dissertation project.docx
TRANSCRIPT
-
7/30/2019 dissertation project.docx
1/34
Dissertation Project on:
Effect of Fund Size on Mutual Fund Performance
Submitted By: Faculty Guide:
Nidhi Srivastava Dr. Vijita Aggarwal
04516603910
2010-12
Submitted towards partial fulfillment of
Master of Business Administration
University School of Management Studies,Guru Gobind Singh
Indraprastha University
Sector- 16C, Dwarka, Delhi 110075
-
7/30/2019 dissertation project.docx
2/34
2
CERTIFICATE
This is to certify that Ms. Nidhi Srivastava a student of Master of Business Administration at
University School of Management Studies, GURU GOBIND SINGH INDRAPRASTHA
UNIVERSITY has worked under my guidance and supervision. This Project report has the
requisite standard for the partial fulfillment the Post Graduate Degree in Management. To the
best of my knowledge no part of this report has been reproduced from any other report and the
contents are based on original research.
Signature
(Dr. Vijita Aggrawal)
-
7/30/2019 dissertation project.docx
3/34
3
DECLARATION
I, Nidhi Srivastava, Enrollment No. 04516603910, MBA 4th
Semester hereby declare that, the
project report titled Effect of Fund Size on Mutual Fund Performance is an original work
done by me under the guidance of Dr. Vijita Aggarwal and has not been submitted to any otheruniversity or institute for the award of any degree or diploma or fellowship.
Date : Nidhi Srivastava
Roll no:- 04516603910
-
7/30/2019 dissertation project.docx
4/34
4
Acknowledgement
No task is a single person effort, same is with this project. Thus I would like to extend my
sincere thanks to all those people who helped me in accomplishing my project. I owe my project
success to all faculty members and to my mentor Dr. Vijita Aggarwal for their help in this
project. This project provided me a platform to increase my knowledge and empowered me with
a better understanding of concepts in the real world scenario.
-
7/30/2019 dissertation project.docx
5/34
5
Executive Summary
The main objective of the project is to analyze the effect of fund size on mutual fund
performance. Mutual funds have become one of the major investment option in India. This report
aims to find out their behavior i.e. how they perform when their fund size increases or decreases.
The report contains all the details about the mutual fund their history, terms, rights of investor. It
includes researches one earlier n their methodologies. The research design is descriptive and
prospective (correlational).
The sample size is ten and target population includes all the mutual funds in India. All the data
that was collected is analyzed in excel sheets to find out the correlation coefficient and
regression coefficient (). In the end it is concluded that increase in fund size leads to decrease in
return.
-
7/30/2019 dissertation project.docx
6/34
6
Table of Contents
Chapter 1: Introduction
1.1 Problem Statement
1.2 Objective of the project
1.3 Hypothesis of the research
1.4 Chapter wise details
Chapter 2: Mutual Funds
2.1 Definition Mutual Funds:
2.2 History
2.2.1 A Retrospect
2.2.2 AMFI and its role
2.3 Types of Mutual Fund
2.4 Advantages and Disadvantages of mutual funds
2.5 TERMS OF MUTUAL FUNDS
2.6 THE RIGHTS OF INVESTORS
2.7Different plans that Mutual Funds offer
2.8 Current Scenario
Chapter 3 Literature Review
Chapter 4 Research Methodology
4.1 Research Problem
4.2 Research Design
4.2.1 Justification for using research design
4.3 Data Collection
-
7/30/2019 dissertation project.docx
7/34
7
4.4 Sample Size
4.4.1 Target population
4.4.2 Techniques of Sampling
4.4.2.1 Justification for using non probability sampling technique
Chapter 5 Data analysis
5.1 HDFC top 200 fund
5.2 Reliance Growth Fund - Institutional Plan (G)
5.3 ICICI Prudential Dynamic Plan (G)
5.4 Birla Sun Life Equity Fund (G)
5.5 AIG India Equity Fund - Regular Plan (G)
5.6 UTI Opportunities Fund (G)
5.7 LIC Nomura Equity Fund(G)
5.8 SBI Magnum Equity Fund (G)
5.9 JPMorgan India Equity Fund (G)
5.10 Morgan Stanley Growth Fund (G)
Chapter 6 Conclusion
6.1 Summary table
6.2 Conclusion
Reference list
-
7/30/2019 dissertation project.docx
8/34
8
Chapter 1: Introduction
1.3 Problem Statement:
To study the effect of fund size on mutual fund performance.
1.4 Objective of the project:
To analyze the effect of fund size on mutual fund performance
To understand the various terms related to mutual funds.
1.3 Hypothesis of the researchHI: Increase in fund Size reduces returns from mutual funds
1.5Chapter wise details
First chapter contains introduction to the report i.e. the problem statement, objective of the
research, hypothesis of the research and chapter wise details.
Second chapter contains details about the topic i.e. Mutual Funds. Definition of mutual funds,
their history, types , advantages and disadvantages, rights of investors and their current scenario.
Third chapter contain details about earlier researches that have been conducted on this topic.
Fourth chapter contains details about the research methodology. It contains research problem,
research design, data collection and sample size.
Fifth chapter contains details about all the mutual funds that have been taken as sample in the
research. Overview, their investment objective and type of scheme.
Sixth chapter contains conclusion. It includes summary table and conclusion.
-
7/30/2019 dissertation project.docx
9/34
9
Chapter 2: Mutual Funds
2.1 Definition Mutual Funds:
A mutual fund is a type of professionally-managed collective investment scheme that pools
money from many investors. While there is no legal definition of mutual fund, the term is mostcommonly applied only to those collective investment schemes that are regulated, available to
the general public and open-ended in nature. Hedge funds are not considered a type of mutual
fund. (wikipedia, 2012)
2.2 History
The first mutual funds were established in Europe. One researcher credits a Dutch merchant with
creating the first mutual fund in 1774. The first mutual fund outside the Netherlands was theForeign & Colonial Government Trust, which was established in London in 1868. It is now the
Foreign & Colonial Investment Trust and trades on the London stock exchange.
The mutual fund industry is a lot like the film star of the finance business. Though it is perhaps
the smallest segment of the industry, it is also the most glamorousin that it is a young industry
where there are changes in the rules of the game everyday, and there are constant shifts andupheavals.
The mutual fund is structured around a fairly simple concept, the mitigation of risk through thespreading of investments across multiple entities, which is achieved by the pooling of a number
of small investments into a large bucket. Yet it has been the subject of perhaps the most elaborateand prolonged regulatory effort in the history of the country.
The mutual fund industry started in India in a small way with the UTI Act creating what waseffectively a small savings division within the RBI. Over a period of 25 years this grew fairly
successfully and gave investors a good return, and therefore in 1989, as the next logical step,
public sector banks and financial institutions were allowed to float mutual funds and theirsuccess emboldened the government to allow the private sector to foray into this area. The initial
years of the industry also saw the emerging years of the Indian equity market, when a number of
mistakes were made and hence the mutual fund schemes, which invested in lesser-known stocksand at very high levels, became loss leaders for retail investors. From those days to today the
retail investor, for whom the mutual fund is actually intended, has not yet returned to the industry
in a big way. But to be fair, the industry too has focused on brining in the large investor, so that it
can create a significant base corpus, which can make the retail investor feel more secure.[http://en.wikipedia.org/wiki/Mutual_fund] (wikipedia, 2012)
2.2.1 A Retrospect:The last year was extremely eventful for mutual funds. The aggressive competition in thebusiness took its toll and two more mutual funds bit the dust. Alliance decided to remain in the
ring after a highly public bidding war did not yield an acceptable price, while Zurich has beensold to HDFC Mutual. The growth of the industry continued to be corporate focused barring a
-
7/30/2019 dissertation project.docx
10/34
10
few initiatives by mutual funds to expand the retail base. Large money brought with it the
problems of low retention and consequently low profitability, which is one of the problems
plaguing the business. But at the same time, the industry did see spectacular growth in assets,particularly among the private sector players, on the back of the continuing debt bull run. Equity
did not find favor with investors since the market was lack-luster and performances of funds,
barring a few, were quite disappointing for investors. The other aspect of this issue is thatinstitutional investors do not usually favor equity. It is largely a retail segment product andwithout retail depth, most mutual funds have been unable to tap this market. The tables given
below are a snapshot of the AUM story, for the industry as a whole and for debt and equity
separately.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 of India. The history of mutual funds in
India can be broadly divided into four distinct phases
First Phase 1964-87Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of theReserve 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. 6,700crores 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
Canbank 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). LICestablished 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. 47,004crores.
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, exceptUTI 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 MutualFund 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 theend 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.
-
7/30/2019 dissertation project.docx
11/34
11
Fourth Phase since February 2003In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcatedinto 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 ofUnit 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.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered withSEBI 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 industryhas entered its current phase of consolidation and growth. The following graph indicates the
growth of assets over the years.
(AMFI, 2012)
(AMFI, 2012)
-
7/30/2019 dissertation project.docx
12/34
12
2.2.2 AMFI and its roleOne of the most effective industry bodies today is probably the Association of Mutual Funds inIndia (AMFI). It has been a forum where mutual funds have been able to present their views,
debate and participate in creating their own regulatory framework. The association was created
originally as a body that would lobby with the regulator to ensure that the fund viewpoint washeard. Today, it is usually the body that is consulted on matters long before regulations are
framed, and it often initiates many regulatory changes that prevent malpractices that emerge
from time to time. This year some of the major initiatives were the framing of the riskmanagement structure, a code of conduct and registration structure for mutual fund
intermediaries, which were subsequently mandated by SEBI. In addition, this year AMFI was
involved in a number of developments and enhancements to the regulatory framework.
AMFI works through a number of committees, some of which are standing committees toaddress areas where there is a need for constant vigil and improvements and other which are ad
hoc committees constituted to address specific issues. These committees consist of industry
professionals from among the member mutual funds. There is now some thought that AMFI
should become a self-regulatory organization since it has worked so effectively as an industrybody.
An Overview:
Overall FY2003 can be summed up as the year of the maturing of the mutual fund industry. Itwas a year when fund houses went through turmoil and consolidation and the strong ones
emerged stronger. Investors too became savvier, and began investing based on far more scientific
criteria than in the past, and with clearly defined investment horizons. Distribution gave wayincreasingly to intermediation and more and more distributors graduated to providing technical
advice to their clients. Thus the industry has come of age in FY2003, and we hope that FY2004
and beyond will see us come out of a stormy adolescence to become a trusted avenue for saving.
(AMFI, 2012)
2.3 Types of Mutual Fund
Wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risktolerance and return expectations etc. The table below gives an overview into the existing types
of schemes in the Industry.
By Structureo Open - Ended Schemes
o Close - Ended Schemes
o Interval Schemes (mutual fund resource, 2012)
By Investment Objectiveo Growth Schemes
o Income Schemes
o Balanced Schemes
o Money Market Schemes
-
7/30/2019 dissertation project.docx
13/34
13
Other Schemeso Tax Saving Schemes
o Special Schemes
Index Schemes
Sector Specfic Schemes (mutual fund resource, 2012)
On the basis of their structure and objective, mutual funds can be classified into following
major types:
Closed-end funds
A closed-end mutual fund has a set number of shares issued to the public through an initial
public offering.
Open-end funds
Open end funds are operated by a mutual fund house which raises money from shareholders andinvests in a group of assets
Large cap funds
Large cap funds are those mutual funds, which seek capital appreciation by investing primarily
in stocks of large blue chip companies
Mid-cap funds
Mid cap funds are those mutual funds, which invest in small / medium sized companies. As there
is no standard definition classifying companies
Equity funds
Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest pooled
amounts of money in the stocks of public companies.
Balanced funds
Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a combination
of common stock, preferred stock, bonds, and short-term bonds
Growth funds
Growth funds are those mutual funds that aim to achieve capital appreciation by investing ingrowth stocks.
No load funds
-
7/30/2019 dissertation project.docx
14/34
14
Mutual funds can be classified into two types - Load mutual funds and No-Load mutual funds.
Exchange traded funds
Exchange Traded Funds (ETFs) represent a basket of securities that is traded on an exchange,
similar to a stock. Hence, unlike conventional mutual funds
Value funds
Value funds are those mutual funds that tend to focus on safety rather than growth, and often
choose investments providing dividends as well as capital appreciation.
Money market funds
A money market fund is a mutual fund that invests solely in money market instruments. Money
market instruments are forms of debt that mature in less than one year and are very liquid.
International mutual funds
International mutual funds are those funds that invest in non-domestic securities marketsthroughout the world.
Regional mutual funds
Regional mutual fund is a mutual fund that confines itself to investments in securities from a
specified geographical area, usually, the fund's local region.
Sector funds
Sector mutual funds are those mutual funds that restrict their investments to a particular segment
or sector of the economy.
Index funds
An index fund is a a mutual fund or exchange-traded fund) that aims to replicate the movements
of an index of a specific financial market.
Fund of funds
A fund of funds (FoF) is an investment fund that holds a portfolio of other investment funds
rather than investing directly in shares, bonds or other securities. (mutual fund resource, 2012)
2.4 Advantages and Disadvantages of mutual funds
Mutual funds have advantages compared to direct investing in individual securities. These
include:
-
7/30/2019 dissertation project.docx
15/34
15
Increased diversification
Daily liquidity
Professional investment management
Ability to participate in investments that may be available only to larger investors
Service and convenience
Government oversight Ease of comparison (wikipedia, 2012)
Mutual funds have disadvantages as well, which include:
Fees
Less control over timing of recognition of gains
Less predictable income
No opportunity to customize (wikipedia, 2012)
2.5 TERMS OF MUTUAL FUNDS
Asset Management Company
An Asset Management Company (AMC) is a highly regulated organization that pools money
from investors and invests the same in a portfolio. They charge a small management fee, whichis normally 1.5 per cent of the total funds managed. (SEBI, 2012)
NAVNAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund net
of its liabilities. NAV per unit is simply the net value of assets divided by the number of units
outstanding. Buying and selling into funds is done on the basis of NAV-related prices. NAV is
calculated as follows:NAV= Market value of the fund's investments + Receivables + Accrued Income- Liabilities-
Accrued Expenses Number of Outstanding units (SEBI, 2012)
How often is the NAV declared?The NAV of a scheme has to be declared at least once a week. However many Mutual Fund
declare NAV for their schemes on a daily basis. As per SEBI Regulations, the NAV of a schemeshall be calculated and published at least in two daily newspapers at intervals not exceeding one
week. However, NAV of a close-ended scheme targeted to a specific segment or any monthly
income scheme (which is not mandatorily required to be listed on a stock exchange) may be
published at monthly or quarterly intervals. (SEBI, 2012)
What is Exit Load?
The non refundable fee paid to the Asset Management Company at the time of redemption/
transfer of units between schemes of mutual funds is termed as exit load. It is deducted from theNAV (selling price) at the time of such redemption/ transfer. (SEBI, 2012)
-
7/30/2019 dissertation project.docx
16/34
16
What is redemption price?Redemption price is the price received on selling units of open-ended scheme. If the fund does
not levy an exit load, the redemption price will be same as the NAV. The redemption price willbe lower than the NAV in case the fund levies an exit load. (SEBI, 2012)
What is repurchasing price?Repurchase price is the price at which a close-ended scheme repurchases its units. Repurchasecan either be at NAV or can have an exit load. (SEBI, 2012)
What is a Switch?Some Mutual Funds provide the investor with an option to shift his investment from one scheme
to another within that fund. For this option the fund may levy a switching fee. Switching allows
the Investor to alter the allocation of their investment among the schemes in order to meet their
changed investment needs, risk profiles or changing circumstances during their lifetime. (SEBI,2012)
What is Shut-Out Period?After the closure of the Initial Offer Period, on an ongoing basis, the Trustee reserves a right to
declare Shut-Out period not exceeding 5 days at the end of each month/quarter/half-year, as the
case may be, for the investors opting for payment of dividend under the respective Dividends
Plans. The declaration of the Shut-Out period is envisaged to facilitate the AMC/the Registrar todetermine the Units of the unit holders eligible for receipt of dividend under the various
Dividend Options. Further, the Shut-Out period will also help in expeditious processing and
dispatch of dividend warrants. During the Shut-Out period investors may make purchases intothe Scheme but the Purchase Price for subscription of units will be calculated using the NAV as
at the end of the first Business Day in the following month/quarter/half-year as the case may be,
depending on the Dividend Plan chosen by the investor. Therefore, if investments are made
during the Shut -Out period, Units to the credit of the Unit holder's account will be created onlyon the first Business Day of the following month/ quarter/half year, as the case may be,
depending on the dividend plan chosen by the investor. The Shut-Out period applies to new
investors in the Scheme as well as to Unit holders making additional purchases of Units into anexisting folio. The Trustee reserves the right to change the Shut-Out period and prescribe new
Shut- Out period, from time to time. (SEBI, 2012)
Minimum lock-in period for investmentThere is no lock-in period in the case of open-ended funds. However in the case of tax saving
funds a minimum lock-in period is applicable. The lock-in period for different tax saving
schemes are as follows:
section minimum lock-in periodU/s 88 3 yrs.
U/s 54EA 3 yrs.
U/s 54EB 7 yrs.(SEBI, 2012)
-
7/30/2019 dissertation project.docx
17/34
17
Who are the issuers of Mutual funds in India?Unit Trust of India was the first mutual fund which began operations in 1964. Other issuers of
Mutual funds are Public sector banks like SBI, Canara Bank, Bank of India, Institutions likeIDBI, ICICI, GIC, LIC, and Foreign Institutions like Alliance, Morgan Stanley, Templeton and
Private financial companies like Kothari Pioneer, DSP Merrill Lynch, Sundaram, Kotak
Mahindra, and Cholamandalam etc. there are many new upcoming fund houses like Edelweiss,J.P. Morgan, Axis, (SEBI, 2012)
SYSTEMATIC INVESTMENT PLAN
SIP is an investment option that is presently available only with mutual funds. The otherinvestment option comparable to SIPs is the recurring deposit schemes from Post office and
banks. Basically, under an SIP option an investor commits making a regular (monthly/quarterly)
investment in a particular mutual fund/deposit. Investor can now use auto debit (ECS) facility
from Banks to automatically debit SIP amount from your account. There is no need to give bulkof cheques for SIP. For that you should have account in nationalized banks. For SIP through
ECS, you have to provide bank details like account no., branch name, MICR no. etc. (SEBI,
2012)
2.6 THE RIGHTS OF INVESTORS
As per SEBI Regulations on Mutual Funds, an investor is entitled to:
1. Receive Unit certificates or statements of accounts confirming your title within 6 weeks fromthe date your request for a unit certificate is received by the Mutual Fund.
2. Receive information about the investment policies, investment objectives, financial position
and general affairs of the scheme;3. Receive dividend within 42 days of their declaration and receive the redemption or repurchase
proceeds within 10 days from the date of redemption or repurchase
4. The trustees shall be bound to make such disclosures to the unit holders as are essential in
order to keep them informed about any information which may have an adverse bearing on theirinvestments
5. 75% of the unit holders with the prior approval of SEBI can terminate the AMC of the fund.
6. 75% of the unit holders can pass a resolution to wind-up the scheme.7. An investor can send complaints to SEBI, who will take up the matter with the concerned
Mutual Funds and follow up with them till they are resolved. (AMFI, 2012)
2.7Different plans that Mutual Funds offer
Growth Plan and Dividend Plan
A growth plan is a plan under a scheme wherein the returns from investments are reinvested andvery few income distributions, if any, are made. The investor thus only realizes capitalappreciation on the investment. This plan appeals to investors in the high income bracket. Under
the dividend plan, income is distributed from time to time. This plan is ideal to those investors
requiring regular income. (SEBI, 2012)
-
7/30/2019 dissertation project.docx
18/34
18
Dividend Reinvestment PlanDividend plans of schemes carry an additional option for reinvestment of income distribution.
This is referred to as the dividend reinvestment plan. Under this plan, dividends declared by afund are reinvested on behalf of the investor, thus increasing the number of units held by the
investors. (SEBI, 2012)
Automatic Investment PlanUnder the Automatic Investment Plan (AIP) also called Systematic Investment Plan (SIP), the
investor is given the option for investing in a specified frequency of months in a specified
scheme of the Mutual Fund for a constant sum of investment. AIP allows the investors to plantheir savings through a structured regular monthly savings program. (SEBI, 2012)
Automatic Withdrawal Plan
Under the Automatic Withdrawal Plan (AWP) also called Systematic Withdrawal Plan (SWP), afacility is provided to the investor to withdraw a pre-determined amount from his fund at a pre-
determined interval. (mutual fund resource, 2012) (SEBI, 2012)
2.8 Current Scenario
The major fund houses which have operated in India include:
Fortis
Birla Sunlife
Bank of BarodaHDFC
ING Vysya
ICICI PrudentialSBI Mutual Fund
Tata
Kotak Mahindra
Unit Trust of IndiaReliance
IDFC
Franklin TempletonSundaram Mutual Fund
Religare Mutual Fund
Principal Mutual Fund (wikipedia, 2012)
Mutual funds are an under tapped market in India
Despite being available in the market for over two decades now with assets under management
equaling Rs 7,81,71,152 Lakhs (as of 28 February 2010) (Source: Association of Mutual Funds,
India), less than 10% of Indian households have invested in mutual funds. A recent report onMutual Fund Investments in India published by research and analytics firm, Boston Analytics,
suggests investors are holding back from putting their money into mutual funds due to their
-
7/30/2019 dissertation project.docx
19/34
19
perceived high risk and a lack of information on how mutual funds work. This report is based on
a survey of approximately 10,000 respondents in 15 Indian cities and towns as of March 2010.
There are 43 Mutual Funds recently.
The primary reason for not investing appears to be correlated with city size. Among respondents
with a high savings rate, close to 40% of those who live in metros and Tier I cities consideredsuch investments to be very risky, whereas 33% of those in Tier II cities said they did not how or
where to invest in such assets (wikipedia, 2012).
(wikipedia, 2012)
Reasons for not investing in mutual funds in India
On the other hand, among those who invested, close to nine out of ten respondents did sobecause they felt these assets were more professionally managed than other asset classes. Exhibit
2 lists some of the influencing factors for investing in mutual funds. Interestingly, while non-investors cite risk as one of the primary reasons they do not invest in mutual funds, those who
do invest consider that they are professionally managed and more diverse most often as their
a reasons to invest in mutual funds versus other investments.
http://en.wikipedia.org/wiki/File:Non_Investors.pnghttp://en.wikipedia.org/wiki/File:Non_Investors.pnghttp://en.wikipedia.org/wiki/File:Non_Investors.pnghttp://en.wikipedia.org/wiki/File:Non_Investors.png -
7/30/2019 dissertation project.docx
20/34
20
(wikipedia, 2012)
http://en.wikipedia.org/wiki/File:Investors.png -
7/30/2019 dissertation project.docx
21/34
21
Chapter 3 Literature Review
Various studies has been conducted to study the performance of mutual funds when asset under
management changes. One of these were done by Jonathan Reuter and Eric Zitzewitz (nber) at
NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge,
MA 02138. They used a regression discontinuity approach. They concluded that diseconomies ofScale start affecting the performance of the mutual fund. The larger the size of the mutual fund
brings in diseconomies of scale and returns start diminishing.
Another study conducted by Mark N. Harris and Petko S. Kalev (melbournecentre)at Faculty of
Business and Economics, Monash University investigated the relationship between fund
performance and f fund size and funds flows of actively managed Australian funds. They used a
new robust panel data approach to trace the performance of individual funds with as little as sixmonths of history. This enables one to consider all existing funds within a given category and
thus the research design avoids any potential survivorship bias.
A study conducted by Joseph Chen (University of Southern California), Harrison Hong (PrincetonUniversity), Ming Huang (Stanford University), Jeffrey D. Kubik (Syracuse University) (hbs)
investigated the effect of scale on performance in the active money management industry. They
were the first to find strong evidence that fund size erodes performance. We then move on to
consider various explanations for why this might be the case. We find that this relationship is notdriven by heterogeneity in fund styles, fund size being correlated with other observable fund
characteristics, or any type of survivorship bias. Instead, we find that the effect of fund size on
fund returns is most pronounced for funds that play small cap stocks. This suggests that liquidity
is an important reason behind why size erodes performance
-
7/30/2019 dissertation project.docx
22/34
22
Chapter 4 Research Methodology
4.1 Research Problem
The main problem area which the research is testing is related to the subject of Mutual Funds.In
this research I want to investigate the impact of fund size on mutual fund performance. The
problem stems from the fact that asset under management increases without giving any benefitsof economies of scale and the return decreases. I by the way of this research is trying to find out
whether increase in fund size affects performance negatively or not.
4.2 Research Design
Research Design is one of the most important steps in the research. I am using descriptive andprospective (Correlational) research designs.
Descriptive: To describe the conditions of mutual funds and their environment.Prospective: To analyze the relationship between fund size and its performance.
4.2.1 Justification for using research designFirstly I will be using descriptive design to provide the details of the mutual funds that are takenas samples. It will provide the details of the environment of the mutual fund.
Then after that I will be using correlational design to find the relation between fund size and its
performance.
4.3 Data CollectionData for any research is taken from primary sources and secondary sources.Primary data: It is collected for the purpose of the research. It is taken only for the research
purpose like questionnaire, survey, interviews etc.
Secondary data: It is available in the market. Any one can access them. It is available inmagazines, newpapers etc.
The data in this research is secondary data. I have taken data from moneycontrol.com and fromspecific sites of mutual funds.
4.4 Sample SizeI have taken 10 mutual funds as sample in this research.
4.4.1 Target populationThe target population for this research is all the mutual funds in India
4.4.2 Techniques of SamplingThe technique for sampling adopted in this research is non probability sampling technique.
-
7/30/2019 dissertation project.docx
23/34
23
4.4.2.1 Justification for using non probability sampling technique
All the samples chosen are on the basis of availability of data rather than on some probabilistic
technique.
-
7/30/2019 dissertation project.docx
24/34
24
Chapter 5 Data analysis
This section of report would cover the analysis for the sample mutual funds.Once the data is
collected it needs to be analyzed. This is very important and crucial step in the research. Wholeproject can be a failure if the analysis is not correct and doesnt meet the objective of the study.
I have collected all the secondary information regarding asset under management, net asset valueand market value at the end of month. Which is then put in excel sheet to be analyzed. Thissection will generate the analysis and impact of fund size on mutual fund performance.
5.1 HDFC top 200 fundOverview
Investment Objective
To generate long term capital appreciation from a portfolio of equity and equity-linked
instruments primarily drawn from the companies in BSE 200 index.
Scheme details :
Fund Type :Open-Ended
Investment Plan :Growth
Launch date:Aug 19, 1996
Benchmark:BSE-200
Asset Size (Rs cr):11,381.10 (Mar-31-2012)
Minimum Investment:Rs.5000
Last Dividend: Rs.2.50 (Mar-24-2000)
Bonus:N.A.
Fund Manager: Prashant Jain
Load Details:
Entry Load:N.A.
Exit Load:1.00%
Load Comments:Exit Load 1% if units are redeemed / switched-out within 1 year from the date
of allotment. (Moneycontrol)
-
7/30/2019 dissertation project.docx
25/34
25
5.2Reliance Growth Fund - Institutional Plan (G)Overview
Investment Objective
The primary investment objective of the scheme is to achieve long term growth of capital by
investing in equity and quity related securities through a research based investment approach.
Scheme details :
Fund Type:Open-Ended
Investment Plan:Growth
Launch date:Aug 08, 2007
Benchmark:BSE-100
Asset Size (Rs cr):73.50 (Mar-31-2012)
Minimum Investment:Rs.50000000
Last Dividend:N.A.
Fund Manager:Sunil Singhania
Load Details:
Entry Load:N.A.
Exit Load:1.00%
Load Comments: Exit load - 1% if redeemed/switched out on or before completion of 1 yrs from
the date of allotment. (Moneycontrol)
5.3 ICICI Prudential Dynamic Plan (G)Overview
Investment Objective
Pru ICICI Dynamic Plan is an open-ended equity scheme. The primary investment objective of
the scheme is to seek to generate capital appreciation by actively investing in equity / equity
related securities. For defensive considerations, the scheme may invest in debt, money market
instruments, to the extent permitted under the regulations.
-
7/30/2019 dissertation project.docx
26/34
26
Scheme details
Fund Type: Open-Ended
Investment Plan: Growth
Launch date: Oct 18, 2002
Benchmark: S&P CNX NIFTY
Asset Size (Rs cr): 4,092.30 (Mar-31-2012)
Minimum Investment: Rs.5000
Last Dividend: N.A.
Bonus: N.A.
Fund Manager: Sankaran Naren / Mittul Kalawadia
Load Details
Entry Load: N.A.Exit Load: 1.00%
Load Comments: Exit Load 1% if units are redeemed / switched-out for a period of up to 1 year
from the date of allotment.
5.4 Birla Sun Life Equity Fund (G)
Overview
Investment Objective
An open-ended growth scheme with the objective of long term growth of capital, through a
portfolio with a target allocation of 90% equity and 10% debt and money market securities.
Scheme details
Fund Type: Open-Ended
Investment Plan: Growth
Launch date: Aug 27, 1998
Benchmark: BSE-200
Asset Size (Rs cr): 750.00 (Mar-31-2012)
Minimum Investment: Rs.5000
-
7/30/2019 dissertation project.docx
27/34
27
Last Dividend: N.A.
Bonus: N.A.
Fund Manager: Mahesh Patil
Load Details
Entry Load: N.A.
Exit Load: 1.00%
Load Comments: Exit Load of 1% if redeemed within 365 Days from the date of allotment.
(Moneycontrol)
5.5 AIG India Equity Fund - Regular Plan (G)
Overview
Investment Objective
The investment objective of the Scheme is to generate long-term capital appreciation from a
diversified portfolio of predominantly equity and equity-related securities including equity
derivatives.
Scheme details
Fund Type: Open-Ended
Investment Plan: Growth
Launch date: May 03, 2007
Benchmark: BSE-100
Asset Size (Rs cr): 140.40 (Mar-31-2012)
Minimum Investment: Rs.5000
Last Dividend: N.A.
Bonus: N.A.
Fund Manager: Huzaifa Husain
Load Details
-
7/30/2019 dissertation project.docx
28/34
28
Entry Load: N.A.
Exit Load: 1.00%
Load Comments:Exit load of 1% if redeemed within 1 year from the date of allotment.
(Moneycontrol)
5.6 UTI Opportunities Fund (G)
Overview
Investment Objective
This scheme seeks to generate capital appreciation and/or income distribution by investing the
funds of the scheme in equity shares and equity-related instruments. The main focus of this
scheme is to capitalize on opportunities arising in the market by responding to the dynamically
changing Indian economy by moving its investments amongst different sectors as prevailingtrends change.
Scheme details
Fund Type: Close-Ended
Investment Plan: Growth
Launch date: Sep 07, 2006
Benchmark: BSE SENSEX
Asset Size (Rs cr): 1,324.80 (Mar-31-2012)
Minimum Investment: Rs.5000
Last Dividend: N.A
Bonus: N.A.
Fund Manager: Swati Kulkarni
Load Details
Entry Load: N.A.
Exit Load: N.A.
-
7/30/2019 dissertation project.docx
29/34
29
Load Comments: Exit Load - An early exit charge equivalent to the unamortized new fund offer
expenses will be recovered from the investors incase of redemption before expiry of 5 years from
the date of allotment
(Moneycontrol)
5.7 LIC Nomura Equity Fund(G)
Overview
Investment Objective
An open ended pure Growth scheme seeking to provide capital growth by investing mainly in
mix of equity instruments. The investment portfolio of the scheme will be constantly monitored
and reviewed to optimize capital growth.
Scheme details
Fund Type: Open-Ended
Investment Plan: Growth
Launch date: Jan 11, 1993
Benchmark: BSE SENSEX
Asset Size (Rs cr): 77.90 (Mar-31-2012)
Minimum Investment: Rs.2000
Last Dividend: N.A.
Bonus: N.A.
Fund Manager: S Ramasamy
Load Details
Entry Load: N.A.
Exit Load: 1.00%
Load Comments: Exit Load 1% if units are redeemed on or before the expiry of 1 year from the
date of allotment. (Moneycontrol)
5.8 SBI Magnum Equity Fund (G)
-
7/30/2019 dissertation project.docx
30/34
30
Overview
Investment Objective
To provide the investor long-term capital appreciation by investing in high growth companies
along with the liquidity of an open-ended scheme through investments primarily in equities andthe balance in debt and money market instruments.
Scheme details
Fund Type: Open-Ended
Investment Plan: Growth
Launch date: Jan 01, 1991
Benchmark: S&P CNX NIFTY
Asset Size (Rs cr): 491.40 (Mar-31-2012)
Minimum Investment: Rs.1000
Last Dividend: N.A.
Bonus: N.A.
Fund Manager: R. Srinivasan
Load Details
Entry Load: N.A.
Exit Load: 1.00%
Load Comments: Exit Load 1% if units are redeemed / switched-out within 1 year from the date
of allotment. (Moneycontrol)
5.9 JPMorgan India Equity Fund (G)
Overview
Investment Objective
The investment objective of the Scheme is to generate income and long-term capital growth from
a diversified portfolio of predominantly equity and equity-related securities including equity
derivatives.
-
7/30/2019 dissertation project.docx
31/34
31
Scheme details
Fund Type: Open-Ended
Investment Plan: Growth
Launch date :Apr 19, 2007
Benchmark: BSE-200
Asset Size (Rs cr): 311.20 (Mar-31-2012)
Minimum Investment: Rs.5000
Last Dividend: N.A
Bonus: N.A.
Fund Manager: Harshad Patwardhan / Amit Gadgil
.
Load Details
Entry Load: N.A.
Exit Load: 2.00%
Load Comments: Exit load 2% if redeemed within 6 months from the date of allotment, exit load
1.5% if redeemed after 6 months upto 12 months from the date of allotment and exit load of 1%
if redeemed after 12 months upto 18 months from the date of allotment. (Moneycontrol)
5.10 Morgan Stanley Growth Fund (G)
Overview
Investment Objective
The investment objective of the scheme is to achieve long-term capital appreciation by investing
primarily in equity and equity related securities of companies having large market capitalization.
Scheme details
Fund Type: open-Ended
Investment Plan: Growth
Launch date: Jan 19, 1994
-
7/30/2019 dissertation project.docx
32/34
32
Benchmark: BSE-100
Asset Size (Rs cr): 1,248.50 (Mar-31-2012)
Minimum Investment: Rs.5000
Last Dividend: Rs.2.00 (Oct-27-2006)
Bonus: N.A.
Fund Manager: Sridhar Sivaram / Amay Hattangadi
Load Details
Entry Load: N.A.
Exit Load: 1.00%
Load Comments: Exit Load 1% if units are redeemed on or before the expiry of 1 year from the
date of allotment.
(Moneycontrol)
-
7/30/2019 dissertation project.docx
33/34
33
Chapter 6 Conclusion
6.1 Summary table
SNo. Name of the mutual fund Correlation
Coefficient
Regression
Coefficient()1 HDFC top 200 fund -0.325397573 0.982436482
2 Reliance Growth fund-
Institutional plan(G)
-0.33476209 0.476361079
3 ICICI Prudential Dynamic plan(G) -0.02738 0.603557
4 Birla sunlife equity fund(G) 0.0378436 0.67497395
5 AIGIndia Equity Fund-Regularplan(G)
-0.16881 0.642422
6 UTI Opportunities Fund Growth 0.049505 0.527992
7 LIC nomura Equity Fund (G) 0.257990549 0.816007279
8 SBI Magnum Equity fund (G) 0.06147369 0.643621339
9 JP Morgun India Equity Fund(G) -0.1147582 0.63937459
10 Morgun Stanley Growth Fund(G) -0.1088008 0.76706467
6.2 Conclusion
From the above table it can be seen that 6 out of 10 mutual funds have negative correlation with
the return from the mutual fund. Moreover it can be said that when fund size increases, it affects
performance in the negative way. Rather than economies of scale, diseconomies of scale comeinto function. It is often believed that huge fund size will help in diversifying the portfolio but itcan be concluded from the above data that it is not always true. All the funds listed above has
positive beta ( ) which means that the return from the mutual fund is related to returns from
market and if market has given better returns then mutual fund has also given positive returns.
To conclude I can say that increase in fund size leads reduced returns from the mutual fund.
Despite the fact that more fund is available for diversification and lower cost of transactions.
-
7/30/2019 dissertation project.docx
34/34
Reference list
www.wikipedia.com http://www.amfiindia.com/
www.moneycontrol.com
www.mutualfundresource.com
http://www.wikipedia.com/http://www.wikipedia.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.mutualfundresource.com/http://www.mutualfundresource.com/http://www.mutualfundresource.com/http://www.moneycontrol.com/http://www.wikipedia.com/