Asset Management

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Asset Management
August 25, 2010

1

Asset Management
Asset Management

Public Markets

Private Markets

Long-Only Funds (FIIs, MFs, Insurers): Relative Returns

Hedge Funds: Absolute Returns, Hurdle Rates

Private Equity: Absolute Returns, Hurdle Rates, involvement in co management

Venture Capital: Absolute Returns, Hurdle Rates, involvement in co management 2

Penetration of Financial Services Low in India
‡ ‡ ‡ ‡ ‡ ‡ Bank accounts: 45% of income earners Life insurance: 10% of population ATM / debit cards: 13% of population Credit cards: 2% of population Loans: 67% of individuals borrow from non-institutions Consumer credit / GDP: lower than most countries at 11.3%, mortgage to GDP at just 5.6% ‡ Financial assets: below 10% of household assets (2002), compared to 66% in USA ‡ Equities & MFs: 10% of household financial assets, compared to 27% in USA
Data Sources: Various RBI reports & presentations, IIMS 2007 Report, US Federal Reserve, NSSO, CLSA

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Bank Deposits Dominate Indian Household Financial Assets

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Investment Process ± Equities
‡ Quantitative Screening: Market capitalization, free float analysis, ownership analysis ‡ Fundamental Analysis: Focus on business, management and valuation
± ± ± ± Size of opportunity, nature of business, competitive landscape Financial statement analysis & forecasts Management quality & integrity Valuation (absolute / relative)

‡ Investment Recommendation: Buy / hold / sell (absolute) or portfolio stance (relative) ‡ Portfolio Construction: Key decisions to buy / hold / sell OR be overweight / equalweight / underweight certain sectors or stocks ‡ Portfolio Review: Periodic review, review of sector weights, review of individual weights
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Measurement of Fund Performance
‡ Returns (Value Research Fundcard) ‡ Risk (Standard Deviation, Beta) ‡ Risk-adjusted returns
± Sharpe Ratio ± Treynor Ratio ± Alpha ± Information Ratio

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Industry Challenges
‡ ‡ ‡ ‡ ‡ Competition Distribution Regulation Cost pressures Efficient markets

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Career Roles ± Research Track
‡ Junior Analyst (Equity / Credit) ± 2-3 Years ‡ Analyst (Equity / Credit) ± 2-5 years ‡ Senior Analyst (Equity / Credit) OR Fund Manager (Equity / Debt) ‡ Senior Fund Manager (Equity / Debt) ‡ Head of Equities / Debt ‡ Chief Investment Officer ‡ Cross-functional experience a plus ‡ One can join in at any level from other industries like brokerages, commercial banks, investment banks, rating agencies, corporates

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Career Roles ± Trader Track
‡ Junior Trader (Equity / Debt) ± 2-3 Years ‡ Trader (Equity / Debt) ± 2-5 years ‡ Senior Trader (Equity / Debt) OR Fund Manager (Equity / Debt) ‡ Senior Fund Manager (Equity / Debt) ‡ Head of Equities / Debt ‡ Chief Investment Officer

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Career Roles ± Sales Track
‡ Institutional sales
± Key clients are banks and corporate treasuries ± Products sold are mostly fixed income

‡ Retail sales, channel management
± Products sold are mainly equity (including tax saver schemes) ± Products sold to HNI clients could include portfolio management services offered by the AMC

‡ Product development
± Product design keeping in mind investor trends, regulatory issues ± Co-ordination with in-house compliance ± Preparation of marketing material

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Further References
Marketing / Sales / Product ‡ www.valueresearchonline.com ‡ National Institute of Securities Markets (NISM) Workbook for MF Distributors ‡ NCFM / NISM Exams Finance / Investments / Research / Portfolio ‡ Standard texts on Corporate Finance, Economics, Financial Statement Analysis, Investment Analysis & Portfolio Management ‡ The CFA Program
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Questions??

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