comparision of hdfc equity schemes with competitor’s equity schemes

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1 The Summer Internship Project report “COMPARISION OF HDFC EQUITY SCHEMES WITH COMPETITOR’S EQUITY SCHEMES” At HDFC BANK. Submitted By Bhut Gaurav B. Enrollment No. 137730592002 Academic Year: 2013-14 MBA Semester III Institute Name: Sunshine Group of Institutions, Faculty of Management, Rajkot Submitted To Gujarat Technological University

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sip project on HDFC, SIP on comparison of HDFC equity schemes with competitor’s equity schemes.

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  • 1. 1 The Summer Internship Project report COMPARISION OF HDFC EQUITY SCHEMES WITH COMPETITORS EQUITY SCHEMES At HDFC BANK. Submitted By Bhut Gaurav B. Enrollment No. 137730592002 Academic Year: 2013-14 MBA Semester III Institute Name: Sunshine Group of Institutions, Faculty of Management, Rajkot Submitted To Gujarat Technological University

2. 2 INTRODUCTION 3. 3 INTRODUCTION The Indian financial market is one of the fastest growing emerging markets of the world, thanks to the new economic policy - liberalization, deregulation and measures of restructuring - which has dismantled entry barriers in the financial markets, allowed the entry of new players and created an environment for efficient allocation of resources. The major investors in the markets are the Individual Investors, Corporate Sectors, Charitable Trusts, etc. The individual investors are now aware about of the other sources of the investment avenues rather than the traditional investment avenue. They are aware about the modern investment avenues. One of the important investment avenues in the financial market is the Mutual Fund. Through out the world, Mutual Funds have played a significant role as far as an investment is concerned. Mutual Funds play a pivotal role in transforming savings into investments and thereby improving financial health of a country. One way to measure this role is to analyze performance of mutual fund schemes. Also understanding of mutual fund structure and advantages etc. is very important. A Mutual Fund is the ideal instrument vehicle for todays complex and modern financial scenario. Mutual funds offer many benefits to the small investors such as Diversification, liquidity, low transaction cost, low risk, transparency, more options and more schemes, professional management, flexibility, convenience to switch and many more. Other than Mutual Funds, Bank Deposits, Post Office Schemes, RBI Relief Bond, Public Provident Fund, Unit Trust of India, Life Insurance, and Equity are the investment avenues where generally investors invest their savings. The survey conducted to understand about the Mutual Fund as an investment Avenue and also generate the awareness of mutual funds in the minds of individual investors & corporate. 4. 4 COMPANY DETAILS 5. 5 MAN WITH A MISSION If ever there was a man with a mission it was Hasmukhbhai Parekh, Founder and Chairman- Emeritus, of HDFC Group who left this earthly abode on November 18, 1994. Born in a traditional banking family in Surat, Gujarat, Mr. Parekh started his financial career at Harkisandass Lukhmidass a leading stock broking firm. The firm closed down in the late seventies, but, long before that, he went on to become a towering figure on the Indian financial scene. In 1956 he began his lifelong financial affair with the economic world, as General Manager of the newly formed Industrial Credit and Investment Corporation of India (ICICI). He rose to become Chairman and continued so till his retirement in 1972. At the ripe age of 60, Hasmukhbhai started his second dynamic life, even more illustrious than his first. His vision for mortgage finance for housing gave birth to the Housing Development Finance Corporation it was a trendsetter for housing finance in the whole Asian continent. Mr. H.T. PAREKH is conferred the Padma Bhushan by the Government of India in the year 1992. 6. 6 Background and Objective of HDFC group Background HDFC was incorporated in 1977 with the primary objective of meeting a social need that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million. Business Objectives The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets... Organizational Goals HDFCs main goals are to a) Develop close relationships with individual households, b) Maintain its position as the premier housing finance institution in the country, c) Transform ideas into viable and creative solutions, d) Provide consistently high returns to shareholders, and e) To grow through diversification by leveraging off the existing client base. 7. 7 Key group Companies and their business HDFC Reality HDFC Bank HDFC Standard Life Insurance HDFC Mutual Fund HDFC Chubb General Insurance Credit Information Bureau (INDIA) Limited HDFC Securities HDFC Consultancy Services Intel net Global 8. 8 HDFC REALTY Profile The property market in India abounds with possibilities and potential but for the large part, it is still highly fragmented and disorganized. HDFCrealty.com is a / your new, organized electronic marketplace for properties. We/ It provides the entire gamut of real estate services, bringing together the "clicks world" and the "bricks world" in a revolutionary and user-friendly way. Making available the best guidance and the most professional, transparent, efficient service to the real estate customer HDFCrealty.com brings together India's most exhaustive database of properties. It acts as a one-stop online hub for information, comparative analyses, transactions, and market reach and comprehensive professional services. For property anywhere in India. For customers anywhere in the world HDFCrealty.com, Housing Development Finance Corporation Limited (HDFC) has formed the company behind this site. HDFC is Indias largest Housing Finance Company and is an expert on the housing sector, property markets and the real estate business.. This expertise and service orientation has developed and strengthened over the last 22 years. Today HDFC has an office network of 63 offices all over the country and an overseas office in Dubai. HDFC has financed over 1.5 million dwelling units with loan approvals and disbursements amounting to Rs. 225 billion and Rs. 186 billion respectively. 9. 9 HDFC Bank Profile The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. Business Focus HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values - Operational Excellence, Customer Focus, Product Leadership and People. Business HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments: 1. Wholesale Banking Services 2. Retail Banking Services 3. Treasury 10. 10 HDFC Standard Life Insurance Profile HDFC Standard Life Insurance Company Ltd. is one of Indias leading private life insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.), Indias leading housing finance institution and The Standard Life Assurance Company, a leading provider of financial services from the United Kingdom. Both the promoters are well known for their ethical dealings and financial strength and are thus committed to being a long-term player in the life insurance industry all-important factors to consider when choosing your insurer. Vision 'The most successful and admired life insurance company, which means that we are the most trusted company, the easiest to deal with, offer the best value for money, and set the standards in the industry'. Values Values that we observe while we work: Integrity, Innovation Customer centric, People Care One for all and all for one, Team work, Joy and Simplicity 11. 11 Parentage HDFC Limited. HDFC is Indias leading housing finance institution and has helped build more than 23, 00,000 houses since its incorporation in 1977. Standard Life Assurance Company Standard Life has been looking after the financial needs of customers for more than 180 years. It currently has a customer base of over 7 million people who rely on the company for their insurance, pension, investment, banking and health-care needs. Leader in the employee benefit market in both the UK and Canada. Rated by Standard & Poor as 'strong' with a rating of A+ and as 'good' with a rating of A1 by Moodys. 12. 12 HDFC Mutual Fund VISION To be a dominant player in the Indian mutual fund space recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests. Sponsors Housing Development Finance Corporation Limited (HDFC) The Standard Life Assurance Company Management HDFC Trustee Company Limited HDFC Asset Management Company Limited (AMC) The present share holding pattern of the AMC is as follows PARTICULARS % OF THE PAID UP SHARE CAPITAL HDFC 50.10 Standard Life Investments Limited 49.90 13. 13 HDFC Chubb General Insurance Company Limited HDFC CHUBB With over one century of experience in the field of non-life insurance from Chubb and HDFC's expertise from the financial segment, HDFC Chubb General Insurance Company Limited has the consumer insight to make its product range world class and comprehensive. HDFC Chubb brings you Insurance solutions that you can rely on. Their offerings are classified into three categories. 1. The categories comprise 2. Personal Insurance, Accident and Health Insurance and 3. Commercial Insurance. 14. 14 HDFC LTD HDFC was incorporated in 1977 with two primary objectives - to enhance housing stock in the country through housing finance systematically and professionally and promote home ownership. They also aim to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets. HDFC is also the largest mobiliser of retail deposits in the private sector outside the banking circle. Our deposits have been awarded the highest safety credit rating 'FAAA' & 'MAAA' by CRISIL and ICRA respectively for eight consecutive years. CHUBB Corporation With more than $30billion in assets, The Chubb Corporation is one of the worlds largest, financially strongest, non-life insurance companies. It is noted for its quality service and innovative insurance products geared to meeting the changing needs of a broad range of customers in diverse markets. Founded in New York in 1882, Chubb today provides property and casualty insurance through more than 10,000 employees in 32 countries of North America, South America and Asia. Chubb also works closely with 5000 independent agents and brokers worldwide. 15. 15 Credit Information Bureau (INDIA) Limited Profile Credit Information Bureau (India) Limited (CIBIL) was incorporated in 2000. CIBILs aim is to fulfill the need of credit granting institutions for comprehensive credit information by collecting, collating and disseminating credit information pertaining to both commercial and consumer borrowers, to a closed user group of Members. Banks, Financial Institutions, Non Banking Financial Companies, Housing Finance Companies and Credit Card Companies use CIBILs services. Data sharing is based on the Principle of Reciprocity, which means that only Members who have submitted all their credit data, may access Credit Information Reports from CIBIL. The relationship between CIBIL and its Members is that of close interdependence. Integral Solution The establishment of CIBIL is an effort made by the Government of India and the Reserve Bank of India to improve the functionality and stability of the Indian financial system by containing NPAs while improving credit grantors portfolio quality. CIBIL provides a vital service, which allows its Members to make informed, objective and faster credit decisions. MISSION Statement To be the leader and trendsetter in India, in providing comprehensive credit information services and related products conforming to global standards, while adhering to the best practices in terms of confidentiality, propriety and fair reporting, with a strong technology orientation and seeking to afford the highest level of customer satisfaction. 16. 16 HDFC SECURITIES Profile HDFCsec is a brand brought to you by HDFC Securities Ltd, which has been promoted by the HDFC Bank & HDFC with the objective of providing the diverse customer base of the HDFC Group and other investors a capability to transact in the Stock Exchanges &other financial market transactions. HDFCsec will equip you with the necessary tools to allocate, select and manage your investments wisely, and also support it with the highest standards of service, convenience and hassle-free trading tools. Mission Statement Mission is to provide our customers with the most useful investment guidance and investment-related services available in the country. We want to become a one-stop solution for all your investment needs, one that will help you get the most out of your money. What HDFC SECURITIES HDFC SECURITIES services comprise online buying and selling of equity shares on the National Stock Exchange (NSE). HDFCsec helps you manage your money in every possible way. We understand your time is valuable and that convenience is important. So were here to provide high quality investment services, in a simple, direct and cost- effective way to help you achieve your financial goals. 17. 17 HDFC Consultancy Services HDFC is a unique example of a housing finance company, which has demonstrated the viability of market-oriented housing finance in a developing country. It is viewed as an innovative institution and a market leader in the housing finance sector in India. The World Bank considers HDFC a model private sector housing finance company in developing countries and a provider of technical assistance for new and existing institutions, in India and abroad. HDFCs executives have undertaken consultancy assignments related to housing finance and urban development on behalf of multilateral agencies all over the world. HDFC has also served as consultant to international agencies such as World Bank, United States Agency for International Development (USAID), Asian Development Bank, United Nations Center for Human Settlements, Commonwealth Development Corporation (CDC) and United Nations Development Programmed (UNDP). HDFC has also undertaken assignments for the United Nations Capital Development Fund in Ethiopia, for the UNCHS in Nairobi, for USAID in Russia and Bulgaria, and projects of the World Bank in Indonesia and Ghana. At the national level, HDFC executives have played a key role in formulating national housing policies and strategies. Recognizing HDFCs expertise, the Government of India has invited HDFCs executives to join a number of committees and task forces related to housing finance, urban development and capital markets. 18. 18 INTELENET GLOBAL Profile Two leading global investors - HDFC and Barclays - provide the financial backing Intelenet needs to lead in a global marketplace. HDFC is India's leading financial services conglomerate, while Barclays is a venerable financial services group headquartered in the United Kingdom, ranking among the Top 10 banks in the world based on market capitalization. At the same time, their combined financial strength provides Intelenet with the ability to remain on the cutting edge of BPO processes while simultaneously maintaining corporate growth and achieving the goals and objectives set forth by our customers. What intelenet global do 100% BPO FOCUS Mission To add value to our clients' business by providing cost-effective, premium quality Customer Management services and be the preferred vendor for off shored, outsourced BPO services. 19. 19 Social Responsibilities The year 2004-05 saw HDFC making renewed efforts in fulfilling its social commitment by way of several ongoing as well as new initiatives. The latter included innovative financing of slum up-gradation and low-income housing projects, dialoguing with key stakeholders on policy issues, responding to the tsunami tidal wave disaster and staff volunteering and participation in varied community development activities. 20. 20 SWOT Analysis Strength Well-regained and reputed brand of HDFC. Experience of Standard Life Investment. Young and well qualified staff. Well aware of customer need. Weakness Less marketing. Presence of HDFC MF in very less places. Comparatively very less staff and very heavy work load. Opportunities Day by day increasing knowledge about Mutual Fund. Only instrument with proper corporate governance and comparatively high return with lesser risk. Rural market is totally untapped. Threat Presence of nationalized player like UTI and many more. Increase in competition and competitor. 21. 21 INDUSTRY DETAILS 22. 22 Mutual Fund Sector And Financial Market Overview Mutual funds have played a significant role in financial intermediation, the development of capital markets and the growth of the Indian Economy. The Indian mutual fund industry has been no exception. Though it is relatively new, it has grown at a dynamic speed, influencing various sectors of the financial market and the national economy. The Indian economy is under transition on account of the on going structural adjustment programs and liberalization. The corporate sector and the investment community play a major role in the markets today. Economic transition is usually marked by changes in the market mechanics, institutional integration, market regulations, relocation of savings and investments and changes in inter-scrotal relationships. These changes often include negativity and shake investors confidence in the capital market. Mutual funds as efficient allocates of resources play a crucial role in this transitional period. They have opened new vistas to investors and imparted much needed liquidity to the system. In the process, they have challenged the hitherto dominant role of commercial banks in the financial market and national economy. Mutual funds are dynamic financial institutions that play a crucial role in an economy by mobilizing savings and investing them in the capital markets, thus establishing a link between savings and capital market. Therefore, the activities of mutual funds have both short and long term impact on the savings and capital markets and the national economy. They mobilize funds in the savings market and act as complementary to banks. 23. 23 Emergence Of Mutual Fund Mutual funds now represent perhaps the most appropriate investment opportunity for most investors. As financial markets become more sophisticated and complex, investors need a financial intermediary who provides the required knowledge and professional expertise on successful investing. It is no wonder then that in the birthplace of mutual funds the U.S.A. the fund industry has already overtaken the banking industry, more funds being under mutual fund management than deposited with banks. The Indian mutual fund industry has already started opening up many of the exciting investment opportunities to Indian investors. We have started witnessing the phenomenon of more savings now being entrusted to the funds than to the banks. Despite the expected continuing growth in the industry, mutual funds are still a new financial intermediary in India. 24. 24 Place of Mutual Funds in Financial Markets Indian households started allocating more of their savings to the capital markets in 1980s, with investments flowing into equity and debt instruments, besides the conventional mode of bank deposits. Until 1992, primary market investors were effectively assured good returns, as the issue price of new equity issues was controlled and low. After introduction of free pricing of shares, new issue prices were higher and with greater volatility in the stock markets, many investors who bought highly priced shares lost money, and withdrew from the markets altogether. Even those investors who continued as Direct investors in the stock markets realized that the key to successful investing in the capital markets lay in building a diversified portfolio, which in turn required substantial capital. Besides, selecting securities with growth and income potential from the capital market involved careful research and monitoring of the market, which was not possible for all investors. Under similar circumstances in other countries, mutual funds had emerged as professional intermediaries. Besides providing the expertise in stock market investing, these funds allow investing in small amounts and yet holding a diversified portfolio to limit risk, while providing the potential for income and growth that is associated with the debt and equity instruments. In India, Unit Trust of India occupied this place as the only capital markets intermediary from 1964 until late 1987, when the Government started allowing other sponsors also to set up mutual funds. With some ups and downs, this new class of intermediary institutions has emerged, in India as elsewhere, as a good alternative to direct investing in capital markets. Mutual Funds serve as a link between the saving public and the capital markets, as they mobilize savings from investors and bring them to borrowers in the capital markets. 25. 25 Concept of Mutual Fund: Summary A mutual fund is a common pool of money into which investors place their contributions that are to be invested in accordance with a stated objective. The ownership of the fund is thus joint or mutual; the fund belongs to all investors. He or her bears in the same proportion as the amount of the contribution make a single investors ownership of the fund to the total amount of the fund. A mutual fund uses the money collected from investors to buy those assets, which are specifically permitted by its stated investment objective. Thus, an equity fund would buy mainly equity assets ordinary shares, preference shares, warrants etc. A bond fund would mainly buy debt instruments such as debentures, bonds, or government securities. It is these assets, which are owned by the investors in the same proportion as their contribution bears to the total contributions of all investors put together. 26. 26 COMPETITORS DETAILS 27. 27 Mutual Fund Player In India A) Bank Sponsored 1. Joint Ventures - Predominantly Indian a. SBI Funds Management Private Ltd. 2. Others a. BOB Asset Management Co. Ltd. b. Can bank Investment Management Services Ltd. c. UTI Asset Management Co. Private Ltd. B) Institutions a. Jeevan Bima Sahayog Asset Management Co. Ltd. C) Private Sector 1. Indian a. Benchmark Asset Management Co. Private Ltd. b. Cholamandalam Asset Management Co. Ltd. c. Credit Capital Asset Management Co. Ltd. d. Escorts Asset Management Ltd. e. J. M. Financial Asset Management Private Ltd. f. Kotak Mahindra Asset Management Co. Ltd. g. Reliance Capital Asset Management Ltd. h. Sahara Asset Management Co. Private Ltd i. Sundaram Asset Management Co. Ltd. j. Tata Asset Management Ltd. 2. Joint Ventures - Predominantly Indian a. Birla Sun Life Asset Management Co. Ltd. b. DSP Merrill Lynch Fund Managers Ltd. c. HDFC Asset Management Co. Ltd. d. Prudential ICICI Asset Management Co. Ltd. 3. Joint Ventures - Predominantly Foreign a. ABN AMRO Asset Management (India) Ltd. b. Deutsche Asset Management (India) Private Ltd. c. Fidelity Fund Management Private Ltd. d. Franklin Templeton Asset Management (India) Private Ltd. e. HSBC Asset Management (India) Private Ltd. f. ING Investment Management (India) Private Ltd. g. Morgan Stanley Investment Management Private Ltd. h. Principal Pnb Asset Management Co. Private Ltd. i. Standard Chartered Asset Management Co. Private Ltd. 28. 28 AUM OF COMPETITORS Assets Under Management (AUM) as at the end of Feb-2006 (Rs in Lakhs) Mutual Fund Name AUM Average AUM For The Month Excluding Fund Of Funds Fund Of Funds Excluding Fund Of Funds Fund Of Funds 1. ABN AMRO Mutual Fund 307401.78 0 294394.15 0 2. Benchmark Mutual Fund 96154.29 0 0 3. Birla Sun Life Mutual Fund 1229567.8 2214.97 0 4. BOB Mutual Fund 16086.69 0 0 5. Can bank Mutual Fund 292803.03 0 285732.35 0 6. Chola Mutual Fund 189609.82 0 0 0 7. Deutsche Mutual Fund 268426.04 0 275141.94 0 8. DSP Merrill Lynch Mutual Fund 995316.22 0 0 9. Escorts Mutual Fund 16253.85 0 0 10. Fidelity Mutual Fund 298476.72 6098.08 294759.13 5281.52 11. Franklin Templeton Mutual Fund 1799634.31 38459.31 1810251.23 38321.47 12. HDFC Mutual Fund 2012162.62 0 1993357.05 0 13. HSBC Mutual Fund 906041.96 0 904766.43 0 14. ING Vysya Mutual Fund 192205.91 0 0 15. JM Financial Mutual Fund 360249.19 0 0 16. Kotak Mahindra Mutual Fund 782165.04 51312.36 772800.56 50690.9 17. LIC Mutual Fund 723932.06 0 0 18. Morgan Stanley Mutual Fund 260283.97 0 254479.13 0 19. PRINCIPAL Mutual Fund 693529.86 0 0 20. Prudential ICICI Mutual Fund 2136649.99 4621.34 0 21. Reliance Mutual Fund 1685928.32 0 0 22. Sahara Mutual Fund 32750.34 0 33578.84 0 23. SBI Mutual Fund 1289213.82 0 1320080.51 0 24. Standard Chartered Mutual Fund 1181321.66 4408.68 0 25. Sundaram Mutual Fund 324969.66 0 344641.09 0 26. Tata Mutual Fund 872429.36 0 0 27. Taurus Mutual Fund 21734.89 0 21584.28 0 28. UTI Mutual Fund 2761883.26 0 2751832.55 0 Total 21747182.46107114.7411357399.24 94293.89 29. 29 REGULATROY ENVIRONMENT DETAILS 30. 30 Regulators in India AMFI (Association of Mutual Fund in India) AMFI not a Self Regulatory Organization (SRO). Its made to promote mutual fund in the masses and give recommendation in order to uphold the interest of the investor. SEBI (Security Exchange Board of India) Securities and Exchange Board of India ("SEBI"), the Capital Markets regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors. All Mutual Funds are registered with SEBI and they function within the provision of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI. RBI (Reserve Bank of India) Reserve bank of India was the regulator of Mutual Fund before SEBI. It regulated mutual fund initially and there were only few schemes in the market. But now with coming of SEBI, it has now become the main regulator of the Mutual Fund. RBI now only governs Bank Sponsored Mutual Fund. 31. 31 Investors Rights Proportionate right to beneficial ownership of schemes assets Right to obtain information from trustees Entitled to receive dividend warrants within 30 days of declaration of dividend Inspect major documents of the fund Appointment of the AMC can be terminated by 75% of the unit holders of the scheme present and voting Right to approve of changes in fundamental attributes of a close ended scheme (75 % of unit holders should approve) - right to be informed so in open ended schemes so that they can redeem Right to receive a copy of annual financial statements of fund and periodic transaction statements 75% of the unit holders can resolve to wind up the scheme Legal Limitations to Investors Rights Unit holders can not sue the trust Can initiate legal proceedings against trustees Sponsor of mutual funds have no obligation to meet any shortfall in the assured return - unless explicitly guaranteed in the offer document No rights to a prospective investor Investors obligations Carefully study the offer document before investing Monitor his investment in a scheme by referring financial statements, performance updates and research reports sent by the AMC 32. 32 ORGANIZATIONAL STUDY 33. 33 MARKETING DEPARTMENT 34. 34 Marketing Scenario The last few years have seen an increased attention to mutual funds across all genres of investors big or small, individuals or corporate. The growing awareness of the advantages that mutual funds offer over other investments avenues have been better communicated and more understood A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. A mutual fund is answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a fulltime basis. Now, Mutual Fund is new developing market. In fact, the mutual fund vehicle exploits economies of scale in all three areas research, investment and transaction processing. 35. 35 Market Segmentation Market segmentation is an effort to increase a companys precision marketing. A market segment consists of large identifiable group within a market with similar wants, purchasing power, buying attitudes or buying habits. As HDFC mutual fund is a service sector industry they introduce different schemes for different people. Each person is different in nature and each have differ criteria for investment like risk factor, return, liquidity, tax benefits etc. So that HDFC Asset management company have introduced varieties of scheme like debt scheme, balanced scheme, equity related scheme and each schemes have option to invest in SIP (Systematic Investment Plan) which help investor to invest a specific amount for a continuous period, at regular intervals so that investor has the advantage of rupee cost averaging and also helps him save compulsorily a fixed amount each amount. Target Market HDFC Asset Management Company is a joint venture of HDFC BANK (50.10%) and Standard Life Investment Limited (49.90%). The joint venture was formed with the key objective of providing the Indian investor mutual fund products to suit a variety of investment needs. HDFC Asset Management Company, have variety of scheme both open ended and close ended scheme. Both have different objective and different target market. Equity Mutual Fund Scheme has target market of person who wants to take high risk and also expect high return. Balanced scheme have target market of person who wants to take moderate risk and expect average return and Debt scheme have target market of person who wants to take less risk. Close-ended scheme have target market of person who wants long-term equity investment. 36. 36 Customers Profile HDFC Asset Management Company, have variety scheme and each scheme have different customer profile. For Equity related scheme customer profile is young generation, for liquid scheme customer profile is business man who wants to utilize their money in effective manner for shorter period, in SIP (Systematic Investment Plan) customer basically are serviced person who invest regularly and want to earn more than average return. Thus, HDFC Asset Management Company, have introduced variety of scheme to suit need of variety of customer. 37. 37 Positioning Strategy Positioning is the act of designing the companys offering and image to occupy a distinctive place in the target markets mind. Positioning starts with a product. A piece of merchandise, a service, a company, an institution, or even a person. But positioning is not what you do to a product. Positioning is what you do the mind of the prospect. That is, you position the product in the mind of prospect. A companys differentiating and positioning strategy must change as the product, market, and competitors change over time. Once the company has developed a clear positioning strategy, it must communicate that positioning effectively. There should be no under positioning, over positioning, confused positioning or doubtful positioning. HDFC Asset Management Company, have positioning strategy of Continuing a Tradition of Trust. It is accurate positioning strategy because it signifies a trust with its clients. Here is special Relationship Manager dedicated towards customer service and satisfaction and give them guidance about various schemes which helps them to get right scheme which suit their investment needs. In this way it continues to maintain a trust with its clients. 38. 38 Product Details 39. 39 What is a Mutual Fund? A mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts etc. Invest / Pool Their Money Invest in number Of Stocks & Bonds Profit / Loss From Individual Investment Profit / Loss From Portfolio of Investment 40. 40 Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The investors in proportion to their investments share the profits or losses. The mutual funds normally come out with a number of schemes with different investment objectives, which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI), which regulates securities markets before it can collect funds from the public. 41. 41 History of the Indian Mutual Fund Industry in India The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases. First Phase 1964-87 An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6, 700 crores of assets under management. Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores. 42. 42 Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds. Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. 43. 43 The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. The graph indicates the growth of assets over the years. 44. 44 Structure of Mutual Fund 45. 45 The Structure Consists of Sponsor Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund. Trust The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908. Trustee Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The main responsibility of the Trustee is to safeguard the interest of the unit holders and inter alia ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the respective Schemes. At least 2/3rd directors of the Trustee are independent directors who are not associated with the Sponsor in any manner. 46. 46 Asset Management Company (AMC) The Trustee as the Investment Manager of the Mutual Fund appoints the AMC. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund. At least 50% of the directors of the AMC are independent directors who are not associated with the Sponsor in any manner. The AMC must have a net worth of at least 10 crores at all times. Registrar and Transfer Agent The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form; redemption requests and dispatches account statements to the unit holders. The Registrar and Transfer agent also handles communications with investors and updates investor records. 47. 47 Benefits of Investing through Mutual Funds There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets like US and UK is the range of benefits they offer, which are unmatched by most other investment avenues. The benefits have been broadly split into universal benefits, applicable to all schemes and benefits applicable specifically to open-ended schemes. 48. 48 Affordability A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.5000/-. This amount today would get you less than quarter of an Infosys share! Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market. Diversification The nuclear weapon in your arsenal for your fight against Risk. It simply means that you must spread your investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.). This kind of a diversification may add to the stability of your returns, for example during one period of time equities might under performs but bonds and money market instruments might do well enough to offset the effect of a slump in the equity markets. Similarly the information technology sector might be faring poorly but the auto and textile sectors might do well and may protect your principal investment as well as help you meet your return objectives. Variety Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity. For example, an investor can invest his money in a Growth Fund (equity scheme) and Income Fund (debt scheme) depending on his risk appetite and thus create a balanced portfolio easily or simply just buy a Balanced Scheme. 49. 49 Professional Management Qualified investment professionals who seek to maximize returns and minimize risk monitor investor's money. When you buy in to a mutual fund, you are handing your money to an investment professional that has experience in making investment decisions. It is the Fund Manager's job to (a) find the best securities for the fund, given the fund's stated investment objectives; and (b) keep track of investments and changes in market conditions and adjust the mix of the portfolio, as and when required. Tax Benefits Any income distributed after March 31, 2002 will be subject to tax in the assessment of all Unit holders. However, as a measure of concession to Unit holders of open-ended equity-oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a concessional rate of 10.5%. In case of Individuals and Hindu Undivided Families a deduction up to Rs. 9,000 from the Total Income will be admissible in respect of income from investments specified in Section 80L, including income from Units of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift- Tax. Regulations Securities Exchange Board of India (SEBI), the mutual funds regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors. 50. 50 Disadvantages of Mutual Funds No control over costs: The funds are managed in huge volume and so the control on expenses cannot be exercised, as there is lot of formalities and administrative expenses attached. Though the limit of incurring expenses is predetermined but still it cannot be kept in control. No tailor made portfolio: There is no tailor made portfolio available to any individual. The products and scheme that is designed by the fund managers is on their philosophy and is floated in the market with a common goal. No individual can have their own portfolio maintained separately from the other investors. Delay in redemption: The redemption of the funds though has liquidity in 24-hours to 3 days takes formal application of redemption as well as needs time for redemption. This becomes cumbersome for the investors. Non-availability of loans: Mutual funds are not accepted as security against loan. The investor cannot deposit the mutual funds against taking any kind of bank loans though they may be his assets. 51. 51 Risk in Investing through Mutual Fund 52. 52 The Risk-Return Trade-off The most important relationship to understand is the risk-return trade-off. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss. Hence it is up to investor, the investor to decide how much risk individual is willing to take. In order to do this investor must first be aware of the different types of risks involved with particular investment decision. Market Risk Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (SIP) that works on the concept of Rupee Cost Averaging (RCA) might help mitigate this risk. Credit Risk The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cash flows determines the Credit Risk faced by you. This credit risk is measured by independent rating agencies like CRISIL who rate companies and their paper. An AAA rating is considered the safest whereas a D rating is considered poor credit quality. A well-diversified portfolio might help mitigate this risk. Inflation Risk Inflation is the loss of purchasing power over time. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could at the time of the investment. This happens when inflation grows faster than the return on your investment. A well-diversified portfolio with some investment in equities might help mitigate this risk. 53. 53 Interest Rate Risk In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise the prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate environment. A well-diversified portfolio might help mitigate this risk. Political/Government Policy Risk Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment or vice versa. Liquidity Risk Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities. 54. 54 Types of Schemes in Mutual Fund 55. 55 A. Investment Objective Schemes can be classified by way of their stated investment objective such as Growth Fund, Balanced Fund, and Income Fund etc. Equity Oriented Schemes These schemes, also commonly called Growth Schemes, seek to invest a majority of their funds in equities and a small portion in money market instruments. Such schemes have the potential to deliver superior returns over the long term. However, because they invest in equities, these schemes are exposed to fluctuations in value especially in the short term. Equity schemes are hence not suitable for investors seeking regular income or needing to use their investments in the short-term. They are ideal for investors who have a long-term investment horizon. The NAV prices of equity fund fluctuates with market value of the underlying stock which are influenced by external factors such as social, political as well as economic. 56. 56 A.General Purpose The investment objectives of general-purpose equity schemes do not restrict them to invest in specific industries or sectors. They thus have a diversified portfolio of companies across a large spectrum of industries. While they are exposed to equity price risks, diversified general-purpose equity funds seek to reduce the sector or stock specific risks through diversification. They mainly have market risk exposure. HDFC Growth Fund is a general-purpose equity scheme. B.Sector Specific These schemes restrict their investing to one or more pre-defined sectors, e.g. technology sector. Since they depend upon the performance of select sectors only, these schemes are inherently more risky than general-purpose schemes. They are suited for informed investors who wish to take a view and risk on the concerned sector. C.Special Schemes Index schemes The primary purpose of an Index is to serve as a measure of the performance of the market as a whole, or a specific sector of the market. An Index also serves as a relevant benchmark to evaluate the performance of mutual funds. Some investors are interested in investing in the market in general rather than investing in any specific fund. Such investors are happy to receive the returns posted by the markets. As it is not practical to invest in each and every stock in the market in proportion to its size, these investors are comfortable investing in a fund that they believe is a good representative of the entire market. Index Funds are launched and managed for such investors. An example to such a fund is the HDFC Index Fund. 57. 57 Tax saving schemes Investors (individuals and Hindu Undivided Families (HUFs)) are being encouraged to invest in equity markets through Equity Linked Savings Scheme (ELSS) by offering them a tax rebate. Units purchased cannot be assigned / transferred/ pledged / redeemed / switched out until completion of 3 years from the date of allotment of the respective Units. The Scheme is subject to Securities & Exchange Board of India (Mutual Funds) Regulations, 1996 and the notifications issued by the Ministry of Finance (Department of Economic Affairs), Government of India regarding ELSS. Subject to such conditions and limitations, as prescribed under Section 88 of the Income-tax Act, 1961, subscriptions to the Units not exceeding Rs.10, 000 would be eligible to a deduction, from income tax, of an amount equal to 20% of the amount subscribed. HDFC Tax Plan 2000 is such a fund. Real Estate Funds Specialized real estate funds would invest in real estates directly, or may fund real estate developers or lend to them directly or buy shares of housing finance companies or may even buy their securitized assets. 58. 58 Debt Based Schemes These schemes, also commonly called Income Schemes, invest in debt securities such as corporate bonds, debentures and government securities. The prices of these schemes tend to be more stable compared with equity schemes and most of the returns to the investors are generated through dividends or steady capital appreciation. These schemes are ideal for conservative investors or those not in a position to take higher equity risks, such as retired individuals. However, as compared to the money market schemes they do have a higher price fluctuation risk and compared to a Gilt fund they have a higher credit risk. 59. 59 A. Income Schemes These schemes invest in money markets, bonds and debentures of corporate with medium and long-term maturities. These schemes primarily target current income instead of capital appreciation. They therefore distribute a substantial part of their distributable surplus to the investor by way of dividend distribution. Such schemes usually declare quarterly dividends and are suitable for conservative investors who have medium to long term investment horizon and are looking for regular income through dividend or steady capital appreciation. HDFC Income Fund, HDFC Short Term Plan and HDFC Fixed Investment Plans are examples of bond schemes. B. Liquid Income Schemes Similar to the Income scheme but with a shorter maturity than Income schemes. An example of this scheme is the HDFC Liquid Fund. C. Money Market Schemes These schemes invest in short term instruments such as commercial paper (CP), certificates of deposit (CD), treasury bills (T-Bill) and overnight money (Call). The schemes are the least volatile of all the types of schemes because of their investments in money market instrument with short-term maturities. These schemes have become popular with institutional investors and high net worth individuals having short-term surplus funds. D. Gilt Funds This scheme primarily invests in Government Debt. Hence the investor usually does not have to worry about credit risk since Government Debt is generally credit risk free. HDFC Gilt Fund is an example of such a scheme. 60. 60 Hybrid Schemes These schemes are commonly known as balanced schemes. These schemes invest in both equities as well as debt. By investing in a mix of this nature, balanced schemes seek to attain the objective of income and moderate capital appreciation and are ideal for investors with a conservative, long-term orientation. HDFC Balanced Fund and HDFC Childrens Gift Fund are examples of hybrid schemes. B. Constitution Schemes can be classified as Closed-ended or Open-ended depending upon whether they give the investor the option to redeem at any time (open-ended) or whether the investor has to wait till maturity of the scheme. Open ended Schemes The units offered by these schemes are available for sale and repurchase on any business day at NAV based prices. Hence, the unit capital of the schemes keeps changing each day. Such schemes thus offer very high liquidity to investors and are becoming increasingly popular in India. Please note that an open-ended fund is NOT obliged to keep selling/issuing new units at all times, and may stop issuing further subscription to new investors. On the other hand, an open-ended fund rarely denies to its investor the facility to redeem existing units. Closed ended Schemes The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed number of units. These schemes are launched with an initial public offer (IPO) with a stated maturity period after which the units are fully redeemed at NAV linked prices. In the interim, investors can buy or sell units on the stock exchanges where they are listed. Unlike open-ended schemes, the unit capital in closed-ended schemes usually remains unchanged. After an 61. 61 initial closed period, the scheme may offer direct repurchase facility to the investors. Closed-ended schemes are usually more illiquid as compared to open-ended schemes and hence trade at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of the scheme. Interval Schemes These schemes combine the features of open-ended and closed-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV based prices. 62. 62 Product Portfolio 63. 63 Investment Strategy INVESTMENT PROTECTION VS. INVESTMENT GROWTH Investor Characteristic Investment Growth Investment Protection Time Horizon Short-term Long-term Future Income Requirements Steady / High Variable / Low Volatility Limit (Risk Averseness) Low High Inflation Protection Low Protection Needed High Protection Needed Investor take on Equity Market Mostly Bearish Mostly Bullish If you are a person who broadly falls into the Investment Growth category you might be interested in looking at an Aggressive portfolio. On the other hand if you are leaning towards an interest income with minimal risk investments you might look at a Conservative asset allocation. Someone who wants a bit of steady income as well as asset growth might go in for a moderate or a balanced asset allocation. AGGRESSIVE PORTFOLIO 64. 64 MODERATE PORTFOLIO CONSERVATIVE PORTFOLIO Another way to ascertain the right asset allocation is by looking at your life cycle. The basis of this theory lies in the simple maxim that younger people with secure jobs will normally opt for higher returns and take higher risks compared to older retired people. One must remember that these are only indicative strategies and will probably have to be fine-tuned to meet your individual needs. 65. 65 Portfolio Strategy AGE MAIN OBJECTIVES PORTFOLIO STRATEGY 20-29 Aggressive Growth Sow the seeds, plan for housing and create a safety cushion 50% - Growth Funds 30% - Balanced Funds 20% - Money Markets / Cash 30-39 Growth Save for housing, childrens expenses (present and future education etc.) and safety cushion 45% - Growth Funds 30% - Balanced Funds 05% - Blue Chip Stocks 20% - Money Markets / Cash 40-49 Growth Childrens expenses (present and future education etc.) and safety cushion 40% - Growth Funds 30% - Balanced Funds 10% - Blue Chip Stocks 20% - Money Markets / Cash 50-59 Retirement Save for retirement and build on safety cushion 30% - Growth Funds 40% - Balanced Funds 10% - Blue Chip Stocks 20% - Money Markets / Cash 60-69 Safety Preserve investments/ savings and opt for minimal growth 10% - Balanced Funds 15% - Income Funds 10% - Blue Chip Stocks 20% - Dividend Stocks 30% - Certificates of Deposits (Shorter-term) 15% - Money Markets / Cash 70- Safety Preserve investments/ savings 30% - Income Funds 25% - Dividend Stocks 35% - Certificates of Deposits (Shorter-term) 10% - Money Markets / Cash 66. 66 HDFC Mutual Fund Products Equity Funds HDFC Growth Fund HDFC Long Term Advantage Fund HDFC Index Fund HDFC Equity Fund HDFC Capital Builder Fund HDFC Tax saver HDFC Top 200 Fund HDFC Core & Satellite Fund HDFC Premier Multi-Cap Fund HDFC Long Term Equity Fund Balanced Funds HDFC Children's Gift Fund Investment Plan HDFC Children's Gift Fund Savings Plan HDFC Balanced Fund HDFC Prudence Fund 67. 67 Debt Funds HDFC Income Fund HDFC Liquid Fund HDFC Gilt Fund Short Term Plan HDFC Gilt Fund Long Term Plan HDFC Short Term Plan HDFC Floating Rate Income Fund Short Term Plan HDFC Floating Rate Income Fund Long Term Plan HDFC Liquid Fund - PREMIUM PLAN HDFC Liquid Fund - PREMIUM PLUS PLAN HDFC Short Term Plan - PREMIUM PLAN HDFC Short Term Plan - PREMIUM PLUS PLAN HDFC Income Fund Premium Plan HDFC Income Fund Premium plus Plan HDFC High Interest Fund HDFC High Interest Fund - Short Term Plan HDFC Sovereign Gilt Fund - Savings Plan HDFC Sovereign Gilt Fund - Investment Plan HDFC Sovereign Gilt Fund - Provident Plan HDFC Cash Management Fund - Savings Plan HDFC Cash Management Fund - Call Plan HDFCMF Monthly Income Plan - Short Term Plan HDFCMF Monthly Income Plan - Long Term Plan HDFC Cash Management Fund - Savings Plus Plan HDFC Multiple Yield Fund HDFC Multiple Yield Fund Plan 2005 68. 68 69. 69 Distribution channel Individual Agents Use of agents has been the most widely prevalent practice for distribution of funds over the years. By definition an agent acts on behalf of principal in this case of mutual funds. An agent is essentially a broker between the fund and the investor. In India we also have the unique system where by a broker has a number of sub brokers working under him. The vast sub broker network ensures a large geographic coverage then otherwise. Distribution Companies Availing of the services of established distribution companies is practice accepted by mutual fund internationally. This practice evolves with a view to provide the huge administrative mechanism require supporting a large agent force. Instead of having to deal with several agents, a fund can interact with distribution companies that have several employees or sub brokers under it. Bank & NBFCs In developed countries, bank are an important marketing vehicles for mutual funds given that banks themselves had large depositors/ clients base of their own. We can see the opening up of this new channel now in India. Several banks, particularly private and foreign banks are involved in fund distribution by providing services similar to those of distribution companies, on a commission basis. 70. 70 Direct Marketing Direct marketing means that the mutual funds sell their own products without any use of intermediateries. Usually, this takes the form of the sales officer and employees of the AMC who approach the investor and accept their contribution directly. However in India, independent agents may really be created as a direct marketing channel in a sense that they do not form a well knit independent and organized a single entity and act more like fund employees. Others channel like distribution companies or banks or even stockbrokers are clearly distinct and independent intermediaries. Pricing Policy HDFC Asset Management Company is service Provider Company so There is Entry Load and Exit Load for each scheme. Thus each scheme has different Entry Load and Exit Load. NO Scheme name Entry load Exit load 1 Equity Funds 2.25%