India - Asset Management Industry June 2011 Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
India: The Opportunity Strong GDP growth • IMF projects Indian GDP growth at 9. 7% & 8. 4% for 2010 & 2011 Favorable demographics • One of the youngest population bases (median age - 25 yrs) Dependency ratio set to fall over next 20 yrs Thrust on Infrastructure • India will spend 1378 bn US$ over the next decade only to build infrastructure Rising rural demand to augment urban demand • Reformist economic policies targeting inclusive growth is helping improve rural incomes & create a huge consumption base Under-penetration to drive growth • Under-penetration in various financial service & other sectors opens up immense opportunity for growth Political stability with consensus on reforms • Higher probability of pro-growth reforms with stable govt with experienced hands at the helm despite challenges Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Financial Services: Under Leveraged & Less Penetrated 80% Retail Loans / GDP Ratio 65% 70% 68% 56% 60% 50% 38% 40% 30% 24% 19% 20% 11% 8% 10% or e K ng ap H Si an iw Ta al ay si a a M Ko re ai la nd a Th ne si a* In do di In C hi n a 0% Financial inclusion & improving income profile will significantly expand market for financial products Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Source: Kotak; Morgan Stanley (2010)
Indian Capital Markets Overview Equity Market Statistics • More than 5000 listed companies • 22 stock exchanges • Daily Turnover • ~ US 5 bn Cash (Equity) • ~ US 14 bn Derivatives (Equity) • Over 1700 FIIs regd with 5000+ sub accounts • FII holding in Indian equities ~18% • Active onshore FX market with daily volumes > US$ 15 bn • Proven long term potential of Indian Equities Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Yield Advantage – India • 1 – 5 year yields ranging in 9. 50 – 10. 10% p. a. (vis-àvis) US yields ~2. 50%) • Sovereign rating is BBB- (investment grade) • Strong banking system & supportive tax environment • Depth of papers available in sovereign & corporate segments 4
Asset Management Industry in Indian Asset Management Industry May 9, 2011 Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
MF Structure in India A mutual fund in India has a 3 -tier structure Sponsor Trustee Trust AMC Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Industry Structure AMC Savings Trust Units Unitholders Registrar SEBI Trust Custodian Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 AMC Investments
Indian MF Industry – Key Statistics No. of Players 41 No. of Schemes 727 No. of Folios 47. 32 mlln No. of Licenced Distributors 105, 000 approx. Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Size of Indian Mutual Fund Industry Amt. in USD Millions Category A B C Bank Sponsored Institutions Private Sector & Joint Venture : Indian Foreign Predominantly Indian Predominantly Foreign Grand Total (A+B+C) Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Avg. Aum as on March 31, 2011 27, 288. 44 2, 487. 78 53, 566. 22 12, 150. 89 56, 454. 44 3, 727. 33 1, 55, 675. 10
Industry profitability trend After dip in profitability in last few years its recovering again backed up by volume growth & market action in FY 10 as well good margin on Fixed Income products. Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 10
Regulator ESTABLISHMENT OF SEBI The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992. PURPOSE “…. . to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto” Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Regulatory Framework Ministry of Finance Supervisor of both SEBI & RBI Securities Appellate Tribunal Department of Company Affairs Financial Intelligence Unit Provide apex appeal mechanism for actions taken by SEBI Registration of AMC and Trustee Company Ro. C for Compliance & supervised by DCA CLB is the interface for prosecution and penalties Implementation of AML Rules Office of Public Trustee Registration of Trust Board of Trustees is accountable to the OPT Complaints against individual trustees Self Regulated Organisations Derive powers regulator from Ability to make bye-laws Regulate own members in a limited way Example : Stock exchanges – NSE, BSE etc. Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Industry Association Collective industry opinion Guidelines & recommendations Example: Association of Mutual Funds in India (AMFI)
Key Constituents Custodian & Depository Banker Securities Dealer / Broker • Custody of MF securities • Investment back-office • Providing bank accounts & remittance services • Purchase and sale of securities R&T Agent • Investor records and transactions Distributor • Selling & Distributing schemes Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Types of Funds in India Existing funds • Open-ended (OEF) & Closeended (CEF) • Growth, Income and Hybrid • Equity, Debt and Balance • Load & No-Load • Guaranteed & Non-Guaranteed • Tax-exempt & Non tax-exempt Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 New Gen Mutual Funds • Fund of Fund • Commodity fund • Real Estate fund • Asset Allocation fund • Exchange-traded fund • Derivative fund • Capital Protection Oriented Fund.
Client Segments Retail Institutional • Resident Investors • Non Resident Investors • HUF • • Corporates Trusts FIIs Banks / Financial Institutions Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Access to Indian opportunity Portfolio Investment (FII) Registration with SEBI FDI Registration as an FDI investor Listed Equity & Debt – applicable limits Repatriation available Venture Capital Registration as a VC - FII Long term investments in unlisted space Real estate, manufacturing & strategic areas Repatriation available Recently Foreign Individual Investors have also been proposed to be allowed to access Indian markets through Indian Mutual Funds Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Portfolio Investments (through FII) § Almost all sectors (barring a few sectors & stocks like banking and Oil & Gas) have blanket approval for portfolio investment in listed equity by foreigners with no limits § Access to Indian Bond Market is restricted to foreigners o Foreign Institutional Investor (FII) needs to apply for a debt limit from Securities Exchange Board of India(SEBI) are issued from time to time o Current limits assigned by the ministry of Finance are as follows: ü US$ 15 billion for Corporate Bonds ü US $ 10 billion for Government Securities ü US $ 5 billion for Government Securities with maturity of more than 5 years. ü US 20 billion for bonds issued by Infrastructure Companies. These bonds should have residual maturity of more than 5 years. § Limits that are auctioned under the bidding process & have to be utilized in 45 days for Government securities and 90 days for corporate bonds While institutions can access the markets through the route above, foreign individual investors will be able to access even the restricted sectors through Mutual Fund route Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Investment Process Macro monitoring & Recycling of Ideas Rejected Change in Recommendation Team Discussion & Scrutiny Proprietary Research Process actively covers over 500 companies. Approximately 50% own proprietary investment ideas. Investment Universe 3 rd Party Research Regular Monitoring Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 18
The Process of Investing 1. Offer Document a) Legal offer from AMC to investor b) Contains vital information about fund and schemes c) SEBI approved format. 2. KIM / SID / SAI a) Abridged OD b) Is mandatory to provide along with every application form. 3. Application and form of holding 4. Distribution channels 5. Investors rights 6. Investors obligations Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Distribution Models Retail Distribution Banks National Distributors Regional Distributors IFAs Institutional Distribution Banks National Distributors Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Regional Distributors Tied Agents
Equity Funds – Positioning Value Growth Blend Thematic BSL Dividend Yield BSL Advantage BSL Gennext BSL Pure Value BSL Tax Plan BSL Buy India Multi Cap BSL Equity BSL Tax Relief '96 BSL Infrastructure BSL Frontline Equity Large Cap India Advantage Fund (Offshore Fund) Excel India Fund (Offshore Fund) BSL Basic Industries BSL India Reforms BSL MNC BSL Top 100 BSL India Opportunities Mid Cap Hybrid BSL Midcap BSL New Millennium BSL Small & Midcap BSL International Equity BSL '95 BSL Special Situations BSL Freedom BSL Commodity Equities Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 21
Fixed Income Funds – Positioning Credit Quality High Medium Low BSL Income Interest Rate Sensitivity High BSL Income Plus BSL Gilt Plus BSL Short Term Opportunities BSL Govt Securities Fund BSL Ultra Short Term BSL Dynamic Bond Medium BSL Medium Term Plan BSL MIP BSL Asset Allocation BSL Capital Protection Series BSL Cash Plus Low BSL Cash Manager BSL Savings Fund BSL Floating Rate Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 22
Asset Management Company 1. Required to be registered with SEBI 2. Appointed as Investment Manager of the mutual fund 3. Appointed by the trustees via an Investment Management Agreement 4. Responsible for operational aspects of the mutual fund 5. Net Worth of at least Rs. 10 Cr at all times 6. At least 1/2 of the board members must be independent 7. Mostly, structured as a private limited company where Sponsor and associates hold capital 8. Quarterly reporting to Trustees Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Role Restrictions ü Sponsor of a fund cannot be its custodian ü Sponsor of a fund can be a distributor ü Trustee of one mutual fund cannot be trustee of another mutual fund ü Exception is Independent trustees provided they obtain approval of both the board of trustees ü Trustee of one fund cannot be AMC of another ü AMC of one fund cannot be Trustee of another ü AMC cannot have any business interest other than fund advisory. Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Birla Sun Life Asset Management Company Limited Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Strong Parentage A joint venture between Aditya Birla Group and Sun Life Financial of Canada Aditya Birla Group • One of the largest Indian conglomerates with operations in over 27 countries & M Cap of over US$ 31. 2 bn • A dominant player in many commodity & manufacturing businesses apart from service businesses • Major presence in Financial Services - Mutual Funds, Insurance, Distribution, Capital Market Financing, General Insurance & Private Equity Sun Life Financial • More than $ 381 billion assets under management globally • Offering diversified range of risk and financial management products for individuals and corporate • Large international footprint across continents – major presence in North America & Asia Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Recognition of strengths across market cycles Constant honing of investment processes & disciplined approach have help the firm in delivering superior performance during the best of the times (2007) and the worst of the times (2008) for the Indian markets Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Thank you Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
India: Fact File § § § § § Population (mn), 2010……. . . . GDP (US$ bn), FY 10……. . . . GDP per capita (US$), 2010. . . . GDP (PPP) as share of world total, 2010 …. . …………. . . Median age of population……………………… Gross Domestic Savings Rate, FY 10………………… Gross Capital Formation Rate, FY 10………………… Average GDP Growth Rate (%) in last 5 years……. . ………………. . Companies with a bn US$ revenue, FY 10…. . ……………. . Large cap companies (> INR 100 bn or 2. 17 bn US$), FY 11…. …… FDI Flows (USD bn), FY 10………………………. . Export to GDP Ratio, 2010…. . . ……………………. Market cap to GDP, 2010 ………………………. . 10 year G. Sec, 4 th May 11. . ……………………. . Stimulus required during the 2008 crisis (% to GDP)………………. . Incremental Capital Output Ratio (%), 2008……………… Promoter Holdings in Top 200 companies, 2010…………… 1, 186. 2 1, 314. 7 (422 in 2000) 1, 123 (2, 900 in PPP terms) 5. 4% 26 years 32. 9% (24% in FY 03) 34. 9% 8. 65% (6. 6% since 1991) 124 (104 in FY 08) 120 (11 in 2000) 32 (4 in FY 03) 21% (41% in China) 111. 49% 8. 09% 2% 3. 95% (4. 2% in China) ~56% Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Sources: Edelweiss India 2020 report, Bloomberg, RBI, Morgan Stanley, Motilal Oswal , IMF 29
History of Mutual Funds in India a) 1964 -1987 (Phase I) – Growth of Unit Trust of India b) 1987 -1993 (Phase II) – Entry of Public Sector Funds c) 1993 -1996 (Phase III) – Emergence of Private Funds d) 1996 -1999 (Phase IV) – Growth and SEBI Regulation e) 1999 -2004 (Phase V) – Emergence of large & uniform Industry f) 2004 onwards (Phase VI) – Consolidation and Growth. Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
What it means Investor Passed back Fund Manager Returns Invest the funds in Generating Securities Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Pool their money with
Characteristics 1. Investors own the mutual fund 2. Everyone else associated with the fund earns a fee 3. Things which are mutual a) Pool of money b) Investment objective c) Risk and return 4. Funds are invested in a portfolio of marketable securities reflecting the investment objective 5. Value of the portfolio and investors’ holdings change with change in the market value of investments. Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Trust 1. Mutual funds in India constituted as a Public Trust under Indian Trust Act, 1882 2. The trust is registered with the Office of Public Trustee 3. The trust or the fund has no independent legal capacity itself 4. Acts in relation to the trusts are taken on its behalf by the trustees 5. Treated as a separate entity and a pass through vehicle 6. Has its own auditors, separate from the AMC Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Sponsor 1. Promoter of the mutual fund 2. Creates a Trust under Indian Trusts Act, 1882 and registers it with Office of Public Trustee 3. Appoints Board of trustees/trustee company 4. Creates AMC under Indian Companies Act, 1956 5. Fulfills necessary formalities and applies to SEBI for registration of the Trust as a Mutual Fund. Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Trustee 1. Appointed by sponsor with SEBI approval 2. Have Registered ownership of investments 3. Formed either as Board of Trustees or Trustee Company 4. Power to appoints all other constituents 5. Appoint AMC through the ‘Investment Management Agreement’ and delegate powers. Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Unit Holder Pattern UNITHOLDING PATTERN OF MUTUAL FUNDS INDUSTRY(as on March 31, 2010) CATEGORY NUMBER OF INVESTORS ACCOUNTS Individuals NRIs FIIs Corporates/ Institutions/ Others TOTAL % TO TOTAL NET ASSETS INVESTORS (RS. CRORE) ACCOUNTS 46, 327, 683 97. 07% 245, 390. 28 39. 77% 943, 482 1. 98% 27, 428. 86 4. 45% 216 0. 00% 6, 335. 00 1. 03% 452, 330 0. 95% 337, 812. 58 54. 75% 47, 723, 711 100. 00% 616, 966. 72 100. 00% Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 % TO TOTAL NET ASSETS
Industry Gross Sales Trends • Non-NFO Equity Gross Sales Volumes are again back to the last 3 year average volumes level. • However, Industry –ve Equity Net Sales suggests higher churning. *Gross sales include NFO volumes of Rs 24 K, 44 K, 2. 5 K, 6. 1 K & 3. 6 K Crs in respective yrs. • Non-Equity asset class continue to see volume growth in last 4 -5 years. • In FY 11 volumes dipped as Industry declined in 2 nd half Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 37
Industry Assets trend AGR 15% C GR A 22% C 17% CAGR C 18% After witnessing growth in last few years Industry de-grew during FY 11. Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Birla Sun Life Asset Management Company Limited Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Aditya Birla Group One of the largest & oldest multinational Aditya Birla Group Revenue conglomerates from India 30 bn $ Revenues of over US$ 30 bn 50 companies across 6 continents in 25 2 bn $ countries Over 50 per cent revenues flow from overseas operations Anchored by 130, 000 employees belonging to over 30 different nationalities Over 1. 5 Mn shareholders India, Australia, China, Thailand, Myanmar, Laos, Indonesia, Philippines, Singapore, Bangladesh, Vietnam, Malaysia, Korea, UAE, Egypt, UK, Germany, Hungary, Italy, France, Luxembourg, Switzerland, USA, Canada, Brazil, Sweden
Aditya Birla Group: Business Rankings | viscose staple fiber | non-ferrous metals | cement | viscose filament yarn | branded apparel | |carbon black | chemicals | fertilizers | sponge iron | insulators | financial services | telecom | BPO | IT | retail | The Group position – India: The Group position – Global: § A premier branded garments player § Largest metals company § Largest cement company § 2 nd largest player in viscose filament yarn fibre § 2 nd largest in the Chlor-alkali sector § The 3 rd largest producer of insulators § Top 5 player in Asset Management business § The 4 th largest producer of carbon black § Top 5 player in Life Insurance business § The 13 th largest cement producer § Among the first five mobile telephony players § Among the world’s top 15 Business Process Outsourcing (BPO) companies § Among the best energy-efficient fertilizer plants § Among the top 3 BPO companies in India § Hindalco, a non-ferrous metals company of the Group, is on the threshold of Fortune 500 § One of the 3 biggest producers of primary aluminium in Asia § Amongst the World leaders in viscose staple Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
ABFSG – a Financial Services powerhouse Over 5. 5 million customers Over 200, 000 channel partners 0 ver 16000 employees Manage assets of over US$ 18 bn Over 1600 branches Revenues of over US$ 1. 4 bn Over 500 cities In 7 businesses To be a leader and role model in financial services, with a broad based and integrated business by leveraging synergies to be more competitive & cost effective Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Overview of BSLAMC Heritage • Founded in 1994, one of the oldest in India • 50: 50 JV between Aditya Birla Group & Sun Life Financial Inc. , since 2001 • Have seen the market evolve across different asset classes over the years • Driven by client centric product innovation Market dominance • One of the top 5 AMCs in India with Avg AUM of US$ 12 Bln * • Over 2. 5 million investor accounts • Strengths across different businesses – – Mutual Funds – Segregated Managed Accounts (PMS) – Offshore Advisory – Real Estate Funds Best in class management • Disciplined processes driving investment management process • Strong emphasis on risk management across functions • Longevity of experienced investment & other management personnel with the organization Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 * As on 31 st Mar 2011
Business Verticals Mutual Fund Birla Sun Life Offshore Advisory Asset Management Company Limited Real Estate Advisory Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Portfolio Management
Awards & Recognitions – 2010 Outlook Money Wealth Creator Awards 2010 * Best Debt Fund House – Winner * Best Fund House – Runner’s up NDTV Profit Mutual Fund Awards 2010 * Debt : Income – Winner * Equity : Mid and Small Cap – Winner * Monthly Income Plans – Runner’s Up Wealth Forum AMC Awards 2010 * Best Debt Fund House – Winner * Best Debt Fund Manager – Winner Lipper Awards, India 2010 * “Best Group – Mixed Assets Category”, second time in a row. * BSL Asset Allocation Fund – Moderate Plan – the “Best Fund” in its category Lipper Awards, India 2010 * “Most Innovative Product – India” for BSL Capital Protection Series Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Strong focus on quality of growth AUM Growth (USD Bln) 16 13. 7 14 12. 0 12 performance vis-à-vis the peer group 7. 4 8 6 fund assets in top 2 quartiles of 9. 7 10 Ø Across time horizons, at least 75% of Ø Over 90% exposure of assets invested 4. 5 4 in credits of AAA or sovereign 2 0 Mar/07 Mar/08 Mar/09 Mar/10 Mar/11 Superior fund performance aided AUM growth Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Source: BMF
Wide offering across risk reward spectrum Thematic Equity Mid Cap Base Equity Risk Large Cap Base Equity Long Term Fund Govt Securities Fund Money Market Fund Play on the different India centric investment themes Play on the valuation gap between capitalizations & alpha potential (e. g. BSL Midcap Fund) Diversified equity fund taking measured risk (e. g. India Advantage Fund) Actively managed emerging markets bond fund Play on the interest rate arbitrage & improving sovereign credit rating Money market fund for management of short term surpluses Returns Presence across the entire risk reward spectrum allows BSLAMC to tailor make solutions for clients across the board Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Investment Philosophy Objective – Outperform the benchmark over full market cycles while maintaining a consistent style Philosophy – Investing with Bottom style: üSustainable above average growth üProspects not adequately valued üCompounding of high ROCE over longer period Strategy – Fundamental analysis to: üFind Strong managements with businesses having sustainable competitive advantages üInvest with a horizon of 24 - 36 months & review regularly üSee whether valuation reflects growth & to what extent it incorporates risk üConstruct portfolio with a view to take measured risk through active bets Indian Growth Story Sustainable growth at a reasonable price is the ultimate goal for the portfolio in line with the Indian Growth Story Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Managed Portfolios
Corporate Governance – Three Lines of Defence Management First Line of Defence - Business Units: § Primary responsibility for the management of risk § Ensures ownership is as close as possible to the activity that creates the risks e. g. § • Client Mandate adherence in Segregated Managed Account(PMS) • Income tax in Finance • Brokerage payout risks in Operations • Liquidity /Derivative limits adherence in Investments Ensure that effective action is taken to manage them. Second Line of Defence - Risk Management: § Facilitate Departments in Risk Management – preventive vs. post mortem § Ensure Policy/Process/Frameworks § Risk and Control Effectiveness § Check Adherence in Key areas § Accountable for Risk Assurance Third Line of Defence - Internal audit: § Independently verify the effectiveness of controls and the Risk Management process Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008
Investment Risk Framework Governance Mechanism • Committee Meetings • Investment Team Meetings – Equity & Fixed Income • Risk Reviews • Internal Audits Tracking & Monitoring • Statutory, Internal & Mandated Limits through IT infrastructure & reporting systems • MSCI Barra – Portfolio & Risk Analysis • Benchmarking with Peers & Indices Policy & Procedure • Applicable regulatory provisions • Investment Manuals – Equity & Fixed Income • Client Agreements – Specific mandates for clients ( Managed Accounts) Statutory Regulations provide a good framework – Supplemented by Internal policies and Governance mechanism Birla Sun Life Asset Management Company Ltd. Copyright: Birla Sun Life Asset Management Company Ltd. 2008 §Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing.
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