A Review About Mutual Fund Management Essay

The year 1993 was a remarkable turning point in the Indian Mutual Fund industry. The stock investment scenario till then was restricted to UTI (Unit Trust of India) and public sector. This year marked the entry of private sector mutual funds, giving the Indian investors a wider choice of selecting mutual funds. From then on, the graph of mutual fund players has been on the rise with many foreign mutual funds also setting up funds in India. The industry has also witnessed several mergers and acquisitions proving it advantageous to the Indian investors. Are mutual funds emerging as preferred investment option? Are they safe and will your money be secured with them? Before proceeding to answer these questions, a look at the February 2006, Indian bull market scenario is worth a mention.

For the first time ever, stock market indices in India are at a record high. The Bombay Stock Exchange closed above the 10,000-mark for the first time ever, an ecstatic event in the history of the Stock exchange. Market savvy Indian investors have been busy transacting across sectors such as banking automobile, sugar, consumer durable, fast moving consumer goods (FMCG) and pharmaceutical scripts. And, the Union Finance Minister, Mr.P.Chidambaram, has responded positively and advised investors to take informed decisions or invest through mutual funds.


The history of the Indian mutual fund industry can be traced to the formation of UTI in 1963. This was a joint initiative of the Government of India and RBI. It held monopoly for nearly 30 years. Since 1987, non-UTI mutual funds entered the scenario. These consisted of LIC, GIC and public-sector bank backed Indian mutual funds. SBI Mutual fund was the first of this kind. 1993 saw the entry of private sector players on the Indian Mutual Funds scene. Mutual fund regulations were revised in 1996 to accommodate changing market needs. With the Sensex on a scorching bull rally, many investors prefer to trade on stocks themselves. Mutual funds are more balanced since they diversify over a large number of stocks and sectors. In the rally of 2000, it was noticed that mutual funds did better than the stocks mainly due to prudent fund management based on the virtues of diversification.

Some of the major players on the Indian mutual fund scene:

  • ABN AMRO Mutual Fund
  • Benchmark Mutual Fund
  • Birla Mutual Fund
  • BOB Mutual Fund
  • Can bank Mutual Fund
  • Chola Mutual Fund
  • Deutsche Mutual Fund
  • DSP Merrill Lynch Mutual Fund
  • Escorts Mutual Fund
  • Fidelity Mutual Fund
  • Franklin Templeton Investments
  • HDFC Mutual Fund
  • HSBC Mutual Fund
  • ING Vysya Mutual Fund
  • JM Financial Mutual Fund
  • Kotak Mahindra Mutual Fund
  • LIC Mutual Fund
  • Morgan Stanley Mutual Fund
  • PRINCIPAL Mutual Fund
  • Prudential ICICI Mutual Fund
  • Reliance Mutual Fund
  • Sahara Mutual Fund
  • SBI Mutual Fund
  • Standard Chartered Mutual Fund
  • Sundaram Mutual Fund
  • Tata Mutual Fund
  • Taurus Mutual Fund
  • Unit Trust of India
  • UTI Mutual Fund

Different Indian mutual funds allow investors various solutions ranging from retirement planning and buying a house to planning for child’s education or marriage. Tax-wise stocks and mutual funds work similarly since long-term capital gains from both stocks and equity-oriented mutual funds are tax-free. Well, what are the charges, fees and expenses associated with investing in Indian mutual funds? At the time of entry into a mutual fund, you have to pay an additional charge or entry load along with the value of units purchased.

When you exit from the scheme, you will get back the value of the units less the exit load charges. If you want to switch from one type of mutual fund investment to another, you will be required to pay the exchange fees. Advisory fees, broker fees, audit fees and registrar fees are some of the other recurring expenditures that would be charged to you. These expenses involve administrative and other running costs.

In India, SEBI (The Securities and Exchange Board of India) is the regulating authority that SEBI formulates policies and regulates the mutual funds to protect the interest of the Indian investors. There have been revisions and amendments from time to time. Even mutual funds promoted by foreign entities come under the purview of SEBI when operating in India. SEBI has revised its regulations to allow Indian mutual funds to invest in both gold and gold related instruments.

How is a mutual fund set up?

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002).


Literature on mutual fund performance evaluation is enormous. A few research studies that have influenced the preparation of this paper substantially are discussed in this section.

  • Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio performance. Drawing on results obtained in the field of portfolio analysis, economist Jack L. Treynor has suggested a new predictor of mutual fund performance, one that differs from virtually all those used previously by incorporating the volatility of a fund’s return in a simple yet meaningful manner.
  • Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensen’s alpha) that estimates how much a manager’s forecasting ability contributes to fund’s returns. As indicated by Statman (2000), the e SDAR of a fund portfolio is the excess return of the portfolio over the return of the benchmark index, where the portfolio is leveraged to have the benchmark index’s standard deviation. S.Narayan Rao , et. al., evaluated performance of Indian mutual funds in a bear market through relative performance index, risk-return analysis, Treynor’s ratio, Sharpe’s ratio, Sharpe’s measure , Jensen’s measure, and Fama’s measure. The study used 269 open-ended schemes (out of total schemes of 433) for computing relative performance index. Then after excluding funds whose returns are less than risk-free returns, 58 schemes are finally used for further analysis. The results of performance measures suggest that most of mutual fund schemes in the sample of 58 were able to satisfy investor’s expectations by giving excess returns over expected returns based on both premium for systematic risk and total risk.
  • Bijan Roy, et. al., conducted an empirical study on conditional performance of Indian mutual funds. This paper uses a technique called conditional performance evaluation on a sample of eighty-nine Indian mutual fund schemes .This paper measures the performance of various mutual funds with both unconditional and conditional form of CAPM, Treynor- Mazuy model and Henriksson-Merton model. The effect of incorporating lagged information variables into the evaluation of mutual fund managers’ performance is examined in the Indian context. The results suggest that the use of conditioning lagged information variables improves the performance of mutual fund schemes, causing alphas to shift towards right and reducing the number of negative timing coefficients.
  • Mishra, et al., (2002) measured mutual fund performance using lower partial moment. In this paper, measures of evaluating portfolio performance based on lower partial moment are developed. Risk from the lower partial moment is measured by taking into account only those states in which return is below a pre-specified “target rate” like risk-free rate. Kshama Fernandes(2003) evaluated index fund implementation in India. In this paper, tracking error of index funds in India is measured .The consistency and level of tracking errors obtained by some well-run index fund suggests that it is possible to attain low levels of tracking error under Indian conditions. At the same time, there do seem to be periods where certain index funds appear to depart from the discipline of indexation. K. Pendaraki et al. studied construction of mutual fund portfolios, developed a multi-criteria methodology and applied it to the Greek market of equity mutual funds. The methodology is based on the combination of discrete and continuous multi-criteria decision aid methods for mutual fund selection and composition. UTADIS multi-criteria decision aid method is employed in order to develop mutual fund’s performance models. Goal programming model is employed to determine proportion of selected mutual funds in the final portfolios.
  • Zakri Y.Bello (2005) matched a sample of socially responsible stock mutual funds matched to randomly selected conventional funds of similar net assets to investigate differences in characteristics of assets held, degree of portfolio diversification and variable effects of diversification on investment performance. The study found that socially responsible funds do not differ significantly from conventional funds in terms of any of these attributes. Moreover, the effect of diversification on investment performance is not different between the two groups. Both groups underperformed the Domini 400 Social Index and S & P 500 during the study


ABN Amro Mutual Funds is a subsidiary of Dutch banking group ABN Amro. It figures among high profile mutual fund companies which are found in India. ABN Amro Mutual Funds was established in India in 2003. Since its inception, the company has been faring steadily with its various schemes and features. The schemes offered by ABN Amro Mutual Funds to its clients give them impressive wealth growth options. The company offers its schemes in the forms of equity fund, debt fund, income fund and liquid fund.

Some of the other important features of ABN Amro Mutual Funds are mentioned below:

  • ABN AMRO Monthly Income Plan
  • ABN AMRO Flexi Debt Fund
  • ABN AMRO Opportunities Fund
  • ABN AMRO Money Plus Fund
  • ABN AMRO Dividend Yield Fund
  • ABN AMRO Equity Fund
  • ABN AMRO Future Leaders Fund
  • ABN AMRO Short Term Income Fund

ABN-AMRO Mutual Fund has a big name in the mutual fund industry of India, which works for the benefit of people as well as play a vital role in the economy of India. It is a sub company of the bank, which handles the fund investors and gives them all types of security.

The company has a great experience in handling the different types of funds investors. The mutual funds of ABN-AMRO are famous and much demanding because of their simple ways to increasing money besides the complicated ways of trading money. The company also gives assurance to the investor for their money, and provides the professionals who trade in the market and avail the opportunities for the benefit of unit holder.

The bank offers the best deal in the mutual fund for the interest of small investor who needs some security of their money with lots of other options such as flexibility in which investor withdraws its money at any time and invests the money with systematic way.

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They also offer the dividend reinvestment so the investor easily recycles its money in the market. This is the best bank, which also take care of the small investor as well as big one. They introduced such schemes with which a low profile investor takes a great advantage from the good investment strategy of the company. The most flexible offer of the bank is its open-ended scheme in which the investor can withdraw its money at any time without any notice.

The ABN-AMRO mutual funds India are the lowest risk fund because the investment trade in different stocks and industries, so the money is safer than any other way of investment. The big advantage of mutual funds is that the money of the people is in the hands of professionals who take good care of the money and trade after the research and analyzed the market before going to invest the money. Therefore, ABN-AMRO mutual fund is the significant company of India, which provides its services for the betterment of people.


Benchmark Asset Management Company Pvt. Ltd. (BAMC) is a SEBI registered Asset Management Company launched in June 2001. BAMC is the first and only asset management company in India with a primary focus on indexing and using quantitative techniques in creating innovative products. Benchmark is run and co-promoted by professionals with a long experience in the Indian and International Financial Markets.

Benchmark Milestones

  • First AMC in Asia (ex Japan) to launch ETF, and only 18th in the World
  • Launched the First ETF in India – Nifty BeES
  • Nifty BeES has been awarded the “Best Performing Mutual Fund of the Year in the index fund category at the CNBC-TV18-CRISIL Mutual Fund Awards in 2007 & 2008
  • BAMC is the largest Index Fund Manager and the largest ETF manager in India
  • BAMC was the first AMC to conceptualize the idea of a Gold ETF in the world
  • BAMC has been ranked as the “Best Provider of Structured Products” in their Private Banking Poll 2006, by Euro money

Details of various products mentioned below:

  • Exchange Traded Funds (ETFs)
  • Nifty BeES: The First ETF in Asia (Barring Japan)
  • Junior BeES: The First and only Midcap Index Fund and ETF in India.
  • Bank BeES: The First and only Sector Index Fund and ETF in India.
  • PSU Bank BeES: The First PSU Bank Sector Index Fund and ETF in India.
  • Gold BeES: The First Gold ETF in India.
  • Liquid BeES: The First and only Liquid ETF in the world
  • Shariah BeES : First Shariah based ETF in India

Open Ended Schemes

  • Benchmark Derivative Fund: The First Equity Arbitrage Fund in India.
  • Benchmark Equity and Derivative Opportunities Fund: The Equity Arbitrage and Volatility Trading Fund.
  • S&P CNX 500 Fund : First Equity Fund based on the broad based S&P CNX 500 Index

Benchmark Mutual Fund – Products

  • Nifty BeES is the first ETF (Exchange Traded Fund) in India: The primary objective of Nifty BeES is to provide returns on investment which match up to the total return on securities as corresponded by the S&P CNX Nifty Index. The Nifty BeES won the Golden Peacock Award as the Most Innovative Financial Product in the year 2002-03.
  • Junior BeES: The Junior BeES provides return which matches up to the return on securities as corresponded by the S&P CNX Nifty Junior Index.
  • Liquid BeES: It is the first Liquid ETF (Exchange Traded Fund) in the world. It is listed and traded as a share. The main objective of the Liquid BeES is to increase the returns and to lower the risks by investing in a basket of short-term government securities, call money, and money market instruments, and at the same time maintaining the liquidity and safety.


Advantages of investing in mutual funds:

  • Diversified portfolio
  • Professional Management
  • Small Investments
  • Well regulated by government
  • Liquidity
  • Convenience in transactions-buying and selling
  • Low cost: less than 1.5 percent
  • Transparency
  • Flexibility
  • Choice of schemes
  • Tax benefits


  • No assured returns
  • No protection of capital mutual funds do not offer assured returns and carry risk
  • Charges: there are various Fees and commissions like entry and exit loads.
  • Management risk: The performance of the fund depends upon the skills of its fund



A. Systematic Investment Plan

The salient features of Systematic Investment Plan (SIP) under AAEF, AAMIP and AAFDF -Regular Plan, are as under:-

  • Under SIP the investor of AAEF, AAMIP and AAFDF – Regular Plan, can for a continuous period of time invest a fixed amount at regular intervals for purchasing additional Units of the Scheme(s) at the Applicable NAV, subject to applicable Load.
  • SIP offers investors the following: Monthly Systematic Investment Facility (MSIF): Under MSIF an investor must invest a minimum of Rs.1,000/- and in multiples of Re.1/- thereafter on a monthly basis by providing a minimum of 6 post-dated cheques, for a block of 6 months in advance.

Quarterly Systematic Investment Facility (QSIF):

Under QSIF an investor must invest a minimum of Rs.3, 000/- and in multiples of Re.1/- thereafter on a quarterly basis by providing a minimum of 2 post-dated cheques for a block of 6 months in advance.

Post-dated cheques for SIP should be dated 7th, 15th or 25th of a month under MSIF or first month of each calendar quarter. All SIP cheques should be of the same amount and same date. In case the date falls on a Non-Business Day or falls during a book closure period, the immediate next Business Day will be considered for the purpose of determining the applicability of NAV subject to the realization of cheques. Units will be allotted on the above applicable dates. To start a SIP, an investor is required to open an account by initially investing the required minimum amount for application in the Scheme(s) as the case may be. However, if the SIP amount is equal to or more than the minimum amount for application of the relevant Scheme(s) / Plan(s) / Options(s), the first SIP instalment shall be treated as the investment amount.

B. Systematic Transfer Plan

The salient features of Systematic Transfer Plan (STP) under AAFDF, AAFRF and AACF are as under:

  • STP is a facility wherein investors of AAFDF, AAFRF and AACF can opt to transfer a fixed amount or capital appreciation amount at regular intervals into AAEF / AAMIP.
  • STP offers unit holders the following two facilities:
    • Fixed Systematic Transfer Facility (FSTF)
    • Capital Appreciation Systematic Transfer Facility (CASTF)

Both the Facilities will offer transfers at monthly and quarterly intervals. Unitholder is free to any of the above Facilities and also choose the frequency of such transfers.

3. Under the FSTF –

Monthly Interval, unitholders will be eligible to transfer a fixed amount (minimum amount of Rs.1,000 and in multiples of Re. 1 thereafter) on the 1st or 15th of a month. Under the FSTF – Quarterly Interval, unitholders will be eligible to transfer a fixed amount (minimum amount of Rs.3,000 and in multiples of Re. 1 thereafter) on the 1st or 15th of first month of each quarter (e.g. 1st / 15th of January, April, July and October). In case there is no minimum amount (as specified above) available in the unitholder’s account the residual amount will be transferred to the Transferee Scheme and the account of the unitholder will be closed.

4. Under the CASTF –

 Monthly Interval, unitholder will be eligible to transfer the entire amount of capital appreciation (subject to a minimum amount of Rs.1000 and in multiples of Re. 1 thereafter) on the 1st or 15th of a month. Under the CASTF – Quarterly Interval, unitholder will be eligible to transfer the entire amount of capital appreciation (subject to a minimum amount of Rs.3,000 and in multiples of Re. 1 thereafter) on the 1st or 15th of first month of each quarter (e.g. 1st / 15th of January, April, July and October). Please note that no transfer will take place if there is no minimum capital appreciation amount (except for the last transfer leading to closure of account).

5. There should be a minimum of six instalments for enrolment under Monthly FSTF and CASTF and two instalments for Quarterly FSTF and CASTF. Also, the minimum unitholder’s account balance at the time of STP enrolment should be Rs. 25,000.

6. A request for STP will be treated as a request for Redemption from / Subscription into the respective Option(s) of the Scheme(s), at the applicable NAV, subject to applicable Load.


(I) Redemption of Units: –

the Scheme is open for continuous redemption subject to the completion of a lock-in period of 3 years from the date of allotment. Accordingly, the Units can be redeemed on or Switched out every Business Day, at the Applicable NAV subject to applicable Load, if any, on expiry of lock in period of three years from the date of allotment. The AMC / Trustees reserve the right to change the Lock in period prospectively from time to time as may be permitted under the regulations, notification of the Government for the Equity Linked Savings Scheme. In case an investor has purchased Units on more than one Business Day the Units purchased first will be deemed to have been redeemed first i.e. on a First-in-First-Out basis. It may, however, be noted that in the event of death of the Unit holder, the nominee/legal heir subject to production of requisite documentary evidence, will be able to redeem the investment only after the completion of one year or anytime thereafter, from the date of allotment of Units to the deceased Unit holder.

(ii) Redemption Price: –

The Redemption / Switch out will be at NAV based prices subject to a Load, if any. Please refer to “Redemption Price” and “Load structure”.

(iii) Payment of Redemption Proceeds: –

As per the SEBI Regulations, the Mutual Fund shall despatch Redemption proceeds within 10 Business Days from the date of acceptance of the Redemption request. However, under normal circumstances, the Mutual Fund will endeavour to despatch the Redemption proceeds within 3 Business Days from the date of acceptance of the Redemption request.

1. Schemes according to Maturity Period:

A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period.

Open-ended Fund / Scheme

An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.

Close-ended Fund / Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

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2. Schemes according to Investment Objective:

A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:

Growth / Equity Oriented Scheme

The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

Income / Debt Oriented Scheme

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.

Future of Mutual Funds in India

By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks should be Rs 40,90,000 crore. The annual composite rate of growth is expected 13.4% during the rest of the decade. In the last 5 years we have seen annual growth rate of 9%. According to the current growth rate, by year 2010, mutual fund assets will be double.

Some facts for the growth of mutual funds in India

  • 100% growth in the last 6 years.
  • Number of foreign AMC’s are in the que to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide.
  • Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required.
  • We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion.
  • ‘B’ and ‘C’ class cities are growing rapidly. Today most of the mutual funds are concentrating on the ‘A’ class cities. Soon they will find scope in the growing cities.
  • Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products.
  • SEBI allowing the MF’s to launch commodity mutual funds.
  • Emphasis on better corporate governance.
  • Trying to curb the late trading practices.
  • Introduction of Financial Planners who can provide need based advice.


A portfolio manager is a person who makes investment decisions using money other people have placed under his or her control. In other words, it is a financial career involved in investment management. They work with a team of analysts and researchers, and are ultimately responsible for establishing an investment strategy, selecting appropriate investments and allocating each investment properly for a fund- or asset-management vehicle.

Portfolio managers make decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against. Performance Portfolio management is about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.

Discretionary Portfolio Management of ABN AMRO MUTUAL FUND:-

The benefits you enjoy with ABN AMRO Discretionary Portfolio Management Markets fluctuate constantly, requiring time for constant monitoring as well as expertise in analysing the ever changing investment landscape. Discretionary Portfolio Management (DPM) is the attractive solution should you wish to make your capital work for you but choose not to manage your investments yourself. With knowledgeable and experienced professionals in our DPM team reviewing and actively managing your assets on your behalf, you will have more time to enjoy life’s precious moments with your family and the peace of mind that your portfolio is in good hands.

Tailoring your portfolio to suit your needs

Should you decide to have all or part of your investments managed through DPM, your personal circumstances and investment objectives will clearly take centre stage. Our starting point is to determine your risk profile with you according to your investment goals, life circumstances, financial reserves, risk appetite, and experience as an investor. Through close consultation with your Private Banker, determining these aspects of your profile will serve as the basis for customizing your investment portfolio.

To ensure you are up to date with your investments, you will receive a detailed portfolio report every month or may choose to view your statements online. Furthermore, you will meet regularly with your portfolio manager and/or Private Banker to review the composition of your portfolio, the performance of your investments and the applied investment strategy.

ABN Amro Turns to Global Portfolio Management

ABN Amro Bank NV has embarked upon what analysts described last week as one of the first global efforts to prioritize and monitor a portfolio of IT projects. Late last year, the wholesale client services business unit for the Amsterdam-based bank began applying IT portfolio management techniques to prioritize hundreds of IT projects it has planned for this year, according to Ed Merchant, global head of vendor management for the wholesale bank in Jersey City, N.J. The IT projects, which could affect business activities in any of the 55 countries where the ABN Amro division has operations, are supported by enterprise portfolio management software from Arlington, Va.- based Expert Choice Inc. “We’re very dependent on IT for the wholesale bank’s product offerings,” said Merchant. “There’s almost nothing the business does that doesn’t have an IT implication.” Howard Rubin, an analyst at Gartner Inc., said that while more than 80% of companies now claim to be using IT portfolio management techniques, fewer than 10% of multinational corporations employ them globally.

One of the main reasons why ABN Amro adopted the portfolio management techniques was to help prioritize conflicting demands among business units, which often have their own agendas, said Merchant. “When we get into a discussion over why Project A should be allocated more resources than Project B, we can use the software to remind people why those decisions were made. ABN Amro’s wholesale banking division outsourced support of its IT infrastructure and applications development and maintenance to Electronic Data Systems Corp. under a five-year deal. The portfolio management software prioritizes EDS development projects along with projects that fall outside of EDS’s purview, according to Merchant. A key benefit of the PC-based portfolio management software is that it cost ABN Amro less than $50,000 to install. It’s also inexpensive to maintain, since it runs on laptops used by 10 senior IT managers within ABN Amro’s wholesale client services IT division who represent different parts of the business, said Merchant. “You can spend $50,000 bringing in a consulting firm for a couple of weeks and not have anything left but a recollection that they were in the chairs.


Portfolio management strategy where the manager makes specific investments with the goal of outperforming an investment benchmark index. Investors or mutual funds that do not aspire to create a return in excess of a benchmark index will often invest in an index fund that replicates as closely as possible the investment weighting and returns of that index; this is called passive management. Active management is the opposite of passive management, because in passive management the manager does not seek to outperform the benchmark index.

The effectiveness of an actively-managed investment portfolio obviously depends on the skill of the manager and research staff. In reality, the majority of actively managed collective investment schemes rarely outperform their index counterparts over an extended period of time, assuming that they are benchmarked correctly. For example, the Standard & Poor’s Index Versus Active (SPIVA) quarterly scorecards demonstrate that only a minority of actively managed mutual funds have gains better than the Standard & Poor’s (S&P) index benchmark. As the time period for comparison increases, the percentage of actively-managed funds whose gains exceed the S&P benchmark declines further.

Due to mutual fund fees and/or expenses, it is possible that an active or passively managed mutual fund could underperform compared to the benchmark index, even though the securities that comprise the mutual fund are outperforming the benchmark. However, since many investors are not satisfied with a benchmark return a demand for actively-managed continues to exist. In addition, many investors find active management an attractive investment strategy when investing in market segments that are less likely to be profitable when considered as whole. These kinds of sectors might include a sector such as small cap stocks.


The primary attraction of active management is that it allows selection of a variety of investments instead of investing in the market as a whole. Investors may have a variety of motivations for following such a strategy:

  • They may be skeptical of the efficient-market hypothesis, or believe that some market segments are less efficient in creating profits than others.
  • They may want to manage volatility by investing in less-risky, high-quality companies rather than in the market as a whole, even at the cost of slightly lower returns.
  • Conversely, some investors may want to take on additional risk in exchange for the opportunity of obtaining higher-than-market returns.
  • Investments that are not highly correlated to the market are useful as a portfolio diversifier and may reduce overall portfolio volatility.
  • Some investors may wish to follow a strategy that avoids or underweight’s certain industries compared to the market as a whole, and may find an actively-managed fund more in line with their particular investment goals. An employee of a high-technology growth company who receives company stock or stock options as a benefit might prefer not to have additional funds invested in the same industry.


The most obvious disadvantage of management is that the fund manager may make bad investment choices or follow an unsound theory in managing the portfolio. The fees associated with active management are also higher than those associated with passive management, even if frequent trading is not present. Those who are considering investing in an actively-managed mutual fund should evaluate the fund’s prospectus carefully. Data from recent decades demonstrates that the majority of actively-managed large and mid-cap stock funds in United States fail to outperform their passive stock index counterparts.

Active fund management strategies that involve frequent trading generate higher transaction costs which diminish the fund’s return. In addition, the short-term capital gains resulting from frequent trades often have an unfavourable income tax impact when such funds are held in a taxable account.

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When the asset base of an actively-managed fund becomes too large, it begins to take on index-like characteristics because it must invest in an increasingly diverse set of investments instead of those limited to the fund manager’s best ideas. Many mutual fund companies close their funds before they reach this point, but there is potential for a conflict of interest between mutual fund management and shareholders because closing the fund will result in a loss of income (management fees) for the mutual fund company.


Investment management is the professional management of various securities (shares, bonds and other securities) and assets (e.g., real estate), to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds or exchange-traded funds).

The term asset management is often used to refer to the investment management of collective investments, (not necessarily) whilst the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors. Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as wealth management or portfolio management often within the context of so-called “private banking”. The provision of ‘investment management services’ includes elements of financial analysis, asset selection, stock selection, plan implementation and ongoing monitoring of investments. Investment management is a large and important global industry in its own right responsible for caretaking of trillions of dollars, euro, pounds and yen. Coming under the remit of financial services many of the world’s largest companies are at least in part investment managers and employ millions of staff and create billions in revenue. Fund manager (or investment adviser in the United States) refers to both a firm that provides investment management services and an individual who directs fund management decisions.

Philosophy, process and people

The 3-P’s (Philosophy, Process and People) are often used to describe the reasons why the manager is able to produce above average results.

Philosophy refers to the over-arching beliefs of the investment organization. For example: (i) Does the manager buy growth or value shares (and why)? (ii) Do they believe in market timing (and on what evidence)? (iii) Do they rely on external research or do they employ a team of researchers? It is helpful if any and all of such fundamental beliefs are supported by proof-statements.

Process refers to the way in which the overall philosophy is implemented. For example: (i) which universe of assets is explored before particular assets are chosen as suitable investments? (ii) How does the manager decide what to buy and when? (iii) How does the manager decide what to sell and when? (iv) Who takes the decisions and are they taken by committee? (v) What controls are in place to ensure that a rogue fund (one very different from others and from what is intended) cannot arise?

People refer to the staff, especially the fund managers. The questions are, who are they? How are they selected? How old are they? Who reports to whom? How deep is the team (and do all the members understand the philosophy and process they are supposed to be using)? And most important of all, How long has the team been working together? This last question is vital because whatever performance record was presented at the outset of the relationship with the client may or may not relate to (have been produced by) a team that is still in place. If the team has changed greatly (high staff turnover or changes to the team), then arguably the performance record is completely unrelated to the existing team (of fund managers).


At the heart of the investment management industry are the managers who invest and divest client investments. A certified company investment advisor should conduct an assessment of each client’s individual needs and risk profile. The advisor then recommends appropriate investments.

Asset allocation

The different asset class definitions are widely debated, but four common divisions are stocks, bonds, real-estate and commodities. The exercise of allocating funds among these assets (and among individual securities within each asset class) is what investment management firms are paid for. Asset classes exhibit different market dynamics, and different interaction effects; thus, the allocation of monies among asset classes will have a significant effect on the performance of the fund. Some research suggests that allocation among asset classes has more predictive power than the choice of individual holdings in determining portfolio return. Arguably, the skill of a successful investment manager resides in constructing the asset allocation, and separately the individual holdings, so as to outperform certain benchmarks (e.g., the peer group of competing funds, bond and stock indices).

Long-term returns

It is important to look at the evidence on the long-term returns to different assets, and to holding period returns (the returns that accrue on average over different lengths of investment). For example, over very long holding periods (eg. 10+ years) in most countries, equities have generated higher returns than bonds, and bonds have generated higher returns than cash. According to financial theory, this is because equities are riskier (more volatile) than bonds which are they more risky than cash.


Against the background of the asset allocation, fund managers consider the degree of diversification that makes sense for a given client (given its risk preferences) and construct a list of planned holdings accordingly. The list will indicate what percentage of the fund should be invested in each particular stock or bond. The theory of portfolio diversification was originated by Markowitz (and many others) and effective diversification requires management of the correlation between the asset returns and the liability returns, issues internal to the portfolio (individual holdings volatility), and cross-correlations between the returns.


Load Structure:-

1. Entry Load:

In respect of each Subscription / Switch – In of Units for an amount less than Rs. 5 crores in value, entry load of 2.25% is payable. In respect of each Subscription / Switch – In of Units for an amount equal to Rs. 5 crores or more in value, entry load payable would be Nil.

2. Exit Load :

Nil CDSC :

In respect of each Subscription / Switch – In of Units for an amount less than Rs. 5 crores in value, CDSC of 1% is payable if the Units are redeemed / switched – out within 6 months from the date of such Subscription / Switch – In. In respect of each Subscription / Switch – In of Units for an amount equal to Rs. 5 crores or more in value, CDSC payable would be Nil, if the Units are redeemed / switched – out.

For the purpose of calculating the Entry Load each Subscription / Switch-In made into the scheme(s) will be tracked separately on first in first out basis. The above provisions of load structure will not be applicable for investments by Fund of Funds (FoF) schemes and investments under Systematic Investment Plan/ Systematic Transfer Plan. In view of the same, provisions notified in terms of an Addendum dated April 24, 2006 for investment by FoF schemes and Addendum dated January 27, 2006 for investments under SIP/ STP would respectively remain applicable for such cases.

3. Liquidity: –

The Scheme(s) will offer for Sale / Switch-in and Redemption / Switch-out of Units on every Business Day on an ongoing basis, commencing not later than 30 days from the closure of Initial Offer Period. As per the SEBI Regulations, the Mutual Fund shall despatch Redemption proceeds within 10 Business Days of receiving the Redemption request. A penal interest of 15% per annum or such other rate as may be prescribed by SEBI from time to time, will be paid in case the Redemption proceeds are not despatched within 10 Business Days of the date of Redemption request. However, under normal circumstances, the Mutual Fund will endeavour to despatch the Redemption proceeds within 3 Business Days from the acceptance of the Redemption request.

4. Transparency: –

The AMC will disclose the first NAV of the Scheme(s) not later than 30 days from the closure of Initial Offer Period. Subsequently, the NAV will be disclosed at the close of every Business Day and released to the Press, News Agencies and the Association of Mutual Funds of India (AMFI) except in case of “Suspension of Sale / Redemption / Switching Options of the Units”.

The AMC will disclose details of the portfolio of the Scheme(s) on a quarterly basis on the website of the AMC www.assetmanagement.abnamro.co.in. As presently required by the SEBI Regulations, a complete statement of the Scheme portfolio would be published by the Mutual Fund as an advertisement in a newspaper within one month from the close of each half year or mailed to the Unitholder. The AMC shall update the NAVs on the website of Association of Mutual Funds in India – AMFI of the AMC. In case of any delay, the reasons for such delay would be explained to AMFI and SEBI by the next day. The Mutual Fund shall issue a press release providing reasons and explaining when the Mutual Fund would be able to publish the NAVs.


In that study we measured the mutual fund its basic of mutual fund and its origin and in my study we study the ABN AMRO MUTUAL FUND AND BENCH MARK MUTUAL FUND its history and its performance and its advantages and disadvantages. In that we also study the its portfolio management and its compare in that we find its structure is same because that its all the rules and regulations its section and its process is made by SEBI that its major rule in mutual fund and its investment option for investor whose invest the money in the mutual funds that they used the company profile and SEBI guidelines which are amended by the security exchange and board of India because mutual fund it’s a like a share market type were we sell and buy the mutual fund from the company of different – different companies we study the ABN AMRO mutual fund that so many schemes are provided by the ABN AMRO mutual fund in Indian investor to invest the money in the market. And also its presented the bench mark mutual fund that also a fund were the investor invest the money that they also provide the so many schemes for investor to invest the money in the market. In that we also study the its investment plan its scheme for investment and save tax of both the mutual funds considered in the study and also its portfolio management and its structure of the mutual funds are same as provided by the SEBI. For investor to invest the money in the market of the mutual fund.


· www.benchmarkfunds.com

· www.abnamrofund.com

· http://www.beta.benchmarkfunds.com/static.pl?pg=BedofDownloads

· http://www.benchmarkfunds.com/pdf_files/KIM_Gold%20BeES%20-%20April%202009.pdf

· file://localhost/D:/DOCUMENT/New%20Folder/FIS/projects%20in%20mutual%20funds.mht


· http://www.aabri.com/manuscripts/09322.pdf

· http://finance.indiamart.com/pdfs/bench-liq.pdf

· http://www.kotak.com/Kotak_BankSite/common/pdf/factsheets/sip-stp.pdf

· http://in.reuters.com/article/companyNews/idINBOM23099320070912

· www.sebi.gov.in

· http://uk.biz.yahoo.com/mutualfunds/manager/sbabnamr.html

· http://www.benchmarkfunds.com/pdf_files/SNP500_KIM_MAY_11.pdf

· http://finance.indiamart.com/pdfs/bench-liquid.pdf

· www.growwithmoney.com

· http://www.sebi.gov.in/mfdp/abnlong.pdf


· http://www.benchmarkfunds.com/static/Portfolio%20Sept%2004.pdf

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