PORTFOLIO MANAGEMENT

ASSIGNMENT

{FT India Life Stage Fofs-20s (G)}

Submitted to : Submitted By:

Prof. Kapil Gupta Saloni Malhotra

09bs0002031

Section - b

Indian Mutual Fund Industry

The Indian mutual fund industry is passing through a transformation. On one side it has seen a
number of regulatory developments while on the other the overall economy is just recovering
from the global crisis of 2008. The regulatory changes have been made keeping in mind the best
interests of the investors. However, like all changes these changes will take time to be adapted by
industry, intermediaries and the investing public at large. The industry is looking forward to
early resolution of certain inter-regulatory issues requiring Government / Court intervention.
Market participants are waiting to see how the industry adapts to these changes, while trying to
maintain its pace of growth. The industry also faces a number of issues which are characterized
by lack of investor awareness, low penetration levels, high dependence on corporate sector and
spiralling cost of operations. The Growth rate of the industry therefore needs to be seen from this
perspective. Though, it is commendable to note, that, Assets Under Management have managed
to record a compounded growth of 28% over 2006-2010, however, the AUM of Equity Funds
and Balanced Funds where retail investors invest have only grown by 20% in the same period.
The net sales of Equity/Balanced funds in 2009-10 have been one of the lowest in recent years.

India has vast growth potential backed by a resilient economy, commensurate with an
accelerated GDP growth rate of 7.4%, high rate of household savings and investments”.

Other key highlights are as follows:

 Low penetration levels have been a persisting challenge for this industry, and the industry
needs to move towards inclusive growth
 Strong distribution networks are crucial. Learning’s can be taken from other sectors like
FMCG, telecom, to get a new perspective
Top 5 Funds on the basis of last 12 months returns

% Return as on
Rank Scheme Name Date NAV (Rs.)
NAV date
Escorts High
1  Yield Equity Nov 24 , 2010   13.1379 73.8107 
Plan - Dividend 
DSP BlackRock
Micro Cap Fund
2  Nov 24 , 2010   17.471 57.7779 
- Regular -
Growth 
Escorts Income
3  Nov 24 , 2010   33.5169 50.0884 
Bond - Growth 
Escorts Income
4  Nov 24 , 2010   31.7806 50.0706 
Bond - Dividend 
Religare Mid N
5  Small Cap Fund Nov 24 , 2010   15.47 48.4645 
- Growth 

Asset under management (AUM) Growth

The Asset under management have grown at a rapid pace over the last few years at a CAGR of
35 % for the five year period from 31st march 2004 to 31st march 2009.Over the 10 year period
from 1999 to 2009, encompassing varied economic cycles, the industry grew at 22% CAGR

Growth in AUM in Mutual Fund Industry (Average AUM in INR billion)

6000

5000

4000

3000

2000

1000

0
2005 2006 2007 2008 2009
 Snapshot of Franklin Templeton Mutual Fund

Franklin Templeton's association with India dates back to more than a decade as an investor. As
part of the group's major thrust on investing in markets around the world, the India office was set
up in 1996 as Templeton Asset Management India Pvt. Limited. It flagged off the mutual fund
business with the launch of Templeton India Growth Fund in September 1996, and since then the
business has grown at a steady pace.

A long – term Commitment

Since starting its operations in India, Franklin Templeton has invested a considerable amount of
time, effort and resources towards investor and distributor education, the belief being - to be
successful in the long term, the fundamentals need to be corrected, at whatever cost! This has
resulted in various advertising campaigns aimed at educating investors, participation in seminars
and distributor training programs. Franklin Templeton has played a pivotal role in steering the
industry to its current stage, and as long term players, we continue to strive to achieve the
objective of 'making mutual funds an investment of choice' for both individual and institutional
investors.

In July 2002, Franklin Templeton India acquired Pioneer ITI, another leading fund house in India
to create an organization with rich investment experience over market cycles, one of the most
comprehensive product portfolios, footprint across the country and an in-house shareholder
servicing function. The huge synergies that existed in the two organizations have helped the
business grow at a rapid pace, catapulting the company to among the top two fund houses in
India.

Templeton Asset Management Company , a company incorporated under the Companies Act,
1956, is a part of the Franklin Templeton Group. The sponsor of the Fund Templeton
International Inc., is a wholly owned subsidiary of Templeton Worldwide Inc., which in turn is a
wholly owned subsidiary of Franklin Resources Inc. The Franklin Templeton Group is one of the
world s largest Investment Management Companies. It has over 50 years of experience in
International Investment Management with 34 offices in over 23 countries, which service over
10 million unit holders.

No. of schemes 59
No. of schemes including 165
options
Equity Schemes 35
Debt Schemes 89
Short term debt Schemes 12
Equity & Debt 8
Money Market 0
Gilt Fund 9

Corpus under management

Rs.38641.88 Crs. as on Oct 31, 2010

Key Personnel
Vivek Kudwa (MD), J Mark Mobius (Exe Chairman), Gaurab Parija (Hd - Sales), Neerav
Kaushik (Hd Operations), S Rajagopalan (AVP TA), R Sukumar (CIO-Equity), Santosh Kamath
(CIO - FI), Shilpa Shetty (Compliance), Sheela Kartik (IRO).
 
Fund Managers
Anand Radhakrishnan , Anil Prabhudas , Chakri Lokapriya , Chetan Sehgal , J Mark Mobius, K.
N. Siva Subramanian, Mr. Gaurav Dangwal , Murali Krishna Yerram , Pallab Roy , R
Janakiraman , Roshi Jain , Sachin Padwal-Desai , Sukumar Rajah, Vikas Chiranwal , Vivek
Ahuja , Umesh Sharma .
 Snapshot of Asset Class – Equity

A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and
are subject to the same laws and regulations. The three main asset classes are equities (stocks),
fixed-income (bonds) and cash equivalents (money market instruments).

An equity investment generally refers to the buying and holding of shares of stock on a stock
market by individuals and firms in anticipation of income from dividends and capital gains, as
the value of the stock rises

Things to consider when selecting an equity mutual fund

Types of equity funds: Equity funds depend primarily on increases in stock prices and payment
of dividends for increased fund value. Equity funds fall into several categories:

Aggressive growth – These funds typically invest in smaller firms that plow earnings back into
the company to fuel growth instead of paying dividends. Aggressive growth funds tend to be
more volatile than other equity funds.
Long-term growth – Long-term growth funds usually invest firms that are expected to grow at a
slower, steadier pace.
Growth and income – These funds invest in large well-known firms that regularly pay dividends,
such as those listed on the S&P500 stock index.
International – International funds invest in firms outside of the US.
Global – Global funds invest in firms all over the world, including the US.
Sector funds – These funds invest in firms of a specific industry sector. For instance, a
biotechnology sector fund would invest heavily in the firms within the biotechnology industry
sector.
Index funds – Index funds are designed to track a market index. For example, a S&P
500 stock indexfund would own the same stocks that are used to calculate the S&P 500 stock
index in the same proportion that is used in determining the index. Therefore an index fund
would perform nearly identically to the index it is intended to track, the difference being fees
incurred by index fund investors.

Past performance: While past performance is no guarantee of future returns, past performance
can provide an indication of how a fund performs under various circumstances. For example, a
fund’s performance in past bear markets, i.e., periods during which the financial markets
generally performed badly, may provide an indication of how the fund is likely to perform during
future economic downturns.

Fund manager’s tenure: When considering past performance, the investor should also consider
the tenure of the fund manager. More attention should be given to the performance in years in
which the current manager was managing the fund.

Load: A load is a transaction fee paid at the time of investment (front-end load) and/or at the
time of redemption (back-end load). Some funds charge a fee at the time of investment (front-
end load) and/or at the time of redemption (back-end load). Loads typically range from 1% to
6% of the investment or redemption. It is often the case with back-end loads that the applicable
percentage for the load decreases over time. For example, you may pay a back-end load of 5% if
you redeemed your mutual fund shares BEFORE six years after investment but would pay no
load if you redeemed the same shares AFTER six years. For some funds, the load varies
according to the size of the investment or value of the investor’s account.
 Snapshot of the Asset Category – Funds of Funds

A "fund of funds" (FOF) is an investment strategy of holding a portfolio of other investment

funds rather than investing directly in shares, bonds or other securities. Investing in a collective
investment scheme may increase diversity compared to a small investor holding a smaller range
of securities directly. Investing in a fund of funds may achieve greater diversification.

Management fees for Funds Of Funds are typically higher than those on traditional investment
funds because they include the management fees charged by the underlying funds [1]. As in the
case of schemes of mutual funds, FOF schemes also work under the due diligence of a fund
manager. This gives the scheme an additional expertise. It also helps to provide access to
information which may be difficult to obtain information by an investor on a case by case basis.
Every fund manager has a particular style of diversification.

In other words, the asset category “fund of funds” is a mutual fund which invests in other
mutual funds. Just as a mutual fund invests in a number of different securities, a fund of funds
holds shares of many different mutual funds. These funds were designed to achieve even greater
diversification than traditional mutual funds. On the downside, expense fees on fund of funds are
typically higher than those on regular funds because they include part of the expense fees
charged by the underlying funds.
 Snapshot of FT India Life Stage Fofs – 20s (G)

The objective of FT India Life Stage FoFs aims to generate superior risk adjusted returns in line
with their chosen asset allocation.The structure of the scheme is open ended fund of funds i.e A
type of fund that does not have restrictions on the amount of shares the fund will issue. If
demand is high enough, the fund will continue to issue shares no matter how many investors
there are. Open-end funds also buy back shares when investors wish to sell. The scheme was
initiated in Nov, 2003 and the benchmark Index for FT India Life Stage FOFs 20s (growth) plan
is CNX500.The ratio of investment in equity and debt in this fund is 80:20. Therefore , this
scheme is appropriate for investors with high risk appetite. The minimum investment in the
scheme is Rs. 5000 and minimum additional investment is Rs.1000.

Current Stats and Profile

Latest NAV 37.7016 (24/11/10)

52-Week High 39.2629 (09/11/10)
52-Week Low 31.1245 (27/11/09)
Fund Category Equity: Large & Mid Cap
Type Open End
Launch Date November  2003
Return Grade Above Average
Net Assets (Cr) 14.35 (30/09/10)

Top 10 Holdings

Description Value(In Crore)

Franklin India Bluechip
7.99
Fund -
Templeton India Growth
2.15
Fund -
Franklin India Prima Fund -
1.45
(G
Templeton India IBA - (G) 1.31
Templeton India Income
1.3
Fund -
Performance

FT India Life Stage FoFs 20s (G) is one of the best performers in its category.

The Absolute Returns(%) for the scheme for last 5 years is as follows :-

Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 Absolute

Returns (%)
2010 3.5 -0.3 12.1 - -
2009 -0.9 34.5 12.7 -0.2 68.9
2008 -18.2 -11.3 -3.5 -17.5 -40.1
2007 -5.7 14.4 11.0 14.2 35.8
2006 16.1 -9.2 11.1 8.5 30.1
2005 -2.2 4.1 17.9 5.9 32.4

Best and Worst Performance

Best Period Worst Period

Month 24.61  (11/05/2009  -  10/06/2009) -25.99  (24/09/2008  -  24/10/2008)

Quarter 61.28  (09/03/2009  -  10/06/2009) -30.46  (02/09/2008  -  02/12/2008)
Year 94.21  (09/03/2009  -  11/03/2010) -42.25  (04/12/2007  -  03/12/2008)

Absolute Returns for last 1 year i.e from 24/11/2009 to 24/11/2010

From Date NAV(Rs.) To Date NAV(Rs.)

24-Nov-2009 31.597 24-Nov-2010 37.702

Absolute Returns 19.3%

Had the investor invested in some other asset class

The major part of investment in FT India Life Stage FoFs 20s Growth plan is in equity. In my
opinion , if the investor had invested more proportion in debt his portfolio would have performed
better . Although FT India Life Stage FOFs -20s (G) is among the better performing equity
oriented funds but in the year 2008 its NAV was lost by 39 % . All equity oriented funds faced
the same situation in the year 2008. Therefore if the proportion had been high on the debt side or
some other risk free assets , the absolute returns would have been higher. Moreover, investment
in the 80:20 in equity and debt becomes a rigid investment strategy. Hence it leaves a little
choice with the investors to make changes in his portfolio. In case when the stock market does
not perform according to the expectation of the investors, the investor can shift his investments
to another asset classes like gold, government securities etc. and vice-versa. Moreover, when the
interest rates in the economy increases, focus can be shifted to debt securities to earn higher
interest rates. Other assets available for investment other than equity are debt instruments i.e
fixed income securities like bonds and money market instruments.