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
3
Bank Deposits Dominate Indian Household Financial Assets
4
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
5
Measurement of Fund Performance
Returns (Value Research Fundcard) Risk (Standard Deviation, Beta) Risk-adjusted returns
± Sharpe Ratio ± Treynor Ratio ± Alpha ± Information Ratio
6
Industry Challenges
Competition Distribution Regulation Cost pressures Efficient markets
7
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
8
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
9
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
10
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
11