Mutual funds are a topic, which is of interest to both investors and academicians all over the world. Mutual Funds as a medium-to-long term investment option are preferred as a suitable investment option by investors. However, with so many market entrants and a plethora of schemes available to the investors, the question is the choice of mutual fund. The study focuses on this problem of mutual fund selection by investors. It involves performance evaluation of ten mutual funds based on the evaluation models: Fama, Jensen, Sharpe and Treynor. It is to be noted that while analyzing performance of a mutual fund both qualitative and quantitative measures should be considered. The performance measures used in the study only depict the quantitative result based on the past return and risk associated with it. And the other factors such as asset allocation of funds, percentage of specific sector investments, fund manager's background, experience and his style has not been taken in to consideration. This report starts with an overview of the Standard Chartered Bank and Standard Chartered Mutual Fund. Following is the basics on Mutual Fund and the present industry scenario and the study on performance evaluation of mutual funds.
[...] It is a common perception of the mutual fund investor to expect a return higher than the bank rate but lesser than the stock market. Treynor's Ratio Jack Treynor (1965) conceived an index of portfolio performance measure called as reward to volatility ratio, based on systematic risk. He assumes that the investor can eliminate unsystematic risk by holding a diversified portfolio. Hence his performance measure denoted as TP is the excess return over the risk free rate per unit of systematic risk, in other words it indicates risk premium per unit of systematic risk. [...]
[...] All AMCs Regulated by SEBI, Funds governed by Board of Directors The Securities and Exchange Board of India (SEBI) mutual fund regulations require that the fund's objectives be clearly spelt out in the prospectus. In addition, every mutual fund has a board of directors that is supposed to represent the shareholders' interests, rather than the AMC's. The diagram below illustrates the organizational set up of a mutual fund: Benefits of investing in Mutual funds Professional expertise: Fund managers are responsible for implementing a consistent investment strategy that reflects the goals of the fund. [...]
[...] Standard Chartered Premier Equity Fund, an innovative open - ended equity fund that attempts to generate wealth over the long term through a potent combination of well defined investment strategy and a robust investment management structure. The portfolio is diversified among 33 stocks. The fund size is Rs Crores and the fund started on September 28,2005. The Standard Chartered Imperial Equity Fund is an open - ended diversified equity fund seeks to invest in India's outstanding companies. The scheme invests in well - managed growth companies that are available at reasonable value. [...]
[...] The logarithmic returns are computed from monthly closing NAVs obtained from AMFI's (Association of Mutual Funds in India) website. The total open-ended well-diversified equity schemes (growth plans) under the study are 10. The NAVs are considered appropriate for the open-ended schemes as purchase and sale prices are linked to NAVs. The market index taken in to account is S&P CNX 500 and the risk free rate is the interest rate applicable on the respective dates of Treasury Bills of 364 days. [...]
[...] It was also observed during the internship tenure that this equity scheme of Standard Chartered Mutual Fund (SCMF) is the most selling scheme offered by SCMF in the category of Equity diversified funds. In all, it can be conclude from the study above that the top three performing funds according to the study are ICICI Prudential Dynamic Plan, Reliance Growth and Sundaram BNP Paribas Select Midcap- Growth Fund. Mutual funds are an uprising trend amongst investors as they ensure high returns. [...]
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