Portfolio Management:

Structured Portfolios & Mutual

Funds

Mutual Fund Management

• Nomenclatures:

– NAV, AUM

– OD, KIM, FFS

– Entry, exit loads - CDSC

– Systematic investment/transfer & target investment

plans

– Systematic withdrawal plans

– Lock in period

– Expense ratio

– Portfolio turnover

NAV

Assets Rs. Crs. Liabilities Rs.

Crs.

Shares 345 Unit Capital 300

Debentures 23 Reserves & Surplus 85.7

Money Market Instruments 12 Accrued 1.5

Accrued Income 2.3 Expenditure

Other Current Assets 1.2 Other Current Liabilities 0.5

Deferred Revenue

Expenditure

4.2

387.7 387.7

Units Issued (Cr.) 30

Face Value (Rs.) 10

Net Assets (Rs.) 385.7

NAV (Rs.) 12.86

Mutual Fund: Equity• 65% of net assets in Indian Equities

• Classification

– Open Vs close ended

– Plans: Regular Vs. Direct

– Styles

• Investment style Vs. mkt. cap

– Types

• Index, sectoral, tax planning or ELSS, size, geography,

arbitrage, multicap, quant, P/E, fund of funds, hybrid,

others

– Schemes

• Growth, dividend payout, dividend reinvestment

Mutual Fund: Debt• Classification:

– Credit quality Vs. duration (int. rate sensitivity)

– ST Vs. LT

• Li Bex, Mi Bex and Si Bex

• Types

– Liquid, ultra ST, ST, FMPs, income- MIPs, gilts,

credit opportunity, dynamic bond, capital

protection, hybrid, balanced, child plans, asset

allocation

• Taxations

– LT, ST, Indexation

Mutual Fund Vs ETF

• Mutual Funds

– Tax inefficient; liquidity needs; low returns for index tracking

– Cannot be shorted or margined

• Exchange Traded Funds

– Tax efficient; low portfolio turnovers

– Can be shorted or margined

– International diversification made easy

– Arbitrage trades and NAVs

ETF

• Calculate ETF price (0), price (1), individual

wealth (1), value of each share (1), strategy to

redeem Rs. 200 Mn in ST

Stock A B C

SP0 150 300 60

No. S (Mn) 2 1 5

SP1 175 280 85

Total units allocated Mn 30

Schemes

• Calculate no. of units, NAV and value for

investors at the end of the period for the three

schemes for ST & LT investments

Initial investment 1000

NAV 10

No. of units 100

Return on portfolio ex dividends 12%

Dividends per unit 0.5

DDT on equity (debt) schemes 0% (28.325%)

Taxation

• Calculate after-tax value and returns to

investor for an FD, FMP dividend payout,

FMP growth with and w/o indexation

Tax bracket 33.99%

Fixed returns 11.75%

Initial Investment 10000

Tax w/o indexation 11.33%

Tax with indexation 22.66%

DDT 28.33%

Marginal maturity 1 year

Inflation 7.25%