Project Title

Understanding the Portfolio Management

of Investors

1
 Executive summary
The whole project is based on analysing the factors that impact the decision of portfolio
manager while creating a portfolio. The study is conducted at India Infoline by studying its
various product and client for them. India Infoline is financial service provider started in the
year 1995. Now it is India’s leading financial service provider which provide various kinds of
financial products to its customer.

The study mainly focusses on which type of customer are targeted to invest in structured
product like Portfolio management service as it tickets size is very high. The product like
PMS attract good revenue for company hence while creating portfolio the care is taken that
the portfolio should not earn negative return.

In this project we can see that lot of factor related to client/customer affect the decision of
portfolio manager. There are various market related factor that also impact the decision of
portfolio manager but that factor are not covered in the study due to several limitation.

2
Chapter 1: Introduction

3
 1.1. Introduction
When it comes to investment an individual has several options such as Gold, Real Estate,
Stocks etc. to invest in stock market an individual needs knowledge about stock market or he
need and professional who handle his portfolio or investment on his behalf. In this market
itself an individual has several options such as trading, Mutual fund, PMS, AIF etc. There are
various criteria to choose from these options. If we take PMS in to consideration it requires
minimum investment of twenty-five lakh rupees which is affordable only to HNIs so the
scope of project has reduced to high net worth individual and products offer to them.

Securities are instrument generally issued by institutions to raise funds. Security market help
to transfer or enable the flow of capital from the person who have surplus of money to those
who need it. Securities market helps in transfer of resources from those with idle or surplus
resources to others who have a productive need for them. In general words security market
provide way for conversion of saving into investment.

Securities are issued by companies, financial institution, or the government. They are bought
by anyone who have money to invest. Security ownership permits investors to convert their
savings into financial assets which will eventually give return. Security issuance allows
borrowers to raise money at a cost.

Products of security/stock market –

1. Equity
2. Debentures/bonds
3. Warrants
4. Indices
5. Mutual fund
6. Exchange Traded Funds (ETFs)
7. Preference Shares
8. Convertible Debentures & Bonds
9. Foreign Currency Convertible Bonds
10. Equity Linked Debentures
11. Commodity Linked Debentures
12. Mortgage Backed Securities (MBS) and Asset Backed Securities (ABS).

4
 Structure of security market.

Stock Exchange

Stock Exchanges is a part of stock market. It provides a trading platform to buyers and sellers
where they can sale and buy security which are possess by them. Stock markets such as NSE,
BSE and MSEI, are nationwide exchanges. These exchanges use electronic trading terminal
for regular trading activity. On electronic trading terminal order matching is done
anonymously. Stock exchanges also appoint clearing and settlement agencies and clearing
banks that manage the funds and securities settlement that arise out of these trades.

these exchanges do not work on their own, they need to be run by some other people or with
the help of some people or institution. Following member help to run exchanges as
mentioned above. These are

1. Stockbroker

Stock brokers are the registered members of stock exchanges. These are the persons who act
on behalf of investor to buy, sell or deal in securities. To become a stock broker a person
needs to have certificate of registration issued by SEBI. SEBI imposes some conditions on

5
 broker while issuing the certificate of registrations. It is obligatory for the person to follow
the rules, regulations and the by-laws of SEBI. Stock brokers are commission broker, floor
broker, arbitrageur etc.

2. Sub broker
A sub-broker acts as agent of stock broker. He does not hold a membership of a
stock exchange. He helps the investors in buying, selling or dealing in securities through
stockbroker. The broker and sub broker should enter into agreement in which obligation of
both should be specified. Sub broker should be registered with SEBI for dealing in securities

3. Market Makers
Market makers are specialist in specified security. They do both bid and offer at the same time.

4. Portfolio consultant.
A combination of stock, bond, money market security is collectively called as portfolio. And
the person, institution who advise or undertake management of portfolio is called as portfolio
consultant.

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 1.2 Company profile.

IIFL is a financial services company which was started by a group of optimistic entrepreneurs
in 1995. The strength of IIFL lies in the power of dreaming big and believing in your dreams.

IIFL was the pioneer in the retail broking industry with its launch of 5paisa trading platform
which offered the lowest brokerage in the industry and the freedom from traditional ways of
transacting. Our strength has been to continuously innovate and reinvent ourselves. IIFL’s
evolution from an entrepreneurial start-up in 1995 to a full range diversified financial
services company is a story of steady growth by adapting to the dynamic business
environment, without losing focus on our core domain of financial services.

Today, IIFL Holdings Limited (Bloomberg Code: IIFL IN, NSE: IIFL, BSE: 532636) is
India’s leading integrated financial services group with diverse operating businesses, mainly,
Non-Banking and Housing Finance, Wealth and Asset Management, Financial Advisory and
Broking, Mutual Funds and Financial Product Distribution, Investment Banking, Institutional
Equities, Realty Broking and Advisory Services.

IIFL serves more than 4 million satisfied customers across various business segments and is
continuously building on its strengths to deliver excellent service to its expanding customer
base.

Rs.5066 cr 15000 + 1400 +

($779 mn)
Networth workforce BRANCHES

500 +
40 lac+

stocks under
Customers
research

7
IIFL foundation of excellence.

At IIFL, we have laid the right foundation for excellence under our four pillars of Research,
Technology, Human Capital and unflinching adherence to the strictest standards of Ethics
and Compliance.

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 1.3 Vision and Mission

Vision –

To be the most respected financial institution in India, not necessarily the largest or most
profitable.

Values –

• Fairness:
Fairness in our transaction with all stakeholder including employees, customers, and vendors
bereft of fear or favour.
• Integrity:
Integrity and honesty of utmost nature, in letter in spirit, and in all our dealings with people
internal or external.
• Transparency:
Transparency in all our dealing with stakeholder, media, investors and the public at large.

Mission -

Begin with an entrepreneurial start-up in 1995, we have steadily grown to become one of
India’s leading financial services company. Ever since our inception, our strategy has been to
align our capabilities and market insights to the country’s rapidly changing business
environment. Our growth motive has only served to reinforce our focus on our domain of
financial services.

• Doubling
• Durability
• De-risking

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 •Revenue - 2X
•Net Profit - 2.5X
•Over FY16 - FY20
•FY16 to FY20 - Doubling of revenue and 2.5x profit and
Doubling target to raise ROE from 17.3% to 24%
•Adequately capitalized to sustain volume growth
•Margin improvement to be driven by
oRating upgrade to help lower cost of funds
ocircle Cost optimization

•Revenue - 2X
•Net Profit - 2.5X
•Over FY16 - FY20
•FY16 to FY20 - Doubling of revenue and 2.5x profit and
Durability target to raise ROE from 17.3% to 24%
•Adequately capitalized to sustain volume growth
•Margin improvement to be driven by
oRating upgrade to help lower cost of funds
ocircle Cost optimization

•Diversifying revenue sources with focus on financial services

•Diversified asset mix geographically well spread
De-risking •Broadening service offerings
•Best-in-class risk management framework
•Scale & digitization to bring costs down

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ACHIVEMENTS OF IIFL
Best Private Banking Services. Overall in India 2017- Euromoney.
ET Best BFSI Brands Recognition.
Digital Innovation Champion Award – CIO Crown 2016

IIFL as a brand

In today’s world, a brand is considered as the most valuable asset of an organization. It serves
as the medium that connects our numerous offerings to customers adding value to their lives.
It is an intangible voice that speaks volumes about the company.

With a product class that fulfils customer expectations and often exceeds them, we have
created a diverse portfolio, a broad spectrum of offerings with a business model that
shareholders and investors have come to trust.

We are a brand that is not afraid to dream big and see those dreams to fruition. Our single-
minded focus in providing investment advice while ensuring the highest standards of ethics
and compliance, transparency while transacting business and staying ahead of the curve in
technological innovations has helped us build credibility and a reputation, we are proud of
today.

Lastly, at IIFL, it is our firm belief that a brand is the face of a company’s work culture. It is
something that introduces you to our customers and to the world. Our brand is your identity;
it narrates your success story and serves as a sign of how you represent us with a sense of
pride and ownership.

11
1.4 Corporate structure

12
 Milestones

• 1996 (Inception) - A small group of passionate individuals formed probity research and
services Pvt. Ltd, an information service company in October 1995 with vision to produce
high quality, unbiased, independent research on the Indian economy, business, industries and
corporates.

Originally incorporated as probity research and services Pvt. Ltd., the name of the
company was later changed to India Infoline ltd.

• 1997 (Focus on high quality research) – the quality of research soon resulted in client list that
read like who’s who of Indian business and finance, from Hindustan liver to Tata’s, from
crisil to McKinsey, from SBI to Citibank.
• 1998 ( Leading FII, brokers, banks and companies were immediate subscriber) – we launched
our research product – probity 200 company reports, followed by economy probe, sector
reports covering pharmaceuticals, information technology, oil and gas and FMCG among
others
• 1999 – Launch of www.indiainfoline.com
• 2000 – Launched online trading through www.5paisa.com
• 2001 (dot com bust and preparation for better times) – the internet bubble which grew at an
alarming pace, reached a saturation point, finally bursting and funding just vanished.
• 2002 (Survival of fittest) – there was a global gloom. The internet bubble burst, the economy
witnessed slowdown and the stock market was paralysed by the Ketan Parekh scam. We
conserved resources, focus on survival and avoided any distractions which were away from
our core competencies.
• 2003 – Trader terminal our proprietary software to revolutionise online trading.
• 2004 – our commodity license.
• 2005 – Listing on NSE and BSE our maiden IPO.
• 2006 – Commencement of our lending business.
• 2007 – From retail to wholesale – Institutional equities begin with bang.
• 2008 – Launch of IIFL Wealth Management.
• 2009 – Enterprising India
• 2010 – commenced gold loan business.
• 2011 – The launch of IIFL mutual fund.
• 2012 – Announcing the real estate fund.

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• 2013 – The biggest AIF, an all-time high income and profit.
• 2014 – Set up advisory services for succession and estate planning in IIFL wealth
management.
• 2015 - Launched mobile trading platform
• 2016 - IIFL finds backing by marquee institutional investors
•
• 2017 - Acquisition of Micro-Finance Institution

• 2018 - IIFL Wealth raised Rs 746cr by way of fresh issue of equity

IIFL wealth management ltd is the subsidiary of IIFL holdings ltd which runs the business of
wealth management (PMS). It have five different option such as for :

• First-gen Entrepreneur
• Family business owner
• Public Figure
• Professional
• NRI

14
Chapter 2: Objectives and Limitation

15
 Objectives:

1 To know what portfolio management system is and how it works.

2 To know what kind of people opt for portfolio management services.

3 To gain the knowledge about asset allocation

4 To know the different factors that affect the decision of portfolio manager.

Limitation

• Time limit was the biggest constraint while during the process of research study.
• Maintaining confidentiality of client’s data is the biggest limitation.
• The information provided by organisation is limited due to norms and competition.

16
Chapter 3: Theoretical Background

17
 3.1 Theoretical background

There are various types of investor depending upon their objectives of investment. Some
investor seek return while some go for return as well as security. Normally there are five
category of investor who invest in PMS and products like PMS

Investors

Institutional
Inheritors Entrepreneurs Professionals. NRI
investors

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3.2 Following are the products that IIFL offer to above individuals. As these products
require high amount of minimum investment these are affordable to High net worth
Individuals.

• Ticket Size 25 lakh

• Fee charged 2.5% of the amount Invested and can be negotiated
PMS as the amount portfolio held increses.

• AIFs offer a chance for to investors to go off the beaten track and
invest in securities that are unavailable to the common investor.
Real estate, venture capital, hedge funds, commodities, pre-IPO
placements and derivative contracts can bolster the portfolio,
AIF
mitigate risk and spur returns.
• While AIFs can also invest in listed equities, the structure allows
for investments in securities which are unavailable under the
traditional mutual fund platform.

• close-ended Category II Alternative Investment Fund (AIF)

• invest primarily in companies at the Pre-IPO stage or in the IPO
SOF
as an anchor investor or through the QIB route.

•Commercial complx
• Residential Real Estate
Real Estate

• Under portfolio restructuring services underlying shares in a portfolio is

annalysed on the basis of current market senario
PRS • Potentially good stocks are bought and underperforming assets are sold off.

•Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) are allowed to
invest in the secondary capital markets in India through the portfolio
NRI Services
investment scheme (PIS).

•Focused Equity Fund. ( Growth fund)

Mutual •Capital Enhancer Fund
Funds

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 3.2.1 Portfolio management

A portfolio is a combination of financial instruments such as stocks, bonds, commodities,

currencies as well as their fund counterparts, including mutual fund, exchange-traded fund and
closed funds. A portfolio also can be group of non-publicly tradable securities, like real estate,
and private investments. Portfolios are own by investor and managed by financial professionals
and money managers.

Portfolio Management is all about managing your portfolio investment strategically, by

selecting the best mix of investment options in the right proportion and continuously shifting
them in the portfolio. That is portfolio management is just like cooking the best recipe for your
appetite to increase the return on investment that you have invested and maximize the wealth.

Portfolio Management Service consist of investment analysis and portfolio management. It's
an investment product usually available for the investors who have high net-worth/idle money.
It's more of an investment portfolio monitoring for those who can't do it for themselves. The
reason this service is special is that it gives the subscriber a complete freedom from the hassles
and complexities that are associated with equity investment. Namely, research of various stocks
and analysis of the stock, keeping track of all the business and political activities which can
potentially have an impact on your investment. That's too much of work for a working
professional.

PMS is different from mutual fund, when you invest in PMS you own individual security unlike
in mutual fund a investor owns units of entire fund. PMS provides you the freedom and
flexibility to tailor your portfolio according to your personal preferences and financial goals.
Although portfolio managers may look after hundreds of portfolios still your account will be
unique.

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 2.1.1 Types of portfolio management in India

Discretionary PMS

In this type, the full authority of buying, selling and strategizing rests with the service provider.
There is no obligation whatsoever on the service provider to consult the investor before taking
any decision on his/her behalf. Most of the top PMS provider in India offer discretionary
service.

NON – Discretionary PMS

In this type, the investor can actively participate in all the portfolio activities. He/she can give
suggestions and ideas to the manager. Though this method gives more liberties to the investors,
it defies the purpose of PMS as the professional portfolio manager, despite knowledge and
aptitude, has to consult the investor before taking crucial calls. Due to these complications of
consulting client, non-discretionary PMS is considered counterproductive.

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 2.1.2 Process of Portfolio management

A best portfolio management service helps you at every stage of the investment since from
constructing your portfolio to evaluate it periodically and make changes.

Security Analysis

Security analysis is the first stage of portfolio creation process, which involves examining the
risk factors, as well as the expected returns of individual securities and its match ability with
the investors risk appetite and financial goals.

Portfolio Analysis

After identifying the potential stocks and the respective risk involved, a number of portfolios
can be created out of them, which are known as feasible portfolios.

Portfolio Selection

Out of all these feasible portfolios, the optimal portfolio, which is best suited for the investors
according to his needs and goals, is selected.

Portfolio Selection

Once the portfolio is chosen, the portfolio manager and his team of research analysts, keep a
track of the portfolio, to make sure that no opportunity is missed of earning best returns for the
investor.

Portfolio Evaluation

Here in this stage, the performance of the portfolio is assessed periodically to evaluate the
quantitative measurement of the return obtained against the risk involved in the portfolio, for
the whole term of the PMS investment. In this stage, if there is a necessity to make changes in
the portfolio to achieve the specific return expectation the asset allocation is also drifted which
in turn helps to achieve the goal within a stipulated period of time.

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 2.1.3 Risk associated with PMS

1. Regulatory risk

2. Asset class risk

3. Credit risk

4. Performance Risk

5. Interest rate risk

2.1.4 Provisions of SEBI for PMS

• High Water Mark Principle regarding calculation of fees, disclosure of fees;

• Obligation to act in a fiduciary capacity;

• Audit of overseas fund;

• Entering into agreement between the portfolio manager and overseas fund;

• Reporting requirements in respect of overseas fund;

• Minimum investment requirements (i.e. INR 25 Lakhs), etc.

2.1.5 TYPICAL PROFILE OF PMS CLIENT

The Investment advice provided by PMS cater to a niche segment of clients. The clients
can be Institutions or Individuals with high net worth. A high net worth individual (HNI)
having a minimum net worth of Rs. 2 crores are a suitable profile. Someone who is looking for
a actively focused portfolio management and personalized investment solutions and high level
of service. The investment offering are usually ideal for investors: who are looking to invest in
asset classes like equity, fixed income, structured products etc

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 2.1.6 ELIGIBLE INVESTORS IN PMS

The following are eligible investors: –

Resident Individuals (>18 years)

Hindu Undivided Families (HUF)

Body corporate (Private /Public)

Trust (registered)

Sole Proprietorship Firm

Co-Operative Society

NRIs (subject to RBI approvals)

Partnership firms and other eligible investors

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 2.1.7 There is various strategy in portfolio management, Presently IIFL is offering
following portfolio strategies to client based on client’s profile, overall investment
objective and other factor that are relevant in constructing and managing portfolio.

• Investment in Customized Discretionary Portfolios:

The Customized Discretionary portfolios are tailor-made to meet clients’ specific objectives.
The portfolios have client-specific investment objectives and risk control metrics. Investments
may be made across equity and debt schemes and are customized to meet specific liquidity
needs. The portfolio under discretionary services can be classified as Customized Equity
Portfolio or Customized Debt Portfolio.
• Investment in Real Estate Companies Portfolio :
The objective is to participate on behalf of the clients in debt instruments issued by companies
into real estate. The aim is to achieve regular interest and/or capital appreciation by investing
in debentures of financially sound unlisted/listed real estate companies or funds investing in
the securities of real estate companies.
• Long Term Value Portfolio:
Its philosophy is money is made by investing in the long term. The portfolio uses a focused,
bottom up approach wherein not more than 15 – 20 stocks are selected. This is value oriented
fund with capitalization in large cap funds. This Portfolio is suitable to Investors who like to
invest with a Long-term wealth creation view with medium risk and medium returns.
• IIFL Multicap Portfolio:
The Portfolio Strategy and objective is to generate long term capital appreciation for investors
from a portfolio of Large, Mid & Small cap stocks. The investment strategy of the Portfolio
will be to invest in companies & sectors that are available at significant discount to their
intrinsic value and provide earnings visibility. We look for companies with a Bottom-Up
approach which includes Quality management, Strong business model, Consistent growth,
Reasonable valuation, etc. The Portfolio will be taking a concentrated position in stocks and
sectors.
• Lease Rent Discounting/ Pre-leased Rental Strategy:
Under this portfolio investment will be made in shares of unlisted companies on private
placement basis. These Companies shall invest in the commercial properties which are already
given on lease and earning rental income. Risk related to land acquisition and development risk
are mitigated through this investment type since the asset is ready and income yielding. An

25
 increase in rentals and appreciation in value of property may positively impact the yield of the
investment.
• Debt Portfolio:
This Portfolio primarily is a growth-oriented Portfolio in debt which will focus on a Universe
of available debt and debt investments. The investments would include Government Securities,
RBI bonds, PSU bonds, Tax Free Bonds, Corporate Debentures, Bank Bonds , State
Guaranteed bonds , money market instruments, commercial paper and Certificate of Deposits,
liquid plus schemes and secured NCD’s.
• IIFL Large Cap Equity Portfolio:
The Portfolio Strategy and objective is to generate long term capital appreciation for investors
from a portfolio of Large cap stocks. The investment strategy of the Portfolio will be to invest
in companies & sectors that are available at significant discount to their intrinsic value and
provide earnings visibility. We look for companies with a Bottom Up approach which includes
Quality management, Strong business model, consistent growth.
• IIFL Focused Equity Strategies:
The objective behind this fund strategy is to create a focused portfolio of select, high conviction
stock ideas. The portfolio constructed will be based on in-depth research leading to bottom-up
stock picking. Given this strategy.

26
 2.2 Alternative Investment Fund (AIF)
Alternative Investment fund is pioneered by IIFL asset management company in India. Each
of IIFL’s alternative fund reaches beyond the mainstream investment universe and tap into
unique boundaries.
AIFs offer a chance for our investors to go off the beaten track and invest in securities that are
unavailable to the common investor. Real estate, venture capital, hedge funds, commodities,
pre-IPO placements and derivative contracts can bolster the portfolio, mitigate risk and spur
returns. While AIFs can also invest in listed equities, the structure allows for investments in
securities which are unavailable under the traditional mutual fund platform.

2.2.1 Eligibility for AIF

1. Minimum investment or ticket size of one crore.
2. The investor can be any one whether Indian, NRI or he might be foreigner.
3. The minimum corpus should be twenty crores.
4. Maximum number of investor for each scheme is 1000.

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 2.3 Mutual Fund

Mutual funds are collective investment schemes which are also called investment funds or
managed funds. Money, when invested collectively by pooling it from a number of investors,
facilitates each investor to participate in a wide range of investments than would be possible
in an individual capacity.
In other words, a mutual fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as disclosed in the
offer document.

2.3.1 Benefits of mutual fund

A Mutual fund is a collective investment that allows many investors, with a common
objective, to pool individual investments that are given to a professional manager who in turn
would invest this money in line with the common objective.
The manager is a qualified investment professional with rich investing experience. He
develops investment strategies after detailed market analysis and manages day-to-day
portfolio trades. Thus, a mutual fund offers the following benefits:
• Professional management:
Focused & dedicated fund manager & well-equipped research team
• Convenience
• Tax benefits

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 2.3.2 IIFL’s funds

1. IIFL focused equity fund

Investor understand that the principle will be at moderately high risk

This product is suitable for investors who are seeking capital appreciation over long term and
investment predominantly in equity and equity related instruments.
Type of Scheme:
An open-ended equity scheme investing in maximum 30 multicap stocks.
Investment Objective:
The investment objective of the scheme is to generate long term capital appreciation for
investors from a portfolio of equity and equity related securities.
However, there can be no assurance or guarantee that the investment objective of the Scheme
would be achieved.
Benchmark:
BSE 200 TRI
Asset Allocation:
The investment policies of each Scheme shall be as per SEBI (Mutual Funds) Regulations,
1996, and within the following guidelines. Under normal market circumstances, the
investment range would be as follows:

Instruments Indicative Allocation (% of Net assets) Risk Profile

Minimum Maximum

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Equity or Equity related instruments 75% 100% High

Debt and Money market instruments 0% 25% Low to medium

Minimum Application Amount:

New Purchase - Rs.5,000/- and in multiples of Rs.100/- thereafter.
Additional Purchase - Rs.1,000/- and in multiples of Rs.100/- thereafter.
Systematic Investment Plan (SIP)
Monthly Option - Rs.1,000/- per month for a minimum period of 06 months .
Quarterly Option - Rs.1,500/- per quarter for a minimum period of 04 quarters.
Load Structure:
Entry Load: Nil
Exit Load: 1% - if redeemed/switched out, on or before 12 months from the date of allotment.

30
2. IIFL dynamic bond fund

This product is suitable for investors who are seeking income and long term gains and
investment in range of debt and money market instruments of various maturities.

Type of scheme:

An open-ended dynamic debt scheme investing across duration.

Investment objective:

The investment objective of the scheme is to generate income and long-term gains by pouring
money in a range of debt and money market instruments of various maturities period. The
scheme will seek to flexibly manage its investment across the maturity period with a view to
optimize the risk return proposition for the investors.

Benchmark:

Crisis composite bond fund index.

Asset allocation:

The investment policies of each Scheme shall be as per SEBI (Mutual Funds) Regulations,
1996, and within the following guidelines. Under normal market circumstances, the
investment range would be as follows:

31
 Instruments Indicative Allocation (% of Net Risk Profile
assets)

Debt Market instruments* Minimum Maximum Low to

Medium

0% 100%

Money Market Instruments 0% 100% Low to

Medium

Units issued by REITs & 0% 10% Medium to

InvITs High

Plans/option for investments:

Plans

Regular plan and Direct Plan

Options

The Scheme has the following Options under each of above plans:

1. Growth option
2. Dividend option
(a) The dividend reinvestment facility
(b) The dividend pay-out facility
Minimum application amount:
New Purchase – Rs. 10,000 and in multiples of Rs. 100 thereafter.
Additional purchase - Rs. 1000 and in multiples of Rs. 100 thereafter
Systematic Investment Plan (SIP)
Monthly option - Rs. 1000 per month for a minimum period of six months
Quarterly Option – Rs.1500 per quarter for a minimum period of 4 quarters

32
 Load Structure:
Entry Load: Nil
Exit load:

• 1% - if redeemed/switched out, on or before 18 months from the date of allotment

• Nil - if redeemed/switched out after 18 months from the date of allotment

33
3. IIFL Liquid fund

Investors understand that the principal will be at low risk

This product is suitable for investors who are seeking income over short horizon and
investment in short term debt instrument with maturity not exceeding 91 days and money
market.

Types of scheme:

An open-ended liquid scheme.

Investment objective:

To provide liquidity with reasonable returns in commensuration with low risk through a
portfolio of money market and debt securities with residual maturity of up to 91days.
However, there can be no assurance that the investment objective of the Scheme will be
achieved.

Benchmark:
CRISIL Liquid Fund Index.

Asset allocation:

The investment policies of each Scheme shall be as per SEBI (Mutual Funds) Regulations,
1996, and within the following guidelines. Under normal market circumstances, the
investment range would be as follows:

34
 Instruments Indicative Allocation (% of Net Risk Profile
assets)

Minimum Maximum

Money market and 0% 100% Low to

debt instruments Medium
with residual maturity
up to 91 days
(including floating
rate debt instruments
and securitized debt)

Plans / Options for Investment:

Plans

Regular plan and Direct Plan

Options

The Scheme has the following Options under each of above plans:

1) Growth option
2) Dividend option
(a) The dividend reinvestment facility
(b) The dividend pay-out facility
Minimum Application Amount:
New Purchase – Rs. 5,000 and in multiples of Rs. 100 thereafter.
Additional purchase - Rs. 1000 and in multiples of Rs. 100 thereafter
Load Structure:
Entry Load is Nil, Exit Load is Nil

35
 2.4 Special Opportunity Fund
IIFL Special Opportunities Fund is a close-ended scheme under Category II Alternative
Investment Fund. The fund was launched to generate long-term capital appreciation through
investment in equity and equity-related instruments of to-be-listed companies. The fund
focused on pre-IPO and IPO space was introduced in India for the first time.

The fund shall also invest in special Corporate events like QIP, Preferential allotment,
FPO, Open Offer, Buy Back and Mergers or in IPO shares within one month from the date of
listing. Further, the Fund may also invest in such IPO shares if they are below issue price for a
period of 1 year from the date of listing (maximum 20% shall be allocated to such investments).

36
 2.5 Portfolio Restructuring Services

IIFL also provide portfolio restructuring service in which a manager sells those stocks which
are underperforming and making portfolio worse and buy those which help portfolio to gain
return more than market average. This enables an investor to actively cater to adverse situations
in market and always keep portfolio in profit.

37
Chapter 4 – Literature Review

38
4.1 Literature review
1. Markowitz Theory 1956, In his theory which is known as modern portfolio theory he
stated that it is possible to create efficient frontier of portfolio offering the maximum
expected return for a given level of risk taken. Actually, he was the first to quantify the
risk and demonstrate quantitatively why and how diversification of portfolio can work to
reduce risk. The theory says in simple word that a diversified portfolio of uncorrelated
stock can provide highest return with least amount of volatility.
2. Dr. G. P. Jakhotia and Mrs. M.G. Jakhotia in their book finance for one and all elaborated
the technique of investment management for individual investor. In their book they have
discuss reasons for investment.
1. Regular Income
2. Growth of wealth
3. Contingency arrangement
4. Fighting inflation
5. Oldest and post retirement provision
After discussing the reasons for investment, he discusses the factors deciding of optional
Investment.

1. Rate of Return
2. Degree of Risk
3. Degree of Inflation
4. Rate of Growth
5. Liquidity and Marketability
6. Frequency of Return
7. Speculative Interest
Further he suggested that individual investor should form a group and assess each other’s
portfolio. An arithmetic average of all the assessment may be the most accurate assessment of
individual’s portfolio.

39
Chapter 5: Research Methodology

40
 5.1 Research methodology

5.1.1 Definition

Research is defined as any systematic investigation carried out in search of truth.

Research is a systematic investigative process employed to increase or revise current
knowledge by discovering new facts.

It is divided into two general categories:

(1) Basic research is inquiry aimed at increasing scientific knowledge, and

(2) Applied research is effort aimed at using basic research for solving problems or developing
new processes, product or techniques.

This an applied research carried on for knowing the customers and the factors which
effects their financial decision making to reach the conclusion on their investment behavioural
patterns.

5.1.2 Types Data

1) Primary data and

2) Secondary data

Primary data- Primary data is that data which are collected for the first time directly or
indirectly from the respondent. In this case primary data is collected through well designed
questionnaire for the research and was obtained from direct interaction with the clients and
observations in the office.

Secondary data- Secondary data is the data which is already collected by a person other than
the researcher. Secondary data was obtained from company’s manual and form the client’s
information available with company, various websites and books.

41
Chapter 6 – Hypothesis

42
Hypothesis:

Row
Age period of years that investor stays invested.
total

5 TO 10 &
Less than year 1 TO 3 3 TO 5
10 above

30 - 35 0 0 6 1 0 7

36 – 40 0 0 0 0 8 8

41 – 45 0 0 1 13 2 16

45 &
0 3 5 0 1
above 9

Column
total 0 3 12 14 11 40

Row
Age period of years that investor stays invested.
total

5 TO 10 &
Less than year 1 TO 3 3 TO 5
10 above

30 - 35 0 0.525 2.1 2.45 1.925 7

36 – 40 0 0.6 2.4 2.8 2.2 8

41 – 45 0 1.2 4.8 5.6 4.4 16

45 &
0 0.675 2.7 3.15 2.475
above 9

Column
total 0 3 12 14 11 40

43
P value 0.0000000009 < 0.05

age does not have impact on decision regarding the period of

HO investment

Age have impact on decision regarding the period of

H1 investment.

Age have impact on decision regarding the period of

Analysis investment.

44
Chapter 7 – Data analysis and Interpretation

45
Investment participation as per gender

Gender Respondents

Male 30

Female 10

Total 40

Investment participation as per gender

females, 10, 25%

male
females
male, 30, 75% total

Interpretation:

From the above data we can interpret that the handling of financial part of family is more
often done by males though the spouse is contributing to the investment. Here in this study
the number of female respondents is 10 in comparison with their counter part which is very
high (30). If we look at ratio of participation it is 1:3. From above we can conclude that the
larger part of society which is females are remaining uneducated when it comes to financial
planning because of dominance of male in decision making.

46
Investment participation as per age of investor

Age No of Respondents

30 – 35 9

36 – 40 8

41 – 45 15

45 & above 8

Investment participation as per age of

Investor

20
No of Respondents

15
15
9 8 8
10
5
0
30 - 35 36 - 40 41 - 45 45 & above
Age

No. of respondents Column1 Column2

Interpretation

If we look at above data carefully we will find that the people who are investing in product
like PMS are more in the age group of 41 – 45 the reason is simple they have huge saving
which they want to use to earn money. The above data also shows that people in the age
group 30 – 35 are also investing in PMS because they have got lot of time to create their
wealth for their retirement.

47
Investment Participation as per Income

Income (Lakhs per annum) No. of respondents

50 – 75 12

75 - 100 9

100 and above 17

No. of Respondents

50 -75 75 - 100 100 & above

Interpretation :

From the above data and figures we can conclude that the people who have high salary or
high income, invest more in product like PMS rest go with mutual fund and other structured
product. The number of people who earn more than one crore and also want to or have
already invested in PMS is 17 out of 40 that means people with high income choose
structured product over unstructured ones.

48
Years for which investor stay invested.

Years for which investor stay invested. No. of respondents

Less than year 0

1-3 3

3-5 12

5 -10 14

10 & above 11

No. of respondents
0
3
11

12

14

Less than year 1 to 3 3 to 5 5 to 10 10 and above

49
Interpretation:

If we look at the above data, we will understand that people invest in product like portfolio
management for longer duration. Out of 40 respondents 14 says that they can keep invested
for 5 to 10 years that means people are ready to keep money in PMS for longer duration.
However, the number reduces for duration more than 10 years that means the duration of
PMS is not only decided by return it is also decided by some other factors such as age of
investor.

50
Age and period of years that investor stay invested.

Age period of years that investor stay invested.

Less than 1-3 3-5 5 -10 10 & above

year

30 - 35 0 0 6 1 0

36 – 40 0 0 0 0 8

41 – 45 0 0 1 13 2

45 & above 0 3 5 0 1

Age and expected year of return

14
12
10
8
6
4
2
0
Less than 1 to 3 3 to 5 5 to 10 10 and above
year
Expected Year of returns

30 to 35 36 to 40 41 to 45 45 and above

Interpretation:

From the above data we can say that people who are in their early age of career invest for
averge duration as 3 – 5 years conversly people who are in middle of their career prefer to
stay invested for longer duration. If we look at the age group 36 – 40 they are the one who
keep their invetment for longer duration say more than 10 years conversly people in the age
group 45 and above seek short term investment and stay invested not more than 5 years.
From this we can conclude that as a person reaches near to his retirement he start
withdrawing his investment and relly more on them and a person who have time for
retirement seek for longer term invesment to create wealth.

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Investor desire for growth in portfolio

Desire for growth in portfolio NO. of respondents

To grow moderately 19

To grow significantly 13

To grow aggressively 8

Investor desire for growth in portfolio

19

13

To grow moderately To grow significantly To grow aggressively

Interpretation:

From the above data we can interpret that the people who invest in PMS stay away from
aggression and want their wealth to grow moderately. In this 19 people out of 40 says that
they would like their wealth to grow moderately over the time there are some who want it to
grow significantly and the number of people who want their wealth to grow aggressively is 8
which is only 20 percent.

52
Age and Desire for growth in portfolio

Age Desire for growth in portfolio

To grow moderately To grow significantly To grow aggressively

30 to 35 1 2 6

36 to 40 5 3 0

41 to 45 8 6 1

45 & 5 2 1
above

Age and Desire for growth in portfolio

8
6
4
2
0
30 to 35 36 to 40 41 to 45 45 and above

Desire for growth in portfolio To grow moderately

Desire for growth in portfolio To grow significantle
Desire for growth in portfolio To grow aggressively

Interpretation:

If we look at above data carefully, we will find that when people invest in product like PMS
they Want their wealth to grow moderately rather than aggressive which is risky. From above
comparison of age and desire for growth we can conclude that as the age of a person
increases his risk appetite decreases and he looks for safe return.

53
Clients response to situation

Clients response to situation No of respondents

Exit from investment 2

Hold and wait for condition to improve 15

Hold the investment and sell the riskier 23

assets once they reach par value

Clients response to situation

Exit from investment

2

15 Hold and wait for condition to

improve
23
Hold the investment and sell the
riskier assets once they reach par
value

Interpretation:

From the above data we can say that people who are investing in PMS may not be familiar
with financial concepts but they do know how things work here. From the response of clients
about how will they react to adverse situation we can conclude that the PMS manager won’t
be pressurise by client for selling assets which are not performing well.

54
Purpose of clients to invest in PMS

Purpose of clients to invest in PMS No. of respondents

Regular Income 15

Capital preservation 6

Wealth creation through long term growth 19

Purpose of clients to invest in PMS

15
19

Regular Income Capital preservation Wealth creation through long term growth

Interpretation

From the above data we can easily conclude that people invest their hard earn money in
product like PMS to create wealth and not for regular income. In this case 19 out of 40 people
said that they are investing in PMS only to create wealth over long period of time. There are
some who wants regular income due to various factor such as age.

55
Investors Knowledge about PMS

Investors Knowledge about PMS No of Respondents

Inexperience 0

Average 33

Good 7

Investors Knowledge about PMS

0

33

Inexperience Average Good

Interpretation:

From the above data we can conclude that investor who buy product like PMS to create
wealth have average knowledge about stock market and how it works because they told us
that how they react to adverse situation and also the number of people saying that the have
average knowledge about PMS is more than 80 percent.

56
Chapter 8 – Findings

57
 8.1 Findings

• At IIFL I observe that most of the client who invest in structured product like PMS, AIF are
high net worth individual and most of them were working in IT sector. Very few of IIFLs client
for PMS were businessman.
• The main factor deciding the weightage of type of assets in portfolio is clients age as his risk
appetite is correlated to his age. More the age of person more will be the secured assets in the
portfolio conversely younger the client more aggressive will be his portfolio.
• People invest their money to save taxes.
• With my observation I found out that people invest in PMS not to get regular income but they
invest for creating wealth.
• People started preferring investment in stocks over deposits in bank, investment in land and
gold etc.
• It takes lot of effort for convincing clients to invest in such product because the main factor
that makes them hesitate to invest is ticket size which is very high and myths about security
market.

58
Chapter 9 – Recommendation

59
 9.1 Recommendations

• As we found out businessman don’t put their money in stocks rather, they invest their money
in their own business which is saturation of risk at one place. Hence IIFL should design a
program which will educate businessman on diversifying risk with the help of PMS.
• If we take look at portfolio of normal person he will definitely choose stock of that company
in which he is working but we should tell them not to add that stock in his portfolio because
if company do not perform well then he might lose his job as well the stock price will also
come down.
• From this study I found out that people prefer moderate growth having potential to take little
more risk IIFL should back that people to increase their risk level to earn more profit.

60
Chapter 10 – Conclusion

61
 10.1 Conclusion –

In this study I found out that professionals in various sector invest in stock market
more than the businessman. The people who invest in structured product are mostly HNIs
because of ticket size of such product. The motive of these people to invest in structured
product is regular income and wealth creation in long run.
Structured products are combination of various types of securities. Portfolio
management service is one of the structured products offered at IIFL. The portfolio manager
very carefully manages the portfolio by taking into consideration the demographics, motive
and earning of the client/investor.
From this study I also found out that clients other than HNIs still prefer fixed deposit
or investment into real estate. It tells us that there is need of financial literacy and government
should take care of this.

62
Chapter 11 – Key Learnings

63
 11.1 Key learnings

• How to persuade client for structured product like PMS as it tickets size is very high.
• Collecting Data of prospective Customer and generating leads.
• How to take follow up without irritating customer and converting lead into client.
• Analysing competitors’ product and finding what we have better than them.
• Approaches of client towards investment such as Aggressive, Moderate, conservative
• Trading terminology such as haircut, Short sell etc
• Factor that impact decision of person while creating a portfolio.
• Terminologies in portfolio management such as ticket size, active and passive asset
management.

64
Annexure

65
 Bibliography
Books referred
1. NISM Research Analyst course book
2. Investment Management by V. K. Bhalla, S CHAND
3. Portfolio Management by J. R. Varma V Raghunathan, Tata McGraw-Hill.
4. PDFs provided by company.
Research Paper
1. Portfolio Selection, By Markowitz, Journal of finance.
2. Finance for one and all, by Dr. G.P.Jakhotia and Mrs. M.G. Jjakhotiya
Websites Referred to
WWW.IIFL.COM
WWW.IIFLAMC.COM

66