater than Rs 500 Crore.

Mid-cap stock - These are issued by mid-sized companies with a

market cap generally between Rs 200 billion and Rs 500 Crore.

Small-cap stocks - These represent smaller-sized companies with a

market cap of less than Rs 200 Crore.

These types of equities tend to have the highest risk due to lower

liquidity.

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Bond funds

Bond funds account for 18% of mutual fund asse Types of bond funds include term

funds, which have a fixed set of time (short-, medium-, or long-term) before they

mature. Municipal bond funds generally have loTheyr returns, but have tax

advantages and loTheyr risk. High-yield bond funds invest in corporate bonds,

including high-yield orjunk bonds. With the potential for high yield, these bonds also

come with greater risk.

Money market funds

Money market funds hold 26% of mutual fund assets in the United States. Money

market funds entail the least risk, as Well as loTheyr rates of return. Unlike

certificates of deposit (CDs), money market shares are liquid and redeemable at any

time. The interest rate quoted by money market funds is known as the 7 Day SEC

Yield.

Funds of funds

Are mutual funds which invest in other underlying mutual funds (i.e., they are funds

comprised of other funds). The funds at the underlying level are typically funds which

an investor can invest in individually. A fund of funds will typically charge a

management fee which is smaller than that of a normal fund because it is considered

a fee charged for asset allocation services. The fees charged at the underlying fund

level do not pass through the statement of operations, but are usually disclosed in

the funds annual report, prospectus, or statement of additional information. The fund

should be evaluated on the combination of the fund-level expenses and underlying

fund expenses, as these both reduce the return to the investor.

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Most FoFs invest in affiliated funds (i.e., mutual funds managed by the same

advisor), although some invest in funds managed by other (unaffiliated) advisors.

The cost associated with investing in an unaffiliated underlying fund is most often

higher than investing in an affiliated underlying because of the investment

management research involved in investing in fund advised by a different advisor.

Recently, FoFs have been classified into those that are actively managed (in which

the investment advisor reallocates frequently among the underlying funds in order to

adjust to changing market conditions) and those that are passively managed (the

investment advisor allocates assets on the basis of on an allocation model which is

rebalanced on a regular basis).

The design of FoFs is structured in such a way as to provide a ready mix of mutual

funds for investors who are unable to or unwilling to determine their own asset

allocation model. Fund companies such as TIAA-CREF, American Century

Investments, Vanguard, and Fidelity have also entered this market to provide

investors with these options and take the guess work out of selecting funds. The

allocation mixes usually vary by the time the investor would like to retire: 2020, 2030,

2050, etc. The more distant the target retirement date, the more aggressive the

asset mix.

Hedge funds

Hedge funds in the United States are pooled investment funds with loose SEC

regulation and should not be confused with mutual funds. Some hedge fund

managers are required to register with SEC as investment advisers under the

Investment Advisers Act. The Act does not require an adviser to follow or avoid any

particular investment strategies, nor does it require or prohibit specific investments.

Hedge funds typically charge a management fee of 1% or more, plusperformance

fee of 20% of the hedge funds profits. There may be a lock-up period, during

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which an investor cannot cash in shares. A variation of the hedge strategy is the

130-30 fund for individual investors.

Equity investment

Generally refers to the buying and holding of shares ofstock on a stock market by

individuals and funds in anticipation of income from dividends and capital gain as the

value of the stock rises. It also sometimes refers to the acquisition of equity(ownership) participation in a private (unlisted) company or a startup (a company

being created or newly created). When the investment is in infant companies, it is

referred to as venture capital investing and is generally understood to be higher risk

than investment in listed going-concern situations.

Direct holdings and pooled funds

The equities held by private individuals are often held via mutual funds or other

forms ofpooled investment vehicle, many of which have quoted prices that are listed

in financial newspapers or magazines; the mutual funds are typically managed by

prominent fund management firms (e.g. Fidelity Investments or The Vanguard

Group). Such holdings allow individual investors to obtain the diversification of the

fund(s) and to obtain the skill of the professional fund managers in charge of the

fund(s). An alternative, usually employed by large private investors and pension

funds, is to hold shares directly; in the institutional environment many clients that

own portfolios have what are called segregated funds as opposed to, or in additionto, the pooled e.g. mutual fund alternative.

Commodities Market

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Commodity markets are markets where raw or primary products are exchanged.

These raw commodities are traded on regulated commodities exchanges, in which

they are bought and sold in standardized contracts.

This article focuses on the history and current debates regarding global commodity

markets. It covers physical product (food, metals, electricity) markets but not the

ways that services, including those of governments, nor investment, nor debt, can be

seen as a commodity. Articles on reinsurance markets, stock markets,bond markets

and currency markets cover those concerns separately and in more depth. One

focus of this article is the relationship between simple commodity money and themore complex instruments offered in the commodity markets.

Art Fund:

Wealth management now includes art, real estate investments.

With prices of paintings rising 10 times in the last two years, three new financialentities have launched art advisory services as part of Wealth management

services. While Citibank has been providing art advisory services like art insurance,

art storage and using art as a tradable collateral for some time, the recent surge in

prices has driven Yes Bank, ABN Amro and Dawnay Day to start this service.

The works of M.F. Hussain, Jatin Das or Anjolie Ela Menon are sought after by art

lovers not only for their aesthethic value but also as an asset. Art galleries are

involved in art valuations, i.e. mapping the pricing history of an artist or research on

art.

Art is now being treated as an investment and high net worth individuals are

prompting banks to look at alternative asset classes, such as art or real estate, for

investment as a part of Wealth management products.

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Diversified portfolio

Individuals looking at alternative investments rather than the usual investments in

equity-related products.

Investments in alternative asset classes give clients a diversified portfolio across a

variety of asset classes,

Yes Bank is expected to launch a Wealth management service that will offer

investment in real estate, art and jeWellery. It expects to kick-start the real estate

service during this fiscal.

The bank is planning tie-ups with real estate consultant agencies. The service will

largely cater to non-resident Indians seeking opportunities to invest in real estate in

the country,.

Tie-ups with galleries

In the art segment, tie-up with art galleries. Contemporary Indian art will be at focus.The hiring specialists in the field for advisory, High net worth individuals in India are

increasingly looking at contemporary Indian art as a good investment. With the

advent of private art funds and galleries, art is becoming an emerging asset class.

ABN Amro advises clients on investment in art. However, the execution depends on

the client in conjunction with experts in the field.

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It is difficult to generalize. The majority of clients begin with an investment of around

4-5 per cent of their portfolio, targets customers with Rs 2-2.5 crore threshold for

investment.

According to the banks, some clients also invest in these asset classes to minimize

risk because they are looking at protecting their capital. Investment in these asset

classes requires a review of clients age, personal ability to take risk and most

importantly, clients interest. What percentage of assets would be allocated to

alternative assets would depend on the clients interest and ability to take risk.

Real Estate Fund:

India Real Estate Fund is a significant component of the Indian realty market flooded

with Indian and foreign financial institutions. The growing increase in the industrial,

commercial and residential projects have boosted the real estate market in India.

This has thrown open unlimited scope for the incoming of the India Real Estate

Funds. The profits have encouraged financial assistance from not only domestic

funds but also lured many foreign investors to participate in the India Real Estate

Fund.

The cooperating assistance from the government has further encouraged liquidity

flow into the India real estate market sector. The foreign contributions in the India

Real Estate Fund have been witnessing a steady rise of 40%-45% per year. The

domestic financial institutions have also build up their investments like their foreign

counterparts. This combined participations from both along with contributions of the

corporate houses has accelerated the growth of India Real Estate Fund.

Leading India Real Estate Fund:

Some of the leading India Real Estate Fund are :

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1. HDFC Property Fund- HDFC India Real Estate Fund (HI-REF), the first

scheme HDFC Property Fund, invest in all the stages of the real estate

projects.

2. DHFL Venture Capital Fund- DHFL Venture Capital Fund, promoted by

Dewan Housing, has a focus on developing properties rather than investing in

real estate.

3. Kshitij Venture Capital Fund - Kshitij Venture Capital Fund, a group venture of

Pantaloon Retail India Ltd., will be deploying funds exclusively in developingmalls specially in western and southern India.

4. India Advantage Fund (ICICI)

5. Kotak Mahindra Realty Fund

6. Reliance Infrastracture

India Real Estate Mutual Fund:

The further involvements of the real estate mutual funds have improved the quality of

the construction practices. The 10th Five-Year Plan has proposed that Securities and

Exchange Board of India would regulate the India real estate mutual funds.

Real Estate Investment Trusts:

The primary difference between Real Estate Investment Trusts and a mutual fund is

that investments made in the former are traded in real estate stocks and not invested

in company stocks moreover they provides a heavier liquidity than the mutual funds.

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India Real Estate Foreign Funds-

The significant international investments in the India

Documents

My Project Report Final Copy