ASSIGNMENT

OF
FINANCIAL
INSTITUTIONS AND
SERVICES
TOPIC: PORTFOLIO MANAGEMENT

SUBMMITED TO:
SUBMMITED BY:
Mr Bhavdeep Singh Kochar Rupinderjit
Kaur RT1902A12

Preeti Bisht
RT1902A16

Suman
Tiwari RT1902A22

Rajat Gupta
RT1902B37
 FINANCIAL SERVICE: PORTFOLIO
MANAGEMENT

INTRODUCTION TO PORTFOLIO MANAGEMENT

The art and science of making decisions about investment mix and policy, matching
investments to objectives, asset allocation for individuals and institutions, and balancing risk
against performance.

Portfolio management is all about strengths, weaknesses, opportunities and threats in the choice
of debt vs. equity, domestic vs. international, growth vs. safety, and many other tradeoffs
encountered in the attempt to maximize return at a given appetite for risk.

In the case of mutual and exchange-traded funds (ETFs), there are two forms of portfolio
management: passive and active. Passive management simply tracks a market index, commonly
referred to as indexing or index investing. Active management involves a single manager, co-
managers, or a team of managers who attempt to beat the market return by actively managing a
fund's portfolio through investment decisions based on research and decisions on individual
holdings. Closed-end funds are generally actively managed.

WHAT IS PORTFOLIO MANAGEMENT?

Portfolio management is the on-going process of constructing portfolios that balance an

investor's ever changing goals with the portfolio manager's assumptions about the future.

Within the framework established by the investor’s investment policy, a strategy will be adopted
that ensures that the investor’s long-term objective(s) will be attained.

Often, the specific tactics that the portfolio manager might employ are also specified. The
portfolio is then monitored so that the strategy and tactics can be adjusted to accommodate the
outcomes realized and changes in the investor's objectives.

OBJECTIVES OF PORTFOLIO MANAGEMENT

The basic objective of Portfolio Management is to maximize yield and minimize risk. The other
objectives are as follows:

⇒
Stability of Income: An investor considers stability of income from his investment. He
also considers the stability of purchasing power of income.
⇒
Capital Growth: Capital appreciation has become an important investment principle.
Investors seek growth stocks which provide a very large capital appreciation by way of
rights, bonus and appreciation in the market price of a share.
⇒
Liquidity: An investment is a liquid asset. It can be converted into cash with the help of
a stock exchange. Investment should be liquid as well as marketable. The portfolio
should contain a planned proportion of high-grade and readily salvable investment.
⇒
Safety: safety means protection for investment against loss under reasonably variations.
In order to provide safety, a careful review of economic and industry trends is necessary.
In other words, errors in portfolio are unavoidable and it requires extensive
diversification.
⇒
Tax Incentives: Investors try to minimize their tax liabilities from the investments. The
portfolio manager has to keep a list of such investment avenues along with the return
risk, profile, tax implications, yields and other returns.

PORTFOLIO MANAGEMENT PROCESS

The portfolio management process steps include:

 Portfolio Management Process

o Identification
o Categorization
o Evaluation
o Selection
o Prioritization
o Balancing
o Authorization
o Review and Reporting
o Strategic Change
  Governance Process

o Consultation
o Preparation
o Selection

 Portfolio Management Dashboards

o Status Summary View

o Gantt View
o Cost View
o Risk view

The Portfolio Management Process

 IDENTIFY GOALS AND OBJECTIVES

When will you need the money from your investments? What are you saving your money for?
With the assistance of your financial advisor, the Investor Profile Questionnaire will guide you
through a series of questions to help identify the goals and objectives for your investments.

 DETERMINE OPTIMAL INVESTMENT MIX

Once you have completed the Investor Profile Questionnaire, your optimal investment mix or
asset allocation will be determined. An asset allocation represents the mix of investments (cash,
fixed income and equities) that match your individual risk and return needs. This step represents
one of the most important decisions in your portfolio construction, as asset allocation has been
found to be the major determinant of long-term portfolio performance.

 CREATE A CUSTOMIZED INVESTMENT POLICY STATEMENT

When your optimal investment mix is determined, the next step is to formalize your goals and
objectives in order to utilize them as a benchmark to monitor progress and future updates. At this
stage in the process, you will be provided with a detailed written Investment Policy Statement,
which summarizes your needs including liquidity, growth and investment horizon.

This Investment Policy Statement forms the roadmap for your personalized investment strategy,
to ensure that you always have a reference point for your investment plan.

 SELECT INVESTMENTS

Your customized portfolio is created using an allocation of select QFM Funds. Each QFM Fund
is designed to satisfy the requirements of a specific asset class, and is selected in the necessary
proportion to match your optimal investment mix. The QFM Funds invest in Exchange Traded
Funds (ETFs), third party mutual funds and individual securities from around the world to ensure
that you maximize your return while minimizing your risk.

 MONITOR PROGRESS

Building an optimal investment mix is only part of the process. It is equally important to maintain
your optimal mix when varying market conditions cause your investment mix to drift away from
its target.

To ensure that your mix of asset classes stays in line with your unique needs, your portfolio will
be monitored and rebalanced back to your optimal investment mix should you drift from these
target allocations? No matter how the markets perform, you can be confident that your portfolio
will stay on track with the objectives set out in your Investment Policy Statement.

 REASSESS NEEDS AND GOALS

Just as markets shift, so do your goals and objectives throughout your life. Whether your personal
goals include retirement, funding education or a major purchase, it is important to conduct regular
reviews with your financial advisor to ensure that your portfolio continues to meet your needs.
With the flexibility of the Portfolio Program and Asset Management Program, when your needs
or other life circumstances change, your portfolio has the flexibility to accommodate such
changes.

PORTFOLIO MANAGEMENT SERVICES

Portfolio Management Services (PMS) is an investment portfolio in stocks, fixed income, debt,
cash, structured products and other individual securities, managed by a professional money
manager that can potentially be tailored to meet specific investment objectives.

When you invest in PMS, you own individual securities unlike a mutual fund investor, who
owns units of the entire fund. You have the freedom and flexibility to tailor your portfolio to
address personal preferences and financial goals. Although portfolio managers may oversee
hundreds of portfolios, your account may be unique.

Investment Management Solutions in PMS, can be provided in the following ways:

• Discretionary
• Non Discretionary
• Advisory

Discretionary: Under these services, the choice as well as the timings of the investment
decisions rest solely with the Portfolio Manager.

Non Discretionary: Under these services, the portfolio manager only suggests the investment
ideas. The choice as well as the timings of the investment decisions rest solely with the Investor.

However the execution of trade is done by the portfolio manager.

Advisory: Under these services, the portfolio manager only suggests the investment ideas.
The choice as well as the execution of the investment decisions rest solely with the Investor.
Note: In India majority of PMS providers offer Discretionary Services.

PMS is a very personalized service wherein each portfolio has to be specifically constructed
in order to reflect the objective and risk appetite of a particular client. Our qualified managers
are constantly evolving methodologies and financial models that provide them with a
composite mix of:
1. Medium term comprising of value investing and other fundament tools
2. Short term comprising primarily of technical analysis and tools
3. Hedging strategies comprising of derivative product
 BENEFITS OF PORTFOLIO MANAGEMENT:

When implemented properly and conducted on a regular basis, Portfolio Management is a high
impact, high value activity.

 Maximizes the return on your production innovation investments.

 Maintains your competitive position.
 Achieves efficient and effective allocation of scarce resources.
 Achievers focus.
 Communicates priorities.
 Achievers balance.
 Enables objective project selection.

Top performers emphasize the link between project selection and business strategy.

SERVICES AND STRATEGIES PROVIDED THROUGH PORTFOLIO

MANAGEMENT ARE:

o Portfolio manager’s works as a personal relationship manager through whom the client
can interact with the fund manager at any time depending on his own preference.
o To discuss any concerns regarding money or saving, the client can interact with his
appointed portfolio manager on monthly basis.
o The client can discuss on any major changes he want in his asset allocation and
investment strategies.
o Portfolio management service (PMS) handles all type of administrative work like
opening a new bank account or dealing with any financial settlement or depository
transaction.
o While choosing online Portfolio management service (PMS), the client receives a User-
ID and Password, which helps him in getting online access to his portfolio details and
checking his portfolio as frequent as he want.
o Portfolio management service (PMS) also help in managing tax of his client based on
the detailed statement of the transactions found on his portfolio.

PORTFOLIO MANAGEMENT PAYMENT CRITERIA

There are types of payment criteria offered by portfolio managers to their client, such as:

• Fixed-linked management fee.

 • Performance-linked management fee.

In fixed-linked management fee the client usually pays between 2-2.5% of the portfolio value
calculated on a weighted average method.

In performance-linked management fee the client pays a flat fee ranging between 0.5-
1.5percent based on the performance of portfolio managers. The profits are calculated on the
basis of 'high watermarking' concept. This means, that the fee is paid only on the basis of
positive returns on the investment.

In addition to these criteria, the manager also gets around 15-20% of the total profit earned by
the client. The portfolio managers can also claim some separate charges gained from
brokerage, custodial services, and tax payments.

PORTFOLIO MANAGEMENT – “GROWTH”

Portfolio management is a tool provides some basic benefits such as giving a holistic view of
the various investments and the alignment of the investments with the long term goals of the
individual Portfolio is one of the most challenging jobs. It helps to control of your investment
and gives benefits to us
The growth depends upon:
 Maximize value of investments while minimizing the risk
 Allow investors to schedule resources more efficiently
 Reduce the number of redundant investments and make it easier to kill loss making
investments.

Therefore portfolio management definitely meaning that you are left with more money with
you and also reduces the expenditure by 2o percent by saving the losses..

In India, we know most of the middle class earners have been risk averse therefore most of
their savings in fixed deposit and other saving accounts though the yield from such investment
avenues is very low. The recent trend has been such that more people have been attracted
towards the portfolio management.

INVESTMENTS IN MUTUAL FUNDS AND EQUITY

It is in this light that Portfolio Management Companies have been gaining prominence in India.
The trend is only set to go upwards in the years to come, as the Indian middle class becomes
more risk friendly and therefore, the growth of the portfolio management in India overall
having a good result,
 therefore with the advent of computers the whole process of portfolio has become quite
easily

 the trend towards liberalisation and globalisation of the economy has promoted free
flow of capital access international borders
Therefore, portfolio now includes not only domestic securities but also foreign securities
therefore growth rate of portfolio management increases time to time and also go up
rapidly......

PORTFOLIO MANAGEMENT IS BECOMING MULTIFACETED

IN INDIA

In the arena of increasing global regulation, uneven inflationary situation and commoditization
of products, it is not at all possible to gain a sustainable growth. All professionals and business
leaders in the investment services have become mindful that only right technologies and active
financial management can achieve financial goals.

Portfolio management in India has provided the vital insights to expand competitive initiation
in this complex financial market. The portfolio management team involves managers who try
to increase the market return by actively managing financial portfolio through investment
decisions based on research and individual investment choices.

They actively manage closed-end funds because they have years of actual daily trading
experience. These managers are highly skilful and adept at carrying on profound research.
They can perform with passion and innovation in investment services. So they can give fruitful
financial advice to expand financial gains. Investment services involve different financial
instruments such as pension fund, mutual fund, equity and share, investment on property,
commodity, IT, stock, and bond, financial derivatives. These instruments have a certain level
of risk and give returns in the long run. The returns can be positive only when it is invested
professionally. In the early days, people were optimizing profit or financial returns by using
heuristic or mathematical models.

However, this methodology paid little interest to balance the portfolio in accordance with the
business's policy. The shortcoming of this approach is evened out with the new criteria of
portfolio management in India. A general growth portfolio includes a number of projects and it
efficiently manages them to reduce cost, expand to the new markets or new products, and so on
to achieve the company's desired business targets. The skilled managers carefully select the
right blend of projects that can increase ROI, market share and achieve a sustainable growth
portfolio. They apply an investment plan to maintain a balance between investment risk and
return. They follow certain rules to allocate the major portion of resources to invest whether in
extremely volatile markets like share and equity market or in treasury notes, money market
funds. They provide a good investment option, excellent return at manageable risk. So any
individuals, a beginner or an experienced investor or a monthly earner for living can take the
advantages of portfolio management service.

With the considerable investments required to expand new products and the risks involved,
portfolio Management in India is becoming a progressively more important tool to make
strategic decisions about product development and the investment of company reserves.

CURRENT STATUS OF PORTFOLIO

MANAGEMENT IN INDIA:
Now-a-days, portfolio management is very popular concept. Because every investor wants to
increase his investment. In the earlier days, it was not so good. People make optimise profits
but now investors are taking the help of the professionals and they help them in various
decisions. Select the right blend of projects that can increase ROI, market share and achieve a
sustainable growth portfolio. They apply an investment plan to maintain a balance
between investment risk and return. They follow certain rules to allocate the major portion of
resources to invest whether in extremely volatile markets like share and equity market or in
treasury notes, money market funds. They provide a good investment option, excellent return
at manageable risk. So any individuals, a beginner or an experienced investor or a monthly
earner for living can take the advantages of portfolio management service.

With the considerable investments required to expand new products and the risks involved,
portfolio Management in India is becoming a progressively more important tool to make
strategic decisions about product development and the investment of company reserves. All
professionals and business leaders in the investment services have become mindful that only
right technologies and active financial management can achieve financial goals.

Portfolio management in India has provided the vital insights to expand competitive initiation
in this complex financial market. The portfolio management team involves managers who try
to increase the market return by actively managing financial portfolio through investment
decisions based on research and individual investment choices. They actively manage closed-
end funds because they have years of actual daily trading experience. These managers are
highly skilful and adept at carrying on profound research. They can perform with passion and
innovation in investment services. So they can give fruitful financial advice to expand financial
gains.

Investment services involve different financial instruments such as pension fund, mutual fund,
equity and share, investment on property, commodity, IT, stock, and bond, financial
derivatives. These instruments have a certain level of risk and give returns in the long run. The
returns can be positive only when it is invested professionally.

Many Companies dealing in Portfolio Management. These are Kotak Securities, Unicon
Portfolio Management, UTI, karvy, Reliance etc.

Here, we take the example of Kotak Securities

Kotak Securities: Portfolio Management Services

Kotak Securities is one of India’s oldest portfolio management companies with over a decade
of experience. It is also one of the largest, with Assets Under Management of over Rs. 3300
Crores. Kotak Portfolio Management from Kotak Securities comes as an answer to those who
would like to grow exponentially on the crest of the stock market, with the backing of an
expert.

Kotak Securities is a SEBI registered Portfolio Manager for providing both Discretionary as
well as Non Discretionary portfolio management service. Kotak Securities is a depository
participant with National Securities Depository Limited (NSDL) and Central Depository
Services Limited (CDSL).

Unlike many other companies, Kotak Securities Ltd. has a Centralised Risk Management
System and an in-house Research Team which allows it to offer the same levels of service to
customers across all locations. Kotak Securities was awarded as the most customer responsive
company in the Financial Institution sector by AVAYA Global Connect Award both in 2006
and 2007.

Kotak Portfolio Management offers various schemes to suit individual investment objectives.

Following are the products offered by Kotak Securities –

o GUARDIAN PORTFOLIO

With the Guardian Portfolio Kotak Securities invests in both gold and equity. At any point of
time around 20 per cent of the assets will be invested in the gold. The allocation to gold may
go up to 50 per cent depending upon the market condition and the rest will be invested in the
equity market. The minimum investment is Rs 10 lakh.

o BEP – Large cap focus portfolio

In the BEP – Large cap focus portfolio, investments will be made in mis-priced large cap
stocks that have a high growth potential and can withstand macro level risks to sustain in an
adverse environment. Large Caps are dominant players in their respective sectors, and hence
have the strength and the ability to maintain margins in a tough operating environment.

o GEMS PORTFOLIO

GEMS are a 30-month closed-end product. The scheme intends to create a focused portfolio of
stocks from across sectors and market capitalization ranges. Its main feature is its special
mandate to participate in the pre-FPO (follow-on public offer) placements and private
placements of listed companies. Investments of up to 30 per cent of the overall assets can be
made in such opportunities.

o ORIGIN

Origin portfolio aims to invest in growth oriented companies with sustainable business models
backed by strong management capabilities with emphasis on smaller capitalized companies
with a market capitalization not exceeding Rs. 2500 crore at the time of investment.

o INVEST GUARD PORTFOLIO

The Invest guard Plan is a ‘CPPI Model’ which invests across shares and fixed income
products, moving from shares into fixed interest investments when the fund’s value drops
below a predetermined “floor”. When markets start to move up, the product increases its
holdings in shares, tapping into these growth opportunities.

o CORE PORTFOLIO

Core Portfolio aims to capture the long term upside of the India Growth Story by diversifying
across the major themes. The investments are in all equity and equity related instruments with
emphasis on companies in the business areas driven by consumerism, outsourcing, real estate
and core infrastructure players and is essentially a mix of small, medium and large
capitalization companies.

The Portfolio Management Service combines competent fund management, dedicated research
and technology to ensure a rewarding experience for its clients. Special relationship managers
are appointed to manage your investments in the best possible manner and make sure that you
get maximum returns of your investments. Kotak PMS has a dedicated fund management and
research team that frequently meets management of companies and is well-placed to spot such
opportunities.

BENEFITS OF CHOOSING PORTFOLIO MANAGEMENT SERVICES

(PMS) INSTEAD OF MUTUAL FUNDS:

While selecting Portfolio management service (PMS) over mutual funds services it is found
that portfolio managers offer some very services which are better than the standardized product
services offered by mutual funds managers.

Such as:

Asset Allocation: Asset allocation plan offered by Portfolio management service helps in
allocating savings of a client in terms of stocks, bonds or equity funds. The plan is tailor made
and is designed after the detailed analysis of client's investment goals, saving pattern, and risk
taking capacity.

Timing: portfolio managers preserve client's money on time. Portfolio management service
(PMS) help in allocating right amount of money in right type of saving plan at right time. This
means, portfolio manager provides their expert advice on when his client should invest his
money in equities or bonds and when he should take his money out of a particular saving plan.
Portfolio manager analyzes the market and provides his expert advice to the client regarding
the amount of cash he should take out at the time of big risk in stock market.

Flexibility: Portfolio Managers plan saving of his client according to their need and
preferences. But sometimes, portfolio managers can invest client's money according to his
preference because they know the market very well than his client. It is his client's duty to
provide him a level of flexibility so that he can manage the investment with full efficiency and
effectiveness.

In comparison to mutual funds, portfolio managers do not need to follow any rigid rules of
investing a particular amount of money in a particular mode of investment.

Mutual fund managers need to work according to the regulations set up by financial authorities
of their country. Like in India, they have to follow rules set up by SEBI.

FUTURE PROSPECTUS OF THE PORTFOLIO

MANAGEMENT SERVICES IN INDIA
Now, if we talk about the future prospective of portfolio services, then we see every investor
want to see growth in its investment and returns. He/ she wants higher return than risk. They
want their investments are diversified in such a manner so that the risk of one may
compensated by another and for this they have to take the services of the experts.

So, we can say that the future of the portfolio management is very bright. Because in today’s
world everyone wants to invest in a wisely manner and so that it may reduce their risk. So, on
the every step they have to take the help of the professionals or experts. In Mutual fund, there
are also the experts who manage the asset mix of the investors but there are some shortcomings
in the mutual fund like flexibility is not there. So portfolio managers provide these facilities to
their clients and they feel satisfied from their managers.

Moreover, many companies are providing the facilities of portfolio management and many
other are entering into these services. So, we can say that in the near future, portfolio
management services will grow very fast and from this many investors are taking benefits from
this. There are specialised portfolio managers who are taking care for it and charges
commission for their services and many other companies are entering for providing better
services to the investors. So, in the near future it will definitely increase.

REFERENCES
 www.npd-solutions.com/portfolio.html
 http://www.ipcc.ca/services/portfolioplanning.aspx
 http://www.indianchild.com/management/portfolio-management.htm
 http://www.kotaksecurities.com/whatweoffer/portfoliomanagement.html
 http://www.botinternational.com/portfolio_management.htm
 http://www.articlesbase.com/investing-articles/portfolio-management-is-becoming-
multifaceted-in-india-2766839.html#ixzz140SWdkGr
 http://www.uniconindia.in/ProdAndServ/PortfolioManagement.aspx?id=14
 http://www.sushilfinance.com/capitalmarket/Services/portfolio-management-services-
india.asp?id=4&MNU=2&SubMNU=2&sel=3
 http://hubpages.com/hub/Kotak-Securities-PMS
 http://www.investopedia.com/terms/p/portfoliomanagement.asp

CONCLUSION

It can be concluded, that future of portfolio management is bright provided proper regulations
prevail and investor’s needs are satisfied by providing variety of schemes. The interest of
investors is protected by SEBI. Portfolio management is governed by SEBI Act.

Due to the benefits available to the individual’s such as reduction in risk, expert professional
management, diversified portfolios, tax benefits etc. People are willing to invest in different
investment avenues through portfolio manager or through mutual funds which are again
managed by portfolio managers.

However, it can be said that the future of portfolio management is bright in years to come.