Acknowledgement

This project would be incomplete without the expression of words of simple gratitude to the people who made it possible, so I take this opportunity to thank them all who directly or indirectly helped me a lot to complete this project successfully. First of all, I would like to thank my project guide Miss. Rajeshwari Nidgundi, Branch in charge for having provided me an opportunity to undertake my project in their organization and also for her co-operation which helped me a lot to complete my project. I am also grateful to Preetha Saldanha, who helped me by providing information relating to the project. I would like to express my great respect to Dr. T. Rangarajan director, K.L.E.Societys Institute of Management Studies and Research for his encouragement. I express my heartily gratitude to our faculty, Prof. M.M Kuri for his excellence guidance ,ever-endeavoring support to undergo 60 days project i.e from 1/7 /2005 to 30/8/2005 with whose support made me submit this project report.

Vanita Shettangoudar

PARTICULARS Executive Summary Industry overview Company background Project details

1. Objective & Sub objective 2. Factors influencing investment decisions 3. About mutual fund industry 4. Structure of mutual fund 5. Types of mutual funds 6. Regulators of mutual fund 7. Advantages of Mutual Fund Investing 8. Disadvantages of Mutual Fund Investing 9. Introduction To ULIP 10. ULIP - Key Features 11. Advantages of ULIP 12. Limitations of ULIP 13. Calculation of SD & return

PAGE NO

Findings Conclusions Suggestions Limitation Bibliography

Executive summary
The main aim of the investor is to minimize the risk involved in investment & maximize return. Decreasing value of money is the main reason which makes people to invest money for maintaining their standard of living and purchasing power of the money. And today there are number of option available to investor like Post office, bank deposit, Real estate, debenture,

Govt.securities, stoke market, insurance & gold etc. among these mutual fund & ULIP introduced by the insurance company are the two option which require less capital & give the benefit of Professional Management & suitable for all especially to the persons who doesnt have time to watch the market regularly. Origin of Mutual Fund Investing: When three Boston securities executives pooled their money together in 1924 to create the first mutual fund. The mutual fund industry in India started in 1963 with the formation of Unit Trust of India. Mutual fund industry today manage near about Rs.1.50 lac Crore. ULIP came into play in the 1960s and became very popular in Western Europe and Americas. In India also it has become popular. Today ULIP contribute 80% of the premium collected by the insurance company

Title of the project

Comparative study of ULIP & mutual fund industry

Main Objective:

To know the difference in investing money in ULIP & mutual fund, which one is preferable between two & whether these two options are substitute for each other or no?

Sub objective:
To know the factors that influence investor while taking investment decisions. To know the mutual fund industry. To know the merits & demerits of mutual funds. To know the legal & regulatory body of mutual fund industry. To know what is ULIP & how it works. To know the advantages & disadvantages of investing in ULIP To know how ULIP is one stop solution for the investor. To know the impact of introduction of ULIP to the market on mutual fund industry. To know to whom ULIP & mutual funds are suitable. To know what is the response of mutual fund industry to the competition given by the ULIP

 To know innovative scheme introduced by mutual fund industry to meet the competition.

Rationale behind choosing this topic

The big question mark in front of every investor is where to invest money to get real income (inflation adjusted).There are so many options available to them but it is very difficult to choose among them, as every option has its own merits & demerits. Investor has to be fully aware of all these options & he should be in a position to choose which one is suitable for him on the basis of his risk appetite, investment objective and expected return etc. Option that is suitable for one person may not suit other persons requirement. This process of choosing suitable product/option take long time & a lot of homework, the best way for the person who has no time & expertise in selecting investment avenue can either go for ULIP or mutual fund which provide one stop solution to all type of investor . Around 80 per cent of the premium income of life insurers is coming through unit-linked plans in 2004.Which gives an indication that mutual fund companies are losing out on a huge market that would have otherwise been theirs. Today mutual fund facing great challenge by ULIP .This situation made me to take this topic & this project is small effort in that direction to find to whom the scheme is suitable. Methodology: For this study, monthly NAV of growth, balance, debt schemes of two fund house i.e JM Financial mutual fund & Prudential ICICI mutual fund is taken which represent performance of the mutual fund industry & monthly NAV of two ULIP plans of two insurance companies i.e Bajaj Allianz life insurance & ICICI Prudential life insurance is taken which will represent performance of ULIP in this project .With the help of these NAV SD & Sharpe ratio is calculated, which will represent risk associated with option, excess return earned over & above the return of risk less security for each unit of risk respectively. Primary source: Personal interview was held with the financial advisor of mutual fund & insurance to get the input for my project. Secondary source: 1. Web site of respective mutual fund & insurance companies.

2. Web site of Amfindia.com for collecting NAV of mutual fund scheme.

Industry overview
The idea of pooling money together for investing purposes started in Europe in the mid-1800s. The first pooled fund in the U.S. was created in 1893 for the faculty and staff of Harvard University. On March 21st, 1924 the first official mutual fund was born. It was called the Massachusetts Investors Trust. After one year, the Massachusetts Investors Trust grew from $50,000 in assets in 1924 to $392,000 in assets (with around 200 shareholders). The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Reserve Bank and the Government of India. The objective then was to attract the small investors and introduce them to market investments. Since then, the history of mutual funds in India can be broadly divided into three distinct phases. Phase 1- 1964-87 (Unit Trust of India) In 1963, UTI was established by an Act of Parliament and given a monopoly. Operationally, UTI was set up by the Reserve Bank of India, but was later de-linked from the RBI. The first, and still one of the largest schemes, launched by UTI was Unit Scheme 1964. Later in 1970s and 80s, UTI started innovating and offering different schemes to suit the needs of different classes of investors. Unit Linked Insurance Plan (ULIP) was launched in 1971. Six new schemes were introduced between 1981 and 1984. During 1984-87, new schemes like Children's Gift Growth Fund (1986) and Mastershare (1987) were launched. Mastershare could be termed as the first diversified equity investment scheme in India. The first Indian offshore fund, India Fund, was launched in August 1986. During 1990s, UTI catered to the demand for income-oriented schemes by

launching Monthly Income Schemes, a somewhat unusual mutual fund product offering "assured returns". The mutual fund industry in India not only started with UTI, but still counts UTI as its largest player with the largest corpus of investible funds among all mutual funds currently operating in India. Until 1980s, UTI's operations in the stock market often determined the direction of market movements. Now, many Indian investors have taken to direct investing on the stock markets. Foreign and other institutional players have been brought in. So direct influence of UTI on the markets may be less than before, though it remains the largest player in the fund industry. In absolute terms, the investible funds corpus of even UTI was still relatively small at about Rs. 600 crores in 1984. But, at the end of this Phase One, UTI had grown large as evidenced by the following statistics: 1987-88 Amount Mobilised (Rs. Crores) UTI Total 2,175 2,175 Assets Under Management (Rs. Crores) 6,700 6,700

Phase 2 - 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non-UTI, Public Sector mutual funds, bringing in competition. With the opening up of the economy, many public sector banks and financial institutions were allowed to establish mutual funds. The State Bank of India established the first non-UTI mutual fund- SBI Mutual Fund - in November 1987. This was foI1owed by Canbank Mutual Fund (launched in December, 1987), LIC Mutual Fund (1989), and Indian Bank Mutual Fund (1990) followed by Bank of India Mutual Fund, OIC Mutual Fund . and PNB Mutual Fund. These mutual funds helped enlarge the investor community and the investible funds. From 1987 toI992-93, the fund industry expanded nearly seven times in terms of Assets Under Management, as seen in the following figures: . 1992-93 Amount Mobilised (Rs. Crores) 11,057 1,964 13,021

Assets Under Management (Rs. Crores) 38,247 8,757 47,004

UTI Public Sector Total

Phase 3 - 1993-1996 (Emergence of Private Funds) A new era in the mutual fund industry began with the permission granted for the entry of private sector funds in 1993, giving the Indian investors a broader choice of 'fund families' and increasing competition for the existing public sector funds. Quite significantly, foreign fund management companies were also allowed to operate mutual funds, most of them coming into India through their joint ventures with Indian promoters. These private funds have brought in with them the latest product innovations, investment management techniques and investor servicing technology

that make the Indian mutual fund industry today a vibrant and growing financial intermediary. During the year 1993-94, five private sector mutual funds launched their schemes followed by six others in 1994-95. Initially, the mobilisation of funds by the private m_tual funds was slow. But, this segment of the fund industry now has been witnessing much greater investor confidence in them. One influencing factor has been the development of a SEBI driven regulatory framework for mutual funds. But another important factor has been the steadily improving performance of several funds themselves. Investors in India now clearly see the benefits of investing through mutual funds and have started becoming selective. Phase 4 - 1996 (SEBI Regulation for Mutual Funds) The entire mutual fund industry in India, despite initial hiccups, has since scaled new heights in terms of mobilisation of funds and number of players. Deregulation and liberalisation of the Indian economy has introduced competition and provided impetus to the growth of the industry. Finally, most investors - small or large - have started shifting towards mutual funds as opposed to banks or direct market investments. More investor friendly regulatory measures have been taken both by SEBI to protect the investor and by the Government to enhance investors' returns through tax benefits. A comprehensive set of regulations for all mutual funds operating in India was introduced with SEBI (Mutual Fund) Regulations, 1996. These regulations set uniform standards for all funds and will eventually be applied in full to Unit Trust of India as well, even though UTI is governed by its own UTI Act. In fact, UTI has been voluntarily dopting SEBI guidelines for most of its schemes. Similarly, the 1999 Union Government Budget took a' big step in exempting all mutual fund dividends from income tax in the hands of investors. Both the 1996 regulations and the 1999 Budget must be considered of historic importance, given their farreaching impact on the fund industry and investors. 1999 marks the beginning of a new phase in the history of the mutual fund industry in India, a phase of significant

growth in terms of both amounts mobilised from investors and assets under management. Consider the growth in assets as seen in the figures below:

Gross Amount Mobilised (Rs. Crores) 1998-99 11,679 1,732 7,966 21,377

UTI Public Sector Private Sector Total

Assets Under Management (Rs. Crores) 1999-2000 1998-99 1999-2000 13,536 53,320 76,547 (77.87%) (67.75%) 4,039 8,292 11,412 (12.11 %) (10.09%) 42,173 6,860 25,046 (10.02%) (22.16%) 59,748 68,4 72 113,005

The size of the industry is growing rapidly, as seen by the figure of assets under management which have gone from over Rs. 68,000 crores to Rs.113,005 crores, a growth of nearly 60% in just one year. Within the growing industry, by March 2000, the relative market shares of different players in terms of amount mobilized and assets under management have undergone a change. Mutual fund A mutual fund is a common fool 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. A single investors ownership of the fund is in the same proportion as the amount of the contribution made by him or her bears to the total amount of the fund. 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. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc.

Market trends in mutual fund industry

The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by nationalized banks and smaller private sector players. Many nationalized banks got into the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing then. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as the difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have serious plans of continuing the activity in a major way. The experience of some of the AMCs floated by private sector Indian companies was also very similar. They quickly

realized that the AMC business is a business, which makes money in the long term and requires deep-pocketed support in the intermediate years. Some have sold out to foreign owned companies, some have merged with others and there is general restructuring going on. The foreign owned companies have deep pockets and have come in here with the expectation of a long haul. They can be credited with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc. In fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these.
SECURITIES AND EXCHANGE BOARD OF INDIA INVESTMENT MANAGEMENT DEPARTMENT Trends in Transactions on Stock Exchanges by Mutual Funds (since January 2000)
Equity (Rs in Crores) Debt Net Gross Gross Purchase/ Gross Purchase Sales Sales Purchase 11070.54 11492.19 -421.65 2764.72 17375.78 20142.76 -2766.98 13512.17 12098.11 15893.99 -3795.88 33583.64 14520.89 16587.59 -2066.70 46663.83 36663.58 35355.67 1307.91 63169.93 45045.25 44597.23 448.02 62186.46 4347.95 2883.04 1464.91 9568.20 7000.72 3660.61 3340.11 10687.90 4567.84 6384.63 -1816.79 10686.86 503.73 754.18 -250.45 1667.89 16420.24 13682.46 (Rs in Crores) Net Gross Purchase/ Sales Sales 1864.29 900.43 8488.68 5023.49 22624.42 10959.22 34059.41 12604.42 40469.18 22700.75 45199.17 16987.29 4533.42 5034.78 5982.47 4705.43 7089.49 3597.37 863.84 804.05 14141.63

Jan 2000-March 2000. April 2000 -March 2001. April 2001-March 2002. April 2002-March 2003 April 2003-March 2004 April 2004-March 2005 April 2005. May 2005. June 2005. July 2005 (as on 5th) Total (April '05 - July '05)

2737.78 32610.85 18469.22

Company background

The gentle, fragile butterfly doesnt trust easily. Its world is fraught with risks & dangers. It will choose a location to sit on only if it feels completely secure. Investors in todays volatile & unpredictable financial markets find themselves in a situation similar to the butterflys , flitting from one investment option to another in their quest for satisfactory returns. What they need is an expert they can trust whose solid foundations in finance & reputation for integrity will grow their money , while ensuring their peace of mind . JM mutual fund , with its broad (Krishnamurthy vijayan) based experience, local expertise & steadfast performance , inspires such trust & faith . History of JM Financial Asset Management Pvt. Ltd. JM Financial Mutual Fund is one of India's first private sector mutual funds-an integral part of the first wave that commenced operations in 1993-94. Today, JM is the top ten mutual funds in the country, ranked by assets managed, and enjoy a superior performance record. JM is the one of the many successful companies that have emerged out of JM Group's strong foundation in financial services. JM Group's origins can be traced back to the 1950s when the Kampani family began to get involved in India 's then nascent capital markets. On September 15, 1973 , J.M. Financial and Investment Consultancy Services was jointly founded by Nimesh N. Kampani, Naveenchandra Kampani and Mahendra Kampani. Under the leadership of Chairman Nimesh N. Kampani, the JM Group has played a stellar and multi-faceted role in the development of India 's capital markets. Apart from helping companies raise finance, JM has also been instrumental in educating a burgeoning and prospering middle class about the advantages of investing in blue chip companies. In 1999, we commenced a joint venture

with Morgan Stanley Dean Witter, that today spans investment banking, broking, fixed income and retail distribution. JM Financial Asset Management Private Limited, the Asset Management Company of JM Financial Mutual Fund, is not a part of this joint venture. Sponsored by J.M. Financial and Investment Consultancy Services Pvt. Ltd., and co-sponsored by JM Financial Ltd., JM Financial Asset Management Private Limited started operations in December 1994 with a simultaneous launch of three funds-JM Liquid Fund (now JM Income Fund), JM Equity Fund and JM balanced Fund. Today, JM Financial Mutual Fund offers a bouquet of funds that caters to the diverse needs of both its institutional and individual investors. Mission: JM Financial Asset Management Pvt. Ltd mission is to manage risk effectively while generating top quartile returns across all product categories. They believe that to cultivate investor loyalty, they must provide a safe haven for their investments. They are focused on helping their investors realize their investment goals through prudent advice, judicious fund management, impeccable research, and strong systems of managing risk scientifically. JM Financial Asset Management Pvt. Ltd. genuinely strive to be their investors' 'friend in the new world of risk'

They have 16 branches all over India

Branches 1. Ahmedabad 2. Patna 3. New Delhi12. Surat Mumbai Mangalore Nagpur Pune Vadodara Bangalore

Chennai Hyderabad Kolkata

Coimbatore Hubli Ludhiana

SPONSORS: J.M. FINANCIAL & INVESTMENT CONSULTANCY SERVICES PRIVATE LIMITED ("The Sponsor"): The Sponsor was incorporated on 15th September 1973 and had maintained its position as a leading private sector Investment Banker in the country till 1999. The Sponsor has lead managed issues with an aggregate monetary value of over Rs. 63,000 Crores during the period 1993-1999 and also been awarded "The Best Domestic Investment Bank in India" by Asia Money for two consecutive years in 1996 and 1997. Consequent to the Joint venture of the JM Financial Group with Morgan Stanley Group, the business operations are carried through the joint venture companies. The Sponsor was holding a Category I Merchant Banking registration with SEBI valid till 15.08.2002. Thereafter, the Sponsor did not seek renewal of registration with SEBI as Merchant Banker. Rs. In Crores
Financial performance of the Sponsor

Total Income Profit After Tax Equity capital Reserves & Surplus Networth Earnings per Share (Rs.) Book Value per Share(Rs.) Dividend Paid (%)

2001-02 4.94 0.62 21.00 32.81 59.54 0.08 25.63 0.50

2002-03 2.68 0.81 21.00 32.23 58.24 0.17 25.35 0.50

2003-04 4.92 0.94 21.00 33.01 59.02 0.23 25.72 0.50

JM FINANCIAL LIMITED (" The Co-Sponsor ")

The Co-Sponsor was a securities brokerage company promoted by the Sponsor and is a listed company. Consequent to a joint venture of JM Financial Group with Morgan Stanley Group, institutional equity sales

and trading business has been transferred to JM Morgan Stanley Securities Private Limited. Financial performance of the Co-Sponsor

Rs. In Crore Total Income Profit After Tax Equity Capital (Paid up) Reserves & Surplus Networth Earnings per Share (Rs.) Book Value per Share (Rs.) Dividend Paid (%) 2001-02 5.36 1.61 11.25 15.07 26.32 1.42 23.24 9.00 2002-2003 2003-04 0.78 4.29 0.03 2.61 11.25 11.25 13.84 14.42 25.09 25.67 0.02 2.30 22.15 22.67 10.00 16.00

TRUSTEE COMPANY - JM FINANCIAL TRUSTEE COMPANY PRIVATE LIMITED JM FINANCIAL TRUSTEE COMPANY PRIVATE LIMITED (formerly known as J.M. Trustee Company Private Limited) has been promoted by J.M. Financial & Investment Consultancy Services Pvt Ltd., and JM Financial Ltd. JM Financial Trustee Company Pvt Ltd., is registered under the Companies Act, 1956 and was incorporated on 9th June 1994. The Sponsors have executed a Trust Deed on 1st September 1994 appointing JM Financial Trustee Company Pvt Ltd., as Trustee Company of JM Financial Mutual Fund.

Board of trustees:
1. 2. 3. 4. 5. 6. Mr. Nimesh N. Kampani,Chairman Mr. Darius Udwadia Mr. Anant V. Setalvad , Industrialist Mr. Anant V. Setalvad, Industrialist Mr. Jalaj Ashwin Dani, Industrialist Mr. Sharad M. Kulkarni, Business Consultant & Corporate Advisor

Board of the asset management company

JM Financial Asset Management Pvt. Ltd:

Dr. Vijay Kelkar Chairman Retired Civil Servant 2. Mr. Rajendra Chitale , Partner, M.P. Chitale & Co. 3. Mr. Vishal Kampani, Investment Banker 4. Dr. R. Srinivasan, Former Chairman, IBA and various nationalised banks 5. Mr. Nityanath P. Ghanekar,Consultant 6. Mr. J.K. Modi Broker (Delhi Stock Exchange)

Management team

Mr. Krishnamurthy Vijayan, Chief Executive Officer Mr Jimmy A. Patel,Chief Operating Officer Mr. Prabal Nag,Senior Vice President, HeadMarketing & Sales Mr. Nandkumar Surti,Head - Fixed Income Ms Shalini Tibrewala,Fund Manager, Debt Mr Aditya Palwankar,Fund Manager, Equity Mr Sandeep Neema,Fund Manager, Equity Mr Biren Mehta,Fund Manager-Derivatives Mr. George Cherian,Vice President, Technology & Risk Management Mr. Sarath Sarma,Head corporate Sales Mr. Sanjay Lakra,Compliance Officer

Title of the project

Comparative study of ULIP & mutual fund industry

Objective:
To know the difference in investing money in ULIP & mutual fund, which one is preferable among two & whether these two options are substitute for each other or no?

Sub-objective:
To know the factors that influence investor while taking investment decisions. To know the mutual fund industry. To know the legal & regulatory body of mutual fund industry. To know the merits & demerits of mutual funds. To know what is ULIP & to understand the modes operandi of ULIP. To know the advantages & disadvantages of investing in ULIP To know how ULIP is one stop solution for the investor.

 To know the impact of introduction of ULIP to the market on mutual fund industry. To know to whom ULIP & mutual funds are suitable. To know what is the response of mutual fund industry to the competition given by the ULIP To know innovative scheme introduced by mutual fund industry to meet the competition.
Following are the factors which influence investor while taking investment decisions: Stability of income: Even though the return is less investor go for that investment which gives uniform/stable income. Capital growth: Some investors go for those investments where there is a scope for capital growth. Liquidity: Liquidity is the one more factor which investor consider before investing .So that he can meet his emergency easily. Tax benefits: To plan an investment programme without regard to ones tax status may be costly to the investor. There are really two problems involved here, one concerned with the amount of income paid by the investment & the other with the burden of income taxes upon that income . When investors incomes are small, they are anxious to have maximum cash returns on their investments, & are prone to take excessive risks. On the other hand, investors who are not pressed for cash income often find that income taxes deplete certain types of investment incomes less than others, thus affecting their choices. Purchasing power stability: Investment involves the commitment of current funds with the objective of receiving greater amounts of future funds, because of this they consider the purchasing power stability, and for this they study the degree of price level inflation in future.

Risk: Risk appetite of the investor also influence investor while taking investment decisions: Following are the two type of risk that investor face 1. systematic risk 2. unsystematic risk Systematic risks are out of external & uncontrollable factors, arising out of the market, nature of industry7 the state of economy etc. Unsystematic risks emerge out of the known & controllable factors, internal to the issuer or the companies. Examples of Systematic risks i. Market risk: This arises out of changes in demand & supply pressures in the markets, following the changing flow of the information or expectations. ii. Interest rate risk: the return on an investment depends on the interest rate promised on it & the changes in the market rates of interest from time to time iii. Purchase power risk: The return expected by investors will change due to change in real value of returns. One more reason for investing is not to earn but to preserve their economic position over time, they utilise investment outlets whose values vary with the price level. They select investments whose market values change with consumer prices which compensates them for cost of living increase. If they do not, they will find that their total wealth has been diminished.

Examples of Unsystematic risks: i. Business risk: This relates to the variability of the business, sales, income, profits etc., which in turn depends on the marked condition for the product mix, input supplies, strength of the competitors, etc. ii. Financial risk: this relates to the method of financing, adopted by the company, high leverage leading to larger debt servicing problems or short-

iii.

term liquidity problems due to bad debts, delayed receivables & fall in current assets or rise in current liabilities. These problems could be solved but they may lead to fluctuations in earnings, profits & dividends to shareholders. Default or insolvency risk: the borrower or issuer of securities may become insolvent or may default, or delay the payments due, such as interest installments or in principal repayments. In such cases, the investor may get no return or negative returns.

About mutual fund industry Mutual funds today manages near about RS 1.50 lac crore 2004-05 97 new schemes were launched mobilizing funds to the tune of RS 25000 Crore in that 36 schemes were equity schemes mobilizing RS 11756 Crore from investor. Equity mutual fund accounts for 25% of the total assets managed by the Indian mutual fund industry. In U.S it is more than 50% even when compared to US based retail investors. There are clear indications that the Indian mutual fund industry has tremendous potential in terms of investors exposure to it. as Nishid Shah. chief investment

officer, Birla sun life puts it ,a recent study reveals that not even 1% of Indian investors were found to be investing in funds. In contrast one out of every two house holds in US is a mutual fund investor In US, second household is a mutual fund holder. In US, the mutual fund industry size is about 67% of the US GDP, whereas the Indian mutual fund industry is just about 6% of our GDP In US, mutual fund assets are around 1.5% times the bank deposits. In India though, bank deposits are about 10.50 times the MF assets. MF product range can suit the needs of almost each & every individual

NAME OF SEBI REGISTERED MUTUAL FUNDS 1. ABN AMRO Mutual Fund Capital Mutual Fund 3. Benchmark Mutual Fund Mutual Fund, 5. Birla Mutual Fund Fund 7. Canbank Mutual Fund Fund(suspended) 9. Chola Mutual Fund, Mutual Fund 11. DSP Merrill Lynch Mutual Fund, Mutual Funds, 13. Escorts Mutual Fund, Mutual Fund 2. Alliance 4. BOB 6. BOI Mutual 8. CRB Mutual 10. Deutsche 12. Dundee 14. Fidelity

15. GIC Mutual Fund Mutual Fund, 17. HSBC Mutual Fund, Securities Fund, 19. IL & FS Mutual Fund, Mutual Fund, 21. J M Financial Mutual Fund
Mahindra Mutual Fund,

16. HDFC 18. ICICI 20. ING Vysya 22. Kotak 24. LIC Mutual 26. PNB Mutual 28. Prudential 30. Sahara 32. Shriram 34. Standard 36. Taurus
38. Franklin

23. KJMC Mutual Fund, Fund 25. Morgan Stanley Mutual Fund Fund 27. Principal Mutual Fund ICICI Mutual Fund 29. Reliance Mutual Fund Mutual Fund, 31. SBI Mutual Fund Mutual Fund 33. Sun F&C Mutual Fund
Chartered Mutual Fund,

35. Sundaram Mutual Fund, Mutual Fund 37. Tata Mutual Fund,
Templeton Mutual Fund

39. UTI Mutual Fund

Status of Mutual Funds for the period April 2005 - June 2005 (Figs in Rs. Crore) Public Sector Mutual Funds

Private Sector

Grand Total

Mutual Funds A

UTI (i)

Others (ii)

Sub-total (i)+(ii) B

A+B

Mobilisation of Funds 181071.43 Repurchase / Redemption Amt. 167783.10 Net Inflow/ Outflow (-ve) of funds 13288.34 Cumulative Position of net assets as on June 30, 2005 130584.74 (%) (79.36%)

13061.72 12557.72

14862.38 14381.43

27924.10 26939.15

208995.53 194722.25

504.00

480.94

984.94

14273.29

21975.57 (13.36%)

11986.03 (7.28%)

33961.60 (20.64%) 164546.35

Structure of mutual fund Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute atleast 40% of the networth of the Investment Manged 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. Atleast 2/3rd directors of the Trustee are independent directors who are not associated with the Sponsor in any manner. Asset Management Company (AMC) The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. 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. Atleast 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 networth of atleast 10 crore at all times. TYPES OF FUNDS Mutual fund can be classified into 3 types from the investors' perspective: Firstly, funds are usually classified in terms of their constitution - as closed-end or open-end. The distinction depends upon whether they give the investors the option to redeem and buy units at any time from the fund itself (open end) or whether the investors have to await a given maturity before they can redeem their units to the fund (closed end). Secondly,Funds can also be grouped in terms of whether they collect from investors any charges at the time of entry or exit or both, thus reducing the investible amount or the redemption proceeds. Funds that make these charges are classified as load funds, and funds that do not make any of these charges are termed no-load funds. Finally, funds can also be classified as being tax-exempt or

non-tax-exempt, depending on whether they invest in securities that give tax-exempt returns or not. Currently in India, this classification may be somewhat less important, given the recent tax exemptions given to investors receiving any dividends from all mutual funds. Under each broad classification, we may then distinguish between several types of funds on the basis of the nature of their portfolios, meaning whether they invest in equities or fixed income securities or some combination of both. Every type of fund has a unique risk-profile that is determined by its portfolio, for which reason funds are often separated into more or less risk-bearing. Mutual Fund Types All mutual funds would be either closed-end or open-end, and either load or no-load. These classifications are general. For example all open-end funds operate the same way; or in case of a load fund a deduction is made from investors' subscription or redemption and only the net amount used to determine his number of shares purchased or sold. Funds are generally distinguished from each other by their investment objectives and types of securities they invest in. a) Broad Fund Types by Nature of Investments Mutual funds may invest in equities, bonds or other fixed income securities, or short-term money market securities. So we have Equity, Bond and Money Market Funds. All of them invest in financial assets. But there are funds that invest in physical assets. For example, we may have Gold or other Precious Metals Funds, or Real Estate Funds.

b) Broad Fund Types by Investment Objective Investors and hence the mutual funds pursue different objectives while investing. Thus, Growth Funds invest for medium to long term capital appreciation. Income Funds invest to generate regular income, and less for capital appreciation. Value Funds invest in equities that are considered under-valued today, whose value will be unlocked in the future. c) Broad Fund Types by Risk Profile The nature of a fund's portfolio and its investment objective imply different levels of risk undertaken. Funds are therefore often grouped in order of risk. Thus, Equity Funds have a greater risk of capital loss than a Debt Fund that seeks to protect the capital while looking for income. Money Market Funds are exposed to less risk than even the Bond Funds, since they invest in short-term fixed income securities, as compared to longer-term portfolios of Bond Funds. 1. Money Market Funds Often considered to be at the lowest run in the order of risk level, Money Market Funds invest in securities of a short-term nature, which generally means securities of less than one-year maturity. The typical, short-term, interest-bearing instruments these funds invest in include Treasury Bills issued by governments, Certificates of Deposit issued by banks and Commercial Paper issued by companies. In India, Money Market Mutual Funds also invest in the inter-bank call money market. The major strengths of money market funds are the liquidity and safety of principal that the investors can normally expect from shortterm investments. . 2. Gilt Funds Gilts are government securities with medium to long-term maturities, typically of over one year (under one-year instruments being money market securities). In India, we have now seen the emergence of Government Securities or Gilt Funds that invest in government paper called dated securities (unlike Treasury Bills that mature in less than one year). Since the issuer is the Government/s of India/States, These funds have little risk of default and hence offer better

protection of principal. However, investors have to recognize the potential changes in values of debt securities held by the funds that are caused by changes in the market price of debt securities quoted on the stock exchanges (just like the equities). Debt securities' prices fall when interest rate levels increase (and vice versa). 3. Debt Funds (or Income Funds) Next in the order of risk level, investor has Debt Funds. Debt funds invest in debt instruments issued not only by governments, but also by private companies, banks and financial institutions and other entities such as infrastructure companies/utilities. By investing in debt, these funds target low risk and stable income for the investor as their key objectives. However, as compared to the money market. funds, they do higher price fluctuation risk, since they invest in longer-term securities. Similarly, as compared to Gilt Funds, general debt funds do have a higher risk of default by their borrowers. Debt Funds are largely considered as Income Funds as they do not target capital appreciation, look for high current income, and therefore distribute a substantial part of their surplus to investors. Income funds that target returns substantially above market levels can face more risks a) Diversified Debt Funds A debt fund that invests in all available types of debt securities, issued by entities across all industries and sectors is a properly diversified debt fund. While debt funds offer high income and less risk than equity funds, investors need to recognise that debt securities are subject to risk of default by the issuer on payment of interest or principal. A diversified debt fund has the benefit of risk reduction through diversification and sharing of any default-related losses by a large number of investors. Hence a diversified debt fund is less risky than a narrow-focus fund that invests in debt securities of a particular sector or industry. b) Focused Debt Funds Some debt funds have a narrower focus, with less diversification in its investments. Examples include sector, specialized debt funds.

One category of specialised funds that invests in the housing sector, but offers greater security and safety than other debt instruments, is the Mortgage Backed Bond Funds that invest in special securities created after securitisation of (and thus secured by) loan receivables of housing finance companies

c) High Yield Debt Funds Usually, Debt Funds control the borrower default risk by investing in securities issued by borrowers who are rated by credit rating agencies and are considered to be of "investment grade". There are, however, High Yield Debt Funds that seek to obtain higher interest returns by investing in debt instruments that are considered "below investment grade". Clearly, these funds are exposed to higher risk. In the U.S.A., funds that invest in debt instruments that are not backed by tangible assets and rated below investment grade (popularly known as junk bonds) are called Junk Bond Funds. These funds tend to be more volatile than other debt funds, although they may earn higher returns as a result of the higher risks taken. d) Assured Return Funds UTI and other funds have offered "assured return" schemes to investors. The most popular variant of such schemes is the Monthly Income Plans of UTI. Returns are indicated in advance for all of the future years of these closed-end schemes. If there is a shortfall, it is borne by the sponsors. Assured Return or Guaranteed Monthly Income Plans are essentially Debt/Income Funds. Assured return debt funds certainly reduce the risk level considerably, as compared to all other debt or equity funds, but only to the extent that the guarantor has the required financial strength. Hence, the market regulator SEBI permits only those funds whose sponsors have adequate net-worth to offer assurance of returns. If offered, explicit guarantee is required from a guarantor whose name has to be specified in advance in the offer document of the scheme. While Assured Return Funds may certainly be considered to be the lowest risk type within the debt funds category, they are still not entirely risk-free, as investors have to normally lock in their funds for the term of the scheme or at least a specified period such as three years. During this period, changes in the financial markets may result in the investor losing the opportunity to obtain higher returns later in other debt or equity funds. Besides, the investor does carry some credit risk on the guarantor who must remain solvent enough to honour his guarantee during the lock in period. .

4 .Equity Funds As investors move from Debt Fund category to Equity Funds, they face increased risk level. However, there is a large variety of Equity Funds and all of them are not equally risk-prone. Equity funds invest a major portion of their corpus in equity shares issued by companies, acquired directly in initial public offerings or through the secondary market. Equity funds would be exposed to the equity price fluctuation risk at the market level, at the industry or sector level and at the company-specific level. Equity Funds' Net Asset Values fluctuate with all these price movements. These price movements are caused by all kinds of external factors, political and social as well as economic. The issuers of equity shares offer no guaranteed repayment as in case of debt instruments. Hence, Equity Funds are generally considered at the higher end of the risk spectrum among all funds available in the market. On the other hand, unlike debt instruments that offer fixed amounts of repayments, equities can appreciate in value in line with the issuer's earnings Potential, and so offer the greatest potential for growth in capital. Equity funds adopt different investment strategies resulting in different levels of risk. Hence, they are generally separated into different types in terms of their investment styles. a) Aggressive Growth Funds There are many types of stocks/shares available in the market; Blue Chips that are recognized market leaders, less researched stocks that are considered to have future growth potential, and even some speculative stocks of somewhat unknown or unproven issuers. Fund managers seek out and invest in different types of stocks in line with their own perception of potential returns and appetite for risk. As the name suggests, aggressive growth funds target maximum capital appreciation, invest in less researched or speculative shares and may adopt speculative investment strategies to attain their

objective of high returns for the investor. Consequently, they tend to be more volatile and riskier than other funds. b) Growth Funds Growth funds invest in companies whose earnings are expected to rise at an above average rate. These companies may be operating in sectors like technology considered to have a growth potential, but not entirely unproven and speculative. The primary objective of Growth Funds is capital appreciation over a three to five year span. Growth funds are therefore less volatile than funds that target aggressive growth. c) Specialty Funds These funds have a narrow portfolio orientation and invest in only companies that meet pre-defined criteria. For example, at the height of the South African apartheid regime, many funds in the U.S. offered plans that promised not to invest in South African companies. Some funds may build portfolios that will exclude Tobacco companies. Funds that invest in particular regions such as the Middle East or the ASEAN countries are also an example of specialty funds. Within the Specialty Funds category, some funds may be broad-based in terms of the types of investments in the portfolio. However, most specialty funds tend to be concentrated funds, since diversification is limited to one type of investment. Clearly, concentrated specialty funds tend to be more volatile than diversified funds. i. Sector Funds Sector funds' portfolios consist of investments in only one industry or sector of the market such as Information Technology, Pharmaceuticals or Fast Moving Consumer Goods that have recently been launched in India. Since sector funds do not diversify into multiple sectors, they carry a higher level of sector and company specific risk than diversified equity funds. ii. Offshore Funds These funds invest in equities in one or more foreign countries

thereby achieving diversification across the country's borders. However they also have additional risks - such as the foreign exchange rate risk - and their performance depends on the economic conditions of the countries they invest in. Offshore Equity Funds may invest in a single country (hence riskier) or many countries (hence more diversified).

iii.Small-Cap Equity Funds These funds invest in shares of companies with relatively lower market capitalization than that of big, blue chip companies. They may thus be more volatile than other funds, as smaller companies' shares are not very liquid in the markets. We can think of these funds as a segment of specialty funds. In terms of risk characteristics, small company funds may be aggressive-growth or just growth type. In terms of investment style, some of these funds may also be "value investors" d) Diversified Equity Funds A fund that seeks to invest only in equities, except for a very small portion in liquid money market securities, but is not focused on anyone or few sectors or shares, may be termed a diversified equity fund. While exposed to all equity price risks, diversified equity funds seek to reduce the sector or stock specific risks through diversification. They have mainly market risk exposure. Such general purpose but diversified funds are clearly at the lower risk level than growth funds. i. Equity Linked Savings Schemes: an Indian Variant In India, the investors have been given tax concessions to encourage them to invest in equity markets through these special schemes. Investment in these schemes entitles the investor to claim an income tax rebate, but usually has a lock-in period before the end of which funds cannot be withdrawn. These funds are subject to the general SEBI investment guidelines for all 'equity' funds, and would be in the Diversified Equity Fund category. However, as there are no specific restrictions on which sectors these funds ought to invest in, investors should clearly look for where the Fund Management Company proposes to invest and accordingly judge the level of risk involved. e) Equity Index Funds An index fund tracks the performance of a specific stock market index. The objective is to match the performance of the stock market by tracking an index that represents the overall market. The fund invests in shares that constitute the index and in the same

proportion as the index. Since they generally invest in a diversified market index portfolio, these funds take only the overall market risk, while reducing the sector and stock specific risks through diversification. f) Value Funds In contrast to the growth investing, other funds follow Value Investing approach. Value Funds try to seek out fundamentally sound companies whose shares are currently under-priced in the market. Value Funds will add only those shares to their portfolios that are selling at low price-earnings ratios, low market to book value ratios and are undervalued by other yardsticks. Value Funds have the equity market price fluctuation risks, but stand often at a lower end of the risk spectrum in comparison with the Growth Funds. Value Stocks may be from a large number of sectors and therefore diversified. However, value stocks often come from cyclical industries. g) Equity Income Funds Usually income funds are in the Debt Funds category, as they target fixed income investments. However, there are equity funds that can be designed to give the investor a high level of current income along with some steady capital appreciation, investing mainly in shares of companies with high dividend yields. As an example, an Equity Income Fund would invest largely in Power l Utility companies' shares of established companies that pay higher dividends and whose prices do not fluctuate as much as other shares. These equity funds should therefore be less volatile and less risky than nearly all other equity funds. 5. Hybrid Funds - Quasi Equity/Quasi Debt In terms of the nature of financial securities held, there are three major mutual fund types: money market, debt and equity. Many mutual funds mix these different types of securities in their portfolios. Thus, most funds, equity or debt, always have some money market securities in their portfolios as these securities offer the much-needed liquidity. However, money market holdings will constitute a lower proportion in the overall portfolios of debt or

equity funds. There are funds that, however, seek to hold a relatively balanced holding of debt and equity securities in their portfolios. Such funds are termed "hybrid funds" as they have a dual equity & bond focus. Some of the funds in this category are described below. a) Balanced Funds A balanced fund is one that has a portfolio comprising debt instruments, convertible securities, and preference and equity shares. Their assets are generally held in more or less equal proportions between debt/money market securities and equities. By investing in a mix of this nature, balanced funds seek to attain the objectives of income, moderate capital appreciation and preservation of capital, and are ideal for investors with a conservative and long-term orientation. b) Growth-and-Income Funds Unlike income-focused or growth-focused funds, these funds seek to strike a balance between capital appreciation and income for the investor. Their portfolios are a mix between companies with good dividend paying records and those with potential for capital appreciation. These funds would be less risky than pure growth funds, though more risky than income funds. c) Asset Allocation Funds Normally, an Equity Fund would have its primary portfolio in equities most of the time. Similarly, a Debt Fund would not have major equity holdings. In other words, their "asset allocation" is predetermined within certain parameters. However, there do exist funds that follow variable asset allocation policies and move in and out of an asset class (equity, debt, money market, or even nonfinancial assets) depending upon their outlook for specific markets. In many ways, these funds have objectives similar to balanced funds and may seek to diversify into foreign equities, gold and real estate backed securities in addition to debt instruments, convertible securities, preference and equity shares. Asset allocation funds that follow more stable allocation policies (which hold relatively fixed

proportions of specific categories) are more like balanced funds. On the other hand, funds that follow more flexible allocation policies (which vary their weightings depending on the fund manager's outlook) are more akin to aggressive growth or speculative funds. The former are for investors who prefer low risk and stable return. The latter carry higher risk and potential for higher return because of the flexibility enjoyed by the fund managers. 6. Commodity Funds While all of the debt/equity/money market funds invest in financial assets, the mutual fund vehicle is suited for investment in any other - for example - physical assets. Commodity funds specialise in investing in different commodities directly or through shares of commodity companies or through commodity futures contracts. Specialised funds may invest in a single commodity or a commodity group such as edible oils or grains, while diversified commodity funds will spread their assets over many commodities. A most common example of commodity funds is the so-called Precious Metals Funds. Gold Funds invest in gold, gold futures or shares of gold mines. Other precious metals funds such as Platinum or Silver are also available in other countries. 7. Real Estate Funds Specialised Real Estate Funds would invest in Real Estate directly, or may fund real estate developers, or lend to them, or buy shares of housing finance companies or may even buy their securitised assets. The funds may have a growth orientation or seek to give investors regular income. There has recently been an initiative to offer such an income fund by the HDFC.

LEGAL AND REGULATORY ENVIRONMENT Regulators in India 1. SEBI - the Capital. Markets Regulator The Government of India constituted Securities and Exchange Board of India, by an Act of Parliament in 1992, as the apex regulator of all entities that either raise funds in the capital markets or invest in capital market securities such as shares and debentures listed on stock exchanges. Mutual funds have emerged as an important institutional investor in capital market securities. Hence they come under the purview of SEBI. SEBI requires all mutual funds to be registered with them. It issues guidelines for all mutual fund operations including where they can invest, what investment limits and restrictions must be complied with, how they should account for income and expenses, how they should make disclosures of information to the investors and generally acts in the interest of investor protection. Other entities that SEBI also regulates are companies when they issue equity or debt, share registrars, custodians, bankers in the primary markets, stock exchanges and brokers in the secondary markets, and foreign and institutional investors such as FIls, offshore mutual funds with dedicated Indian mutual funds or venture capital investors. 3. Ministry of Finance The Ministry of Finance, which is charged with implementing the government policies, ultimately supervises . both the RBI and the SEBI. Besides being the ultimate policy making and supervising entity, the MOF has also been playing the role of an Appellate Authority for any major disputes over SEBI guidelines on certain specific capital market related guidelines - in particular any cases of insider trading or mergers and acquisitions. 4. Company Law Board, Department of Company Affairs and Registrar of Companies

Mutual fund Asset Management Companies and corporate trustees are companies registered under the Companies Act, 1956 and are therefore answerable to regulatory authorities empowered by the Companies Act. The primary legal interface for all companies is the Registrar of Companies (RoC). RoCs in turn are supervised by the Department of Company Affairs. The DCA forms part of the Company Law Board, which is part of the Ministry of Law and Justice of the Govt. of India. The RoC ensures that the AMC, or the Trustee company as the case may be is in compliance with all Companies Act provisions. The overall responsibility for formulating and modifying regulation relating to companies lies with the Department of Company Affairs (DCA). The Company Law Board (CLB) is the apex regulatory authority under the Companies Act. While the CLB guides the DCA, another arm of the CLB called the Company Law Bench is the Appellate Authority for corporate offences. 5. Stock Exchanges Stock exchanges are self-regulatory organizations supervised by SEBI. Many closed-end schemes of mutual funds are listed on one or more stock exchanges. Such schemes are subject to regulation by the concerned stock exchange(s) through a listing agreement between the fund and the stock exchange. 6. Office of the Public Trustee Mutual Funds, being Public Trusts are governed by the Indian Trust Act, 1882. The Board of Trustees or the Trustee Company is accountable to the Office of the Public Trustee, which in turn reports to the Charity Commissioner. These regulators enforce provisions of the Indian Trusts Act, to be complied with by the fund trustees.

Advantages of Mutual Fund Investing Identifying stocks that have growth potential is a difficult process involving detailed research & monitoring of the market. Mutual funds specialize in this area &possess the requisite resources to carry out research & continuous market monitoring. This is clearly beyond the capability of most individual investors Diversification Diversification requires substantial investment that may be beyond the means of most individual investors. mutual funds pool the resources of many investors & thus have the funds necessary to build a diversified portfolio ,&by investing even a small amount in a mutual fund ,an investor can, through his proportionate share, reap the benefit of diversification. Professional Management By purchasing mutual funds, investor are essentially hiring a professional manager at an especially inexpensive price. These managers have been around the industry for a long time and have the academic credentials to back it up. Efficiency By pooling investors' monies together, mutual fund companies can take advantage of economies of scale. With large sums of money to invest, they often trade commissionfree and have personal contacts at the brokerage firms. Ease of Use keeping track of a portfolio consisting of hundreds of stocks & The bookkeeping duties involved with stocks are much more complicated than owning a mutual fund. Cost Mutual funds are excellent for the new investors because they can invest small amounts of money and they can also invest at regular intervals with no trading costs. Stock investing, however, carries high transaction fees making it difficult for the small investor to make money. If an investor wanted to put in 100 a month into stocks and the broker charged 15 per transaction, their investment is automatically

down 15 percent every time they invest. That is not a good way to start off! Risk In general, mutual funds carry much lower risk than stocks. Disadvantages of Investing Through Mutual Funds
1. No guarantee of returns in mutual fund

2. MFs return is the average return of the entire portfolio & not that of the best performing instruments in the portfolio. 3. Unit holder of the mutual fund do not enjoy any right to attend the meeting of the company & exercise voting rights. 4. performance of the mutual fund is determined by the conditions prevailing in the stock market.
5. No Control over Costs: An investor in a mutual fund

has no control over the overall cost of investing. He pays investment management fees as long as he remains with the fund, albeit in return for the professional management and research. Fees are usually payable as a percentage of the value of his investments, whether the fund value is rising or declining. A mutual fund investor also pays fund distribution costs, which he would not incur in direct investing. However, this shortcoming only means that there is a cost to obtain the benefits of mutual fund services. However, this cost is often less than the cost of direct investing by the investors.
6. No Tailor-made Portfolios: Investors who invest on

their own can build their own portfolios of shares, bonds and other securities. Investing through funds means he delegates this decision to the fund managers. The very high-net-worth individuals or large corporate investors may find this to be a constraint in achieving their

objectives. However, most mutual funds help investors overcome this constraint by offering families of schemes - a large number of different schemes - within the same fund. An investor can choose from different investment plans and construct a portfolio of his choice.
7. Managing a Portfolio of Funds: Availability of a large

number of funds can actually mean too much choice for the investor. He may again need advice on how to select a fund to achieve his objectives, quite similar to the situation when he has to select individual shares or
bonds to invest in.

Introduction To ULIP
ULIP came into play in the 1960s and became very popular in Western Europe and Americas. The reason that is attributed to the wide spread popularity of ULIP is because of the transparency and the flexibility which it offers. As times progressed the plans were also successfully mapped along with life insurance need to retirement planning. In todays times, ULIP provides solutions for insurance planning, financial needs, financial planning for childrens future and retirement planning. Features of ULIP distinguishes itself through the multiple benefits that it provides to the consumer. The plan is a one-stop solution providing: Life protection Investment and Savings FlexibilityAdjustable Life Cover- Investment Options Transparency Options to take additional cover against- Death due to accident- Disability- Critical Illness- Surgeries Liquidity.

Mutual funds is the 'safety of the principal' guaranteed, plus the added advantage of capital appreciation together with the income earned in the form of interest or dividend. Insurance is a provision against risk and it is a device with which man tries to protect himself from risk in life. The recent development in the financial innovation is Unit Link

Insurance Policy (ULIP), which covers the concept of mutual fund and insurance. ULIP is a unique, multiple benefits plan which combines the basic benefit of life insurance with good returns, tax benefits and accident insurance cover. It offers free accident insurance cover up to Rs 50,000. The investment objective of the plan is primarily to provide returns through growth in NAV or through income distribution and reinvestment thereof in further units at NAV. ULIPs work on the premise that there is class of investors who regularly invest their savings in products like fixed deposits (FDs), coupon-bearing bonds, debt funds, diversified equity funds and stocks. There is another class of individuals who take insurance to provide for their family in case of an eventuality. So typically both these categories of individuals (which also overlap to a large extent) have a portfolio of investments as well as life insurance. ULIP as a product combines both these life insurance) into a single product. This saves the investor/insurance-seeker the hassles of managing and tracking a portfolio of products. The premium paid is invested in either debt or equity products or a combination of the two. In other words, it enables the buyer to secure some protection for his family in the event of his untimely death and at the same time provides him an opportunity to earn a return on his premium paid. In the event of the insured person's untimely death, his nominees would normally receive an amount that is the higher of the sum assured or the value of the units (investments). To put it simply, ULIP attempts to fulfill investment needs of an investor with protection/insurance needs of an insurance seeker. It saves the investor/insurance-seeker the hassles of managing and tracking a portfolio or products. Various Schemes However, there are some schemes in which the policyholder receives the sum assured plus the value of the investments.

Various schemes have been tailored to suit different customer profiles and, in that sense, offer a great deal of choice. The advantage of ULIP is that since the investments are made for long periods, the chances of earning a decent return are high. Just as in the case of mutual funds, buyers who are risk averse can buy debt schemes while those who have an appetite for risk can opt for balanced or equity schemes. ULIP - Key Features A multi-purpose tax saving plan with a choice of 10 years or 15 years duration( for some plans there is no maturity). Sale of units will be at NAV
No medical examination is required at the time of joining the plan. Investment can be made in ones spouses or childrens name. Totally exempt from the levy of gift tax and wealth tax.

Premiums paid can be single, regular or variable. The payment period too can be regular or variable. The risk cover can be increased or decreased. As in all insurance policies, the risk charge (mortality rate) varies with age. The maturity benefit is not typically a fixed amount and the maturity period can be advanced or extended. The policyholder can switch between schemes, for instance, balanced to debt or gilt to equity, etc. The maturity benefit is the net asset value of the units. The costs in ULIP are higher because there is a life insurance component in it as well, in addition to the investment component. Insurance companies have the discretion to decide on their investment portfolios. They are simple, clear, and easy to understand. Being transparent the policyholder gets the entire episode on the performance of his fund. Lead to an efficient utilisation of capital. ULIP products are exempted from tax and they provide life insurance. Provides capital appreciation.

 Investor gets an option balanced and equity funds.

to

choose

among

debt,

4 reasons why ULIPs get the thumbs up ULIPs have been selling like proverbial `hot cakes' in the recent past and they are likely to continue to outsell their plain vanilla counterparts going ahead. So what is it that makes ULIPs so attractive to the individual is, 1. Insurace cover plus savings To begin with, ULIPs serve the purpose of providing life insurance combined with savings at market-linked returns. To that extent, ULIPs can be termed as a two-in-one plan in terms of giving an individual the twin benefits of life insurance plus savings. This is unlike comparable instruments like a mutual fund for instance, which does not offer a life cover. 2. Multiple investment options ULIPs offer a lot more variety than traditional life insurance plans. So there are multiple options at the individual's disposal. ULIPs generally come in three broad variants:

Aggressive ULIPs (which can typically invest 80%-100% in equities, balance in debt) Balanced ULIPs (can typically invest around 40%-60% in equities) Conservative ULIPs (can typically invest upto 20% in equities)

Although this is how the ULIP options are generally designed, the exact debt/equity allocations may vary across insurance companies. Individuals can opt for a variant based on their risk profile. For example, a 30-Yr old individual looking at buying a life insurance plan that also helps him build a corpus for retirement can consider investing in the Balanced or even the Aggressive ULIP. Likewise, a risk-averse individual who is not comfortable with a high equity allocation can opt for the Conservative ULIP.

3. Flexibility Individuals may well ask how ULIPs are any different from mutual funds. After all, mutual funds also offer hybrid/balanced schemes that allow an individual to select a plan according to his risk profile. The difference lies in the flexibility that ULIPs afford the individual. Individuals can switch between the ULIP variants outlined above to capitalize on investment opportunities across the equity and debt markets. Some insurance companies allow a certain number of `free' switches. This is an important feature that allows the informed individual/investor to benefit from the vagaries of stock/debt markets. For instance, when stock markets were on the brink of 7,000 points (Sensex), the informed investor could have shifted his assets from an Aggressive ULIP to a low-risk Conservative ULIP. Switching also helps individuals on another front. They can shift from an Aggressive to a Balanced or a Conservative ULIP as they approach retirement. This is a reflection of the change in their risk appetite as they grow older. 4. Works like an SIP Rupee cost-averaging is another important benefit associated with ULIPs. Individuals have probably already heard of the Systematic Investment Plan (SIP) which is increasingly being advocated by the mutual fund industry. With an SIP, individuals invest their monies regularly over time intervals of a month/quarter and don't have to worry about `timing' the stock markets. These are not benefits peculiar to mutual funds. Not many realise that ULIPs also tend to do the same, albeit on a quarterly/half-yearly basis. As a matter of fact, even the annual premium in a ULIP works on the rupee cost-averaging principle. An added benefit with ULIPs is that individuals can also invest a onetime amount in the ULIP either to benefit from opportunities in the stock markets or if they have an investible surplus in a particular year that they wish to put aside for the future. The chart below shows how ULIP can meet multiple needs at different life stages.

Integrated Financial Planning Starting a job,Single individual Your Need Low protection, high asset creation and accumulation Recently married, no kids Reasonable protection, still high on asset creation Married, with Kids going to Higher studies for Children kids school,college child,marriage independent, nearing the golden years Higher protection, still high on asset creation but steadier options, increase savings for child Higher Protection, high on asset creation but steadier options, liquidity for education expenses Lumpsum money for education, marriage. Facility to stop premium for 23 yrs for these extra expenses Safe accumulation for the golden yrs.Considerably lower life insurance as the dependancies have decreased

Flexibilit Choose low y death benefit, choose growth/balance d option for asset creation

Increase death benefit,choose growth/balance d option for asset creation

Increase death benefit, choose balanced option for asset creation. Choose riders for enhanced protection.Use top-ups to increase your accumulation

Withdrawal from the account for the education expenses of the child

Withdrawal from the account for higher education/marriage expenses of the child. Premium holiday-to stop premium for a period without lapsing the policy

Decrease the death benefitreduce it to the minimum possible.Choose the income investment option.Top-ups form the accumulation (with reduced expenses) for the golden yrs cash accumulation

The key to good financial planning is to understand one's current and future financial goals, risk appetite and portfolio mix. This done, the next step is to allocate assets across different categories and systematically adhere to an investment pattern, so that they work in tandem to meet one's requirements over the next month, year or decade. Because of their flexibility to adjust to different life stage needs, ULIPs fit in very well with financial planning efforts. Moreover, as a systematic investment plan, ULIPs greatly diminish the hazards of investing in a volatile market, and using the concept of 'Rupee Cost Averaging' , allow the policyholder to earn real returns over the long term.

it is important for investor must monitor ULIP on a regular basis, though not as frequently as investor would a stock or mutual fund. ULIP is a long-term investment and daily fluctuations in the NAV should not impact investor. The mutual fund industry is all set to get aggressive to counter competition from the insurance industrys unit linked risk products. For mutual funds the unit linked insurance products launched by life insurance companies are an encroachment on their territory, Following statement will prove this: Around 80 per cent of the premium income of life insurers has come in through unit-linked plans in 2004.Which means mutual fund companies are losing out on a huge market that would have otherwise been theirs. These products are investment avenues that provide market related returns to the investor with an element of insurance thrown in. For the customer the attraction of market related returns with insurance is an attractive option. On the contrary though mutual fund companies also have unit-linked products what is absent is the insurance cover

Expenses One area where unit-linked plans come in for widespread criticism relates to the expenses that insurers charge under three broad heads: mortality charges (which goes towards

paying for your insurance cover), general expenses (agents' commissions and underwriting costs), and fund management costs. The second head, general expenses, accounts for the biggest component-typically, around 40 per cent (of the premium paid) in the first two years, which goes down sharply in later years. The actual expense structure may vary from one product to another depending on, among other things, the amount invested, the investment tenure and the period beyond which withdraws are permitted.

A ULIP policyholder has the option to invest in a variety funds, depending on his risk profile. If one does not have appetite to invest in equity, they can choose a debt or balanced fund. However, the structure of a ULIP takes care of quite a bit of the uncertainty in the markets. Insurance companies understand the need to give insurance seekers the flexibility to rethink their investment strategy in view of market histrionics. It is the investors to make the right switch they need to track markets actively and be well informed, which is actually the job of the investment advisor/consultant. ULIP is suitable for individuals who are already adequately insured and are reasonably well informed and savvy to take active investment decisions by using the 'switch option' that is provided to a ULIP policyholder. Also policyholders with regular endowment plans that are not satisfied with the 4-6 per cent returns can consider taking a ULIP with a lower equity component. this is a viable option for those who have the time and skill to manage several products separately. However, for those who want a convenient, economical, onestop solution, ULIPs are the best bet.& ULIP also get the benefit of bancassurance. India has an extensive bank network established over the years. What Insurance companies have to do is to

just take advantage of the customers' long-standing trust and relationships with banks In bancassurance tie up, banks have many advantages apart from increasing return on assets by building fee income through the sale of insurance product the banks 7 increasing productivity of the employees . Furthermore, improvement of overall customer satisfaction resulting in higher customer retention levels, cross selling of the insurance products like term insurance products. The other partner insurer is not only benefited from the banks customer database but can also exploit authentic information about customers financial standing, spending habits, investment & purchase capability. Needless to mention the wide network of the branches form the ideal distribution channel. Urban as well as rural both markets are tapped simultaneously. Not only this already established relationship with customers also is included in the package. bancassurance as a tool for increasing their market penetration in India. It is also good for the one who sees bancassurance in terms of reduced price, high quality product and delivery at doorsteps. Everybody is a winner here. The creation of bancassurance operations has made an important impact on the financial services industry at large. This is though a new concept but it has gained a lot of importance in the industry at present and has a great future. Limitation: 1. It is prudent to make equity-oriented investments based on an established track record of at least three years over different market cycles. ULIPs do not fulfil this criterion now. 2. Insurance and savings are two different goals and it is better to address them separately rather than bundle them into a single product. A combination of a term plan and a mutual fund could give better results over the long term.

3.The free hand given to ULIPs might prove risky if the timing of exit happens to coincide with a bearish market phase, because of the inherently high equity component of these schemes 4. An initial allocation charge is deducted from investor premiums for selling, marketing and broker commissions. These charges could be as high as 65 per cent of the first year premiums. Premium allocation charges are usually very high (5-65 per cent) in the first couple of years, but taper off later. The high initial charges mainly go towards funding agent commissions, which could be as high as 40 per cent of the initial premium as per IRDA (Insurance Regulatory and Development Authority) regulations. The charges are higher for a linked plan than a non-linked plan, as the former require lot more servicing than the latter, such as regular disclosure of investments, switches, redirection of premiums, withdrawals, and so on. Insurance companies have the discretion to structure their expenses structure whereas a mutual fund does not have that luxury. The expense ratios in their case cannot exceed 2.5 per cent for an equity plan and 2.25 per cent for a debt plan respectively. The lack of regulation on the expense front works to the detriment of investors in ULIPs. 5. The front-loading of charges does have an impact on overall returns as investor lose out on the compounding benefit. Insurance companies explain that charges get evened out over a long term. Thus investor are forced to stay with the plan for a longer tenure to even out the effect of initial charges as the shorter the tenure, the lower will be the investor real returns 6. When investor choose a mutual fund, they look for an established track record of three to five years of consistent returns across various market cycles to judge a fund's performance. It is early days for insurance companies on this score;

investing substantially in linked plans might not be advisable at this juncture. 7. In effect, when investor lock in their money in a ULIP, despite the promise of flexibility and liquidity, investor will stuck with one fund management style. This is all the more reason to look for an established track record before committing investor hard-earned money. 8. investor life cover charges would depend on the accumulation in investor investment account. As accumulation increases, the amount at risk for the insurance company decreases. However, with increasing age, the cost per Rs 1,000 sum assured increases, effectively increasing policy holder overall insurance costs. A lower life cover could yield better returns.

9. it would deal with the fact that expenses on ULIPs were on the higher side in the initial years and therefore, the exit option would hardly prove to be beneficial for the investors. 10. ULIPs face tough competition from mutual funds, which are short-term instruments. Hence, a liquidity option makes ULIPs as attractive but because of the high front-end charges on policy, investor may not be left with much to withdraw at the end of 3 years.

Protector (Income) Plan

(X - x)(X - x) DATE 2/8/2004 1/9/2004 1/10/2004 1/11/2004 1/12/2004 3/1/2005 1/2/2005 1/3/2005 4/4/2005 2/5/2005 1/6/2005 1/7/2005 1/8/2005 TOTAL N=12 X= x Reward for per unit risk NAV 13.43 13.49 13.48 13.47 13.54 13.63 13.62 13.66 13.7208 13.7461 13.8203 13.8717 13.9266 RETURN(x) 0.00446761 -0.00074129 -0.00074184 0.005196733 0.006646972 -0.000733676 0.002936858 0.004450952 0.001843916 0.005397895 0.003719167 0.003957698 0.036400994 X - x 0.001434194 -0.003774706 -0.003775256 0.002163317 0.003613556 -0.003767092 -9.65584E-05 0.001417536 -0.0011895 0.002364479 0.000685751 0.000924282 2.05691E-06 1.42484E-05 1.42526E-05 4.67994E-06 1.30578E-05 1.4191E-05 9.32353E-09 2.00941E-06 1.41491E-06 5.59076E-06 4.70254E-07 8.54297E-07 7.28355E-05

n = 0. 3033416
0. 24662

=0.036400994
12 =0. 3033416

*100 =1.2299

SD=

(X - x)(X - x) n

=0. 2463662

Maximiser (Growth) Plan

DATE 2/8/2004 1/9/2004 1/10/2004 1/11/2004 1/12/2004 3/1/2005 1/2/2005 1/3/2005 4/4/2005 2/5/2005 1/6/2005 1/7/2005 1/8/2005 Total

(X - x)(X - x) NAV 19.36 19.7 20.86 21.31 23.55 25.17 24.64 25.35 24.61 23.55 24.95 26.17 27.74 RETURN 0.017561983 0.058883249 0.021572387 0.105114969 0.068789809 -0.021056814 0.028814935 -0.029191321 -0.043071922 0.059447983 0.048897796 0.059992358 0.375755412 X - x -0.013750968 0.027570298 -0.009740564 0.073802018 0.037476858 -0.052369765 -0.002498016 -0.060504272 -0.074384873 0.028135032 0.017584845 0.028679407 0.000189089 0.000760121 9.48786E-05 0.005446738 0.001404515 0.002742592 6.24008E-06 0.003660767 0.005533109 0.00079158 0.000309227 0.000822508 0.021761366

N=12 X= X

Reward for per unit risk

= 3.1312951
0.375755412

=
12 =3.1312951

*100

4.2584586 =0.7353

SD=

(X - x)(X - x) n

=4.2584586

Life time I (Balancer (Balanced) Plan)

DATE
NAV RETURN

(X - x)(X - x) X - x -0.003861769 0.010389105 -0.005993507 0.029019976 0.016860745 -0.022310677 -0.00136985 -0.02116242 -0.029147735 0.011425187 0.006900352 0.009250587 1.49133E-05 0.000107934 3.59221E-05 0.000842159 0.000284285 0.000497766 1.87649E-06 0.000447848 0.00084959 0.000130535 4.76149E-05 8.55734E-05 0.003346017 15.89 16.04 16.42 16.54 17.24 17.76 17.6 17.81 17.67 17.39 17.82 18.18 18.59

2/8/2004 1/9/2004 1/10/2004 1/11/2004 1/12/2004 3/1/2005 1/2/2005 1/3/2005 4/4/2005 2/5/2005 1/6/2005 1/7/2005 1/8/2005 Total N=12 X= X

0.009439899 0.023690773 0.007308161 0.042321644 0.030162413 -0.009009009 0.011931818 -0.007860752 -0.015846067 0.024726855 0.02020202 0.022552255 0.159620011

n
Reward for per unit risk 0.159620011

=
12 = 1.3301668

*100

= 1.3301668
1.6698353 =0.7966

SD=

(X - x)(X - x) n

=1.6698353

Unit gain plus (equity plus)

Date (MM/DD/YYYY) 8/2/2004 9/1/2004 10/1/2004 11/1/2004 12/1/2004 1/3/2005 2/1/2005 3/1/2005 4/11/2005 5/2/2005 6/1/2005 7/1/2005 8/1/2005 Total N=12 X= X

(X - x)(X - x) NAV 10.114 10.194 10.958 11.167 12.051 13.467 13.601 14.152 13.756 13.357 14.18 14.415 15.604 return 0.00791 0.074946 0.019073 0.079162 0.117501 0.00995 0.040512 -0.02798 -0.02901 0.061616 0.016573 0.082484 0.452737 X - x -0.029818172 0.037218047 -0.018655176 0.041433816 0.079772622 -0.027777751 0.002783727 -0.065709911 -0.066733525 0.023887632 -0.021155362 0.044755524 0.000889123 0.001385183 0.000348016 0.001716761 0.006363671 0.000771603 7.74914E-06 0.004317792 0.004453363 0.000570619 0.000447549 0.002003057 0.023274488

n
0.452737

Reward for per unit risk

=
12 =3.7728

*100

= 3.7728
4.404022 =0.8567

SD=

(X - x)(X - x) n

=4.404022

Debt Plus

(X - x)(X - x) Date 8/2/2004 9/1/2004 10/1/2004 11/1/2004 12/1/2004 1/3/2005 2/1/2005 3/1/2005 4/11/2005 5/2/2005 6/1/2005 7/1/2005 8/1/2005 Total NAV 9.699 9.746 9.783 9.757 9.791 9.874 9.921 9.974 10.036 10.076 10.125 10.176 10.219 RETURN 0.004846 0.003796 -0.00266 0.003485 0.008477 0.00476 0.005342 0.006216 0.003986 0.004863 0.005037 0.004226 0.052376 N=12 X= X X - x 0.00048086 -0.000568571 -0.007022671 -0.000880322 0.004112173 0.000394976 0.000977203 0.001851162 -0.000379348 0.000498041 0.000672037 -0.000139371 2.31227E-07 3.23273E-07 4.93179E-05 7.74967E-07 1.691E-05 1.56006E-07 9.54926E-07 3.4268E-06 1.43905E-07 2.48045E-07 4.51634E-07 1.94243E-08 7.29581E-05

n
0.052376 = 12 =0.4365 *100

Reward for per unit risk = 0.4365 0.2466441 =1.7698

SD=

(X - x)(X - x) n

=0.2466441

Balanced Plus

(X - x)(X - x) DATE 8/2/2004 9/1/2004 10/1/2004 11/1/2004 12/1/2004 1/3/2005 2/1/2005 3/1/2005 4/11/2005 5/2/2005 6/1/2005 7/1/2005 8/1/2005 Total N=12 X= X NAV 10.035 10.08 10.418 10.444 10.84 11.262 11.172 11.275 11.125 10.951 11.353 11.665 11.928 RETURN 0.0044843 0.03353175 0.00249568 0.03791651 0.03892989 -0.0079915 0.00921948 -0.0133038 -0.0156404 0.03670898 0.02748172 0.02254608 0.17637869 X - x -0.010213915 0.018833526 -0.012202539 0.023218287 0.024231669 -0.022689696 -0.005478743 -0.028001989 -0.030338669 0.022010756 0.012783503 0.007847858 0.000104324 0.000354702 0.000148902 0.000539089 0.000587174 0.000514822 3.00166E-05 0.000784111 0.000920435 0.000484473 0.000163418 6.15889E-05 0.004693056

n
0.17637869 = 12 =1.469822 *100

Reward for per unit risk = 1.469822 1.9775945 = 0.7432

SD=

(X - x)(X - x) n

=1.9775945

Prudential ICICI Growth Plan-Growth Option (X - x)(X - x) DATE 2-Aug-04 1-Sep-04 1-Oct-04 1-Nov-04 1-Dec-04 3-Jan-05 1-Feb-05 1-Mar-05 1-Apr-05 2-May-05 1-Jun-05 1-Jul-05 1-Aug-05 TOTAL NAV 32.82 33.54 35.95 36.65 39.69 44.08 42.61 44.64 44.92 41.69 45.91 48.08 48.66 RETURN 0.021937843 0.071854502 0.019471488 0.082946794 0.110607206 -0.033348457 0.047641399 0.006272401 -0.07190561 0.101223315 0.047266391 0.012063228 0.416030499 X - x -0.012731365 0.037185294 -0.01519772 0.048277586 0.075937998 -0.068017666 0.01297219 -0.028396807 -0.106574818 0.066554107 0.012597183 -0.02260598 0.000162088 0.001382746 0.000230971 0.002330725 0.005766579 0.004626403 0.000168278 0.000806379 0.011358192 0.004429449 0.000158689 0.00051103 0.031931529

N=12 X= X

n
Reward for per unit risk

=3.4669208
0.416030499 5.1584503

=
12 =3.4669208

*100
=0.6721

SD=

(X - x)(X - x) n

=5.1584503

Prudential ICICI Balanced Plan-Growth Option

(X - x)(X - x) DATE 2-Aug-04 1-Sep-04 1-Oct-04 1-Nov-04 1-Dec-04 3-Jan-05 1-Feb-05 1-Mar-05 1-Apr-05 2-May-05 1-Jun-05 1-Jul-05 1-Aug-05 TOTAL NAV 15.64 16.03 17.03 17.06 18.03 19.50 19.07 19.77 20.16 19.33 20.37 20.97 22.37 RETURN 0.024936 0.062383 0.001762 0.056858 0.081531 -0.02205 0.036707 0.019727 -0.04117 0.053802 0.029455 0.066762 0.370701 X - x -0.00596 0.031491 -0.02913 0.025966 0.050639 -0.05294 0.005815 -0.01117 -0.07206 0.02291 -0.00144 0.03587 3.54732E-05 0.000991685 0.00084858 0.000674241 0.002564286 0.002802991 3.38127E-05 0.00012466 0.005193023 0.000524885 2.06474E-06 0.00128666 0.015082363

N=12 X= X Reward for per unit risk

n =3.0892
0.370701 3.5452278

=
12 =3.0892

*100
=0.8714

SD=

(X - x)(X - x) n

=3.5452278

Prudential ICICI Income Plan-Growth Option

(X - x)(X - x) DATE 2-Aug-04 1-Sep-04 1-Oct-04 1-Nov-04 1-Dec-04 3-Jan-05 1-Feb-05 1-Mar-05 4-Apr-05 2-May-05 1-Jun-05 3-Jul-05 1-Aug-05 Total NAV 19.2489 19.3250 19.3093 19.2431 19.3250 19.5401 19.5368 19.5921 19.7131 19.7156 19.8673 20.0057 20.0120 RETURN 0.003953473 -8.12E-04 -0.0034284 0.004256071 0.01113066 -1.69E-04 0.002830556 0.006175959 1.27E-04 0.007694415 0.006966221 3.15E-04 0.03903938 X - x 0.000700191 -0.004065701 -0.006681682 0.001002789 0.007877378 -0.003422165 -0.000422726 0.002922677 -0.003126463 0.004441133 0.003712939 -0.002938372 4.90267E-07 1.65299E-05 4.46449E-05 1.00559E-06 6.20531E-05 1.17112E-05 1.78698E-07 8.54204E-06 9.77477E-06 1.97237E-05 1.37859E-05 8.63403E-06 0.000197074

N=12 X= X

n
0.03903938

Reward for per unit risk

=0.3253282
*100 0.4052505 =0.8028

=
12 =0.3253282

SD=

(X - x)(X - x) n

=0.4052505

JM Equity Fund-Growth

(X - x)(X - x) DATE 2-Aug-04 1-Sep-04 1-Oct-04 1-Nov-04 1-Dec-04 3-Jan-05 1-Feb-05 1-Mar-05 1-Apr-05 2-May-05 1-Jun-05 1-Jul-05 1-Aug-05 TOTAL N=12 X= X NAV 13.89 14.40 15.37 15.51 16.45 18.03 17.65 18.58 18.88 18.35 19.91 21.35 22.27 RETURN 0.036717063 0.067361111 0.009108653 0.060606061 0.096048632 -0.021075984 0.052691218 0.016146394 -0.028072034 0.085013624 0.072325465 0.043091335 0.489961537 X - x -0.004113065 0.026530983 -0.031721475 0.019775933 0.055218504 -0.061906112 0.01186109 -0.024683734 -0.068902162 0.044183496 0.031495337 0.002261207 1.69173E-05 0.000703893 0.001006252 0.000391088 0.003049083 0.003832367 0.000140685 0.000609287 0.004747508 0.001952181 0.000991956 5.11306E-06 0.017446331

n
0.489961537

Reward for per unit risk =4.0830128 *100 12 3.8129529 =1.0708

=
=4.0830128 SD=

(X - x)(X - x) n

=3.8129529

JM Balanced Fund-Growth

(X - x)(X - x) DATE 2-Aug-04 1-Sep-04 1-Oct-04 1-Nov-04 1-Dec-04 3-Jan-05 1-Feb-05 1-Mar-05 1-Apr-05 2-May-05 1-Jun-05 1-Jul-05 1-Aug-05 TOTAL NAV 10.85 11.05 11.55 11.63 12.17 13.01 12.75 13.07 13.07 12.71 13.21 13.50 14.05 RETURN 0.01843318 0.045248869 0.006926407 0.046431642 0.069022186 -0.019984627 0.025098039 0 -0.027543994 0.039339103 0.021953066 0.040740741 0.265664611 X - x -0.003705538 0.023110151 -0.015212311 0.024292924 0.046883468 -0.042123345 0.002959321 -0.022138718 -0.049682712 0.017200385 -0.000185652 0.018602023 1.3731E-05 0.000534079 0.000231414 0.000590146 0.00219806 0.001774376 8.75758E-06 0.000490123 0.002468372 0.000295853 3.44667E-08 0.000346035 0.008950982

N=12 X= X

n
Reward for per unit risk

=2.2138718
0.265664611

=
12 =2.2138718

*100

2.7311444

=0.8106 SD=

(X - x)(X - x) n

=2.7311444

(X - x)(X - x) DATE 2-Aug-04 1-Sep-04 1-Oct-04 1-Nov-04 1-Dec-04 3-Jan-05 1-Feb-05 1-Mar-05 1-Apr-05 2-May-05 1-Jun-05 1-Jul-05 1-Aug-05 TOTAL N=12 X= X NAV 10.0429 26.1933 26.2441 26.2260 26.3535 26.6082 26.6987 26.8590 26.9219 26.9261 27.1896 27.3052 27.4255 RETURN 1.608141075 0.001939427 -6.90E-04 0.004861588 0.00966475 0.003401207 0.006004038 2.34E-03 1.56E-04 0.009786044 0.004251626 0.004405754 1.654263696 X - x 1.470285767 -0.135915881 -0.138544987 -0.13299372 -0.128190558 -0.134454101 -0.13185127 -0.135513449 -0.137699301 -0.128069264 -0.133603682 -0.133449554 2.161740236 0.018473127 0.019194713 0.01768733 0.016432819 0.018077905 0.017384757 0.018363895 0.018961098 0.016401736 0.017849944 0.017808783 2.358376343

n
Reward for per unit risk 1.654263696

=
12 =13.7855308

*100

=13.7855308
44.3318578 =0.3109

SD=

(X - x)(X - x) n

=44.3318578

TABLE SHOWING SD & REWARD/RETURN FOR PER UNIT RISK OF THE SCHEMES NAME OF THE SD REWARD FOR SCHEMES PER UNIT RISK MUTUAL FUND
JMFINANCIAL MUTUAL FUND a. Equity Scheme b. Balance Scheme c. Debt Scheme Prudential ICICI mutual fund a. Equity Scheme b. Balance Scheme c. Debt Scheme ULIP ICICI PRUDENTIAL LIFE INSURENCE LIFE TIME I a. Maximiser (Growth) Plan b. Balancer (Balanced) Plan c. Protector (Income) Plan BAJAJ ALLIANZ LIFE INSURANCE a. Maximiser (Growth) Plan b. Balancer (Balanced) Plan c. Protector (Income) Plan 4.2584586 1.6698353 0. 2463662 4.404022 1.9775945 0.2466441 0.7353 0.7966 1.2299 0.8567 0.7432 1.7698 3.8129529 2.7311444 44.3318578 5.1584503 3.5452278 0.4052505 1.0708 0.8106 0.3109 0.6721 0.8714 0.8028

NAME OF THE SCHEMES MUTUAL FUND a. Equity Scheme b. Balance Scheme c. Debt Scheme

SD

REWARD FOR PER UNIT RISK 0.87145 0.841 0.55685 0.796 0.7699 1.49985

4.4857016 3.1381861 22.36855415 4.3312403 1.8237149 0.24650515

ULIP
a. Maximiser (Growth) Plan b. Balancer (Balanced) Plan c. Protector (Income) Plan

Innovative product offered by the mutual fund industry

Index Fund
One of the possible ways to reduce risk while investing in equity is to invest in index funds. An Index Fund is a mutual fund that seeks to replicate the returns generated by an Index. Index funds made their first appearance in India in 1998.It is a passive style of managing portfolios as the fund manager invests the funds in the stocks comprising the index in similar ratio. This reduces the risk associated to that of the general market conditions. The benefits offered are many. First of all, one gets to invest in a portfolio of blue chip stocks that constitute the index. Next, they offer diversification across a multiplicity of sectors as at least 2025 sectors find their way in to the index. Added to these is the relatively low cost of management as trading and research costs etc. are minimized. And above all, even small investors can afford them, as the minimum subscription amount is low. Indian mutual fund industry has several index based products. Some of them are UTI Master Index Fund, UTI Index Equity Fund, Franklin India Index Fund and IDBI Principal Index Fund etc. The performance of index funds is generally similar to that of their benchmark indices. The performance of the Index fund is measured against the benchmark index and the variation from the benchmark is called the tracking error.

Real estate fund

Selling capital assets such as real estate is a big problem in India, where realizing the proceeds of sale is as difficult and a lengthy procedure as finding the buyer for a property. But, if these funds are structured as open-ended funds, they will remove the hitch and enable immediate receipt of the money. While the main benefit offered could be of liquidity as against the difficulties in selling property.

Pitching such a product in the mutual fund industry in India is certainly not expected to be an easy task though. The major reasons for this would revolve around the concept and the structure of the industry itself. First of all, the product will have a very long-term view, as the real estate prices don't move much in short run. This might not be exciting for many as generating required return could take a lot of time. Next in the list is the present structure of the stamp duties and legal statutes. Held under the state governments, this is indeed a major issue that needs to be tackled to create a pre-launch favourable environment. Valuation of the properties is another big and important issue facing the proposal, as the norms regarding such valuations are not uniform. Apart from these, the industry will categorize this product into a "high-risk high return" category, like the sector funds, indicating that the product will not suit everybody's needs. Also to be taken care of is the problem pertaining to customization of the product to cater to different classes of investors. While it is possible to offer different category funds like equity and debt to investors from the normal market, this might not be an easy job in the real estate industry. SIP The practical problem of identifying the right entry and exit points in market has indeed been one of the most crucial requirements of making money in Indian markets of late. This is where the efficacy of Systematic Investment Plan (SIP) becomes paramount. Based on the Rupee cost averaging fundamental, SIPs demonstrate the power of compounding and its ability to beat the general market on a longer run. The best part about SIPs is that one doesnt withdraw in between but stays invested irrespective of the prevailing market conditions. The reason behind SIPs being a successful means of beating the highs and lows of the market is, that by being systematic, all cycles of the market tend to be negated and the ultimate beneficiary is the investor.

Advantages of SIP 1. Avoiding the market predicting: Most investors cannot resist the urge to try to invest at a market low and take their profits at a market high. They usually fail because the task is extremely tough, even for experts. 2. Disciplined investing: Once investor start with SIP, he invest at the appointed time and that makes him a disciplined investor. Further, SIP ensures investor dont divert his savings earmarked for investment purposes towards spending. By giving the cheques to your fund house in advance, the incentive to backtrack on his commitment is reduced. When its time to invest, investor does so, regardless of whats going on in the market. If investor invested in a good scheme and are in it for the long haul, he shouldnt anyway worry about his investments on a daily basis. However, there are some of the disadvantages of SIP. SIP does not protect investor from making a loss in constantly declining markets. If he has been investing in a falling market without saving a thought for the long-term trend, he might make losses. Second factor is that cost averaging is of no use if investor portfolio is fundamentally not sound. So first one must identify the right portfolio and than think of price averaging. Systematic withdrawal plans (SWP) If SIP is for making a disciplined investment in market, the SWP is the disciplined way of unwinding investor investment. The crux lies in the fact that just the way it is less risky to invest in bits, it is similarly less risky to liquidate investor positions in bits. This is because if investor keep booking profit in predefined successions, he avert the risk of getting stuck should the market fall suddenly. If investor is booking profit periodically he is in fact derisking himself by leaving less and less of his portfolio to be liquidated at higher market levels. This means that even

though the market is going higher consistently, he is moving out of market. Though he is surrendering his returns a bit, as he would have made more if he had held on to all his holdings and liquidated at the top, but the entire philosophy of systematic investment is based on the pretext that investor can not identify the waves correctly, that is, he can not find out when market peaked and when it bottomed out. Therefore it makes more sense to go in for systematic investment and withdrawal mechanisms when he is trading in a market which behaves in high troughs and crests and does not follow a secular trend. In short though investor may be sacrificing returns a notch, but this is worth derisking that investor get through systematic investments SYSTEMATIC TRANSFER PROGRAM (STP) A plan that allows the investor to give a mandate to the fund to periodically and systematically transfer a certain amount from one scheme to another Birla Mutual Fund is launching Birla GenNext Fund, a thematic fund targeting growth of capital by investing in equities of companies that are expected to benefit from the consumption habits of younger generation in the country. According to S V Prasad, CEO, Birla Mutual Fund, 'the fund intends to take advantage of the large opportunity created by the emergence of Gen Next (younger generation) as the largest population in the country and its lavish spending habits.' The initial offer opens on 14 June to close on 12 July. The scheme offers a dividend and growth options and an investor can participate in the scheme with a minimum investment of around Rs 5,000. Birla GenNext Fund is an open-ended diversified equity fund, which would focus its investments in the companies that are directly catering to the consumers. The investments would be spread across industries like automobiles, travel and tourism, healthcare, banking, utilities, retailing, housing, consumer durables, among others.

The product and services of the target companies would typically have a distinct brand identity. Focus would be on companies that are cash generating, have a predictable growth earnings and are quick to adapt themselves to the ever changing needs of the customers, Prasad said. Thematic (specialty) fund As the name itself suggests, they are built around a theme or concept. Many of these funds generally have a risk positioning which is different from a sector fund or a large cap diversified fund. The theme is the philosophy, and not the quantum of market capitalization. So what happens is that such schemes have a fairly high degree of diversification, and naturally, a perceivably lower risk. The Birla GenNext or the SBI Comma Fund are some examples of such schemes. Unlike a sector fund, a specialty fund does not track a particular sector or industry. And unlike a diversified equity fund, a specialty fund is constrained due to narrowed investment universe though the portfolio is spread out in comparison to a sector fund.

Floating rate fund

Floating Rate debt products have been created to help investors reduce the risk caused by interest rate movements. The prices of floating rate securities are less sensitive to interest rate fluctuation leading to minimal interest rate risk since the rate of interest is reset periodically. Interest rate offered by the floating rate fund is Variable and changes as the market rates change. Since floaters give a market related rates of return without much price volatility, they are ideal for conservative debt investors. These are good to buy in a rising interest rate scenario. if the rates were to fall in future, and investor forget to sell their floater, they lose on the capital appreciation that other debt funds would enjoy. Ex: DSP ML FRF, Birla FRF, JM Floater Fund, Prudential ICICI FRF etc.

Brand fund:
A brand fund will build a portfolio of companies, whose brands are synonym with the products like Telco for trucks, Colgate for toothpaste and Cadbury for chocolates. This kind of a portfolio could have companies like Asian Paints, ITC (owner of Wills), Zee Telefilms, NIIT, Blue Dart Express, Archies and Tata Tea. This gives investors a diversified portfolio, although investments are likely to be concentrated in growth stocks.

Arbitrage
A central idea in modern finance is the law of one price. This states that in a competitive market,if two assets are equivalent from the point of view of risk and return, they should sell at the same price. If the price of the same asset is different in two markets, there will be operators who will buy in the market where the asset sells cheap and sell in the market where it is costly. This activity termed as arbitrage, involves the simultaneous purchase and sale of the same or essentially similar security in two different markets for advantageously different prices. The buying cheap and selling expensive continues till prices in the two markets reach an equilibrium. Hence,arbitrage helps to equalize prices and restore market efficiency. Two categories of risk in arbitrage: fundamental risk and noise trader risk. An arbitrage strategy can be risky because the fundamental value of a partially hedged portfolio might change over time. Besides, the arbitrageurs model may often not coincide with the true datagenerating process. Thus, arbitrageurs have to bear fundamental risk even if they can sustain the arbitrage strategy until the final payoff is realized. In addition to this, the activity of behavioral noise traders might lead to temporary price movements. These price changes temporarily reduce the value of the arbitrage portfolio as prices move even further from fundamental values. If

arbitrageurs are compelled to liquidate their positions in the intermediate term, then they are forced to take losses when the arbitrage opportunity is greatest. This is called the noise trader risk. Cash and futures arbitrage Arbitraging between cash and futures has emerged as the favourite activity among fund managers in a lacklustre (Dull) market. Armed with stocks in their portfolios and with the price differential prevailing between the cash and futures markets. UTI MF, Templeton AMC, Birla Sun Life AMC and a few others are leading the pack of fund arbitragers. A fund manager at UTI MF said: "Currently, IT stocks are providing reverse arbitrage opportunity (buy in futures and sell in cash) and some of our schemes are taking the benefit of this price difference. Fund of Funds: Mutual fund invests in units of other mutual fund schemes. in this way fund of fund allows investor to diversify among various asset management companies(AMCs), rather than putting all money in the hands of a single fund manager.

Advantages of fund of fund schemes

1. Diversification: Fund of funds takes diversification to a new level. By investing in more than one mutual fund. 2. Diverse management styles: If a FoF were to invest in top performing funds, the investors would benefit from the expertise of more than one leading fund manager. With each fund manager comes his unique style and strategies. 3. Convenience is another area where Fund of funds score heavily. The investor is spared the bother of tracking the performances of various schemes.

Asset Allocation funds:

A fund that spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities, gold bullion and real estate stocks. Some of these funds keep the proportions allocated between different sectors relatively constant, while others alter the mix as market conditions change. Asset Allocation funds use asset allocation as a tool to maximize returns. Here, the fund manager attempts to earn returns by shifting between asset classes. In doing so, he can increase exposure to debt when equity markets are down and vice versa. Investments in this case are generally made in index heavy stocks.

split capital funds While ETFs simply mimic the returns of market indices, split capital funds are a little more complicated. Here, the capital of the fund is split between two classes of investors, Class A or preferred unit holders and Class B or capital unit holders. The scheme is a three-year close-ended one with a portfolio of debt and equity. While the debt component will be

invested in three-year government securities or AAA bonds, the equity portion will mimic returns of the Nifty. Class A/preferred units The USP of Class A units is that while their capital is guaranteed, they also offer an upside from the equity markets. Also, at the time of payout, Class A unit holders would get preference over Class B unit holders in case of a shortfall. These units have been rated AAA,which is the highest rating for structured products. In the case of Benchmark's Split Capital Fund, the structure is such that even if the equity portion of the fund's portfolio reduces to nil at the end of three years, the debt portion of the portfolio would be enough to guarantee the capital of Class A units. For instance, if there's Rs 100 worth investment in Class A units, there would be an additional investment of Rs 25 in the form of Class B units (in the ratio of 4:1), which makes the size of the portfolio Rs 125. Thirty-two per cent of this or Rs 40 will be invested in equity, while the balance Rs 85 will be parked in three-year debt. The current yield on three-year paper is about 6 per cent, which means that the debt portfolio will be worth Rs 101.2 at the end of three years. So, even if the equity portion turns to nil at the end of three years, the debt portfolio would be sufficient to redeem the Rs 100 worth capital of Class A units. Of course, this is based on the assumption that there are no defaults on any of the investments in the debt portfolio, which is unlikely given that investments will be either in government paper or AAA-rated bonds.

While the debt portfolio will take care of the capital, returns would solely depend on how the equity market performs in the three-year period. Benchmark has defined the return for Class A unit holders at 40 per cent of the return of the Nifty in the three-year period. Thus, if the Nifty rises by 100 per cent, the return of Class A unit holders would be 40 per cent. In order to beat the 19 per cent cumulative return from three-year bonds or bank deposits, the markets would have to rise by about 50 per cent. Class B/capital units Class B unit holders have almost the opposite risk-return profile. Their capital is not guaranteed, and if the value of the equity portion of the portfolio were to turn to nil, this class of investors would lose all their capital. But let's be realistic - an index of blue-chip stocks can not be expected to turn to nil. So Class B unit holders can't be expected to lose all their capital. In fact, they start losing capital only when the Nifty falls by more than 40 per cent in the three year period. As far as returns go, they are capped at 64.95 per cent or 18.15 per cent on an annualized basis, as long as the Nifty is flat or in positive territory. If the Nifty falls, returns for Class B unit holders would be lower to that extent The risk-return profile of Class B investors seems better, but the catch is that there can only be one Class B unit for every four Class A units, which means that allotment would be restricted for Class B units.

Findings: Investor will not think whether it is ULIP or mutual fund in which they have invested they are only concerned about return & risk associated with return. Mutual fund has its own merits like Diversification, Professional Management, reduced cost, and reduced work of watching market & demerits like No Tailor-made Portfolios, difficulty of managing large Portfolio of Funds, no control over the cost incurred by the fund house No guarantee of returns in mutual fund, MFs return is the average return of the entire portfolio & not that of the best performing instruments in the portfolio. Unit holders of the mutual fund do not enjoy any right to attend the meeting of the company & exercise voting rights &Performance of the mutual fund is determined by the conditions prevailing in the stock market etc. ULIPs are also started providing solutions for insurance planning, financial needs, financial planning for childrens future and retirement planning. ULIP provide Insurace cover plus savings, Flexibility, and benefit of SIP Impact of introduction of ULIP is: Around 80 per cent of the premium income of life insurers has come in through unit-linked plans in 2004 this indicate that mutual fund companies are losing out on a huge market that would have otherwise been theirs. Because of the high front-end charges on policy, even though ULIP provide liquidity by allowing policy holder to withdraw after 3rd year but policy holder may not be left with much to withdraw at the end of 3 years. ULIP can meet multiple needs at different life stages by allowing Top ups, decreasing death benefit, increasing death benefit, premium holiday, choice of fund, switching between the funds. ULIPs are the best solution, for those who want a convenient, economical one-stop solution ULIP is a long-term investment and daily fluctuations in the NAV will not impact investor. Expense involved in investing is less in mutual fund compared to the expenses levied by the insurance companies.

 There are number of schemes like split capital funds, ETF, Fund

of Funds,Arbitragefund, Brand fund, Thematic (specialty) fund, Real

LEGAL

estate fund and Index Fund etc such variety of plan or schemes which are not available in ULIP.
AND REGULATORY ENVIRONMENT protects the interest of the investor. of mutual fund

Mutual fund investor can enjoy return of the blue chip companies by investing small amount.
Diversification requires substantial investment that may be beyond the means of

most individual investors but by investing small amount in mutual fund investor can get the benefit of diversification. Investor will get the benefit of rupee cost averaging with the help of introduction of SIP in mutual fund schemes.

Suggestions:
Some important suggestions are: Mutual fund industry should give more importance to the distribution because ULIP enjoying the benefit of bancassurance.and India has an extensive bank network established over the years. What Insurance companies are doing is they are just taking the advantage of the customers' long-standing trust and relationships with banks. Contacts with the financial advisor should be increased as the majority of the investor depends on these advisors while making decision on investing. Complete information should be provided regularly to the advisor as well as to the investor. Mutual fund industry should come out with more and more innovative schemes to meet the requirement of every investor. Educate people about how mutual fund work because investor aware of mutual fund as an investment option but investors

dont have the sufficient knowledge of the basic concept of mutual funds, nor about the operations of mutual funds.

Limitations of the project: In this project prudential ICICI & JM financial mutual fund represent the performance of the mutual fund industry which may not be right. Bajaj allianz & ICICI prudential life insurance may not represent the performance of the ULIP. For the comparative study only 3 schemes of JM financial & prudential ICICI mutual fund is taken. But there are number of schemes in mutual fund industry which generate good return which is not considered here. Same is the case with ULIP where capital guaranteed plans are not taken. Only the return from the investment in the unit is considered & benefits like death benefit, free accident cover etc are not taken into account for the calculation of return from the ULIP. Because of the time limitation monthly NAV of one year is taken for the calculation of SD. SD represents both systematic & unsystematic risk of the schemes where systematic risk is common for all the schemes but not unsystematic risk which are specific to the schemes & to the company to that extent result is biased.

CONCLUSION
Mutual fund can be one product class that the investor may look at for satisfying all their investment need. No other product class offers such variety and options like split capital funds, ETF, Fund of Funds, Arbitrage fund, Brand fund, Thematic (specialty) fund, Real estate fund and Index Fund etc as in mutual fund & one may stop looking elsewhere for his/her investment need. Each one of us can be in any of the following three types. 1. Planters: planters look ahead in time .They make investments hoping that it would grow, their investment horizon extends beyond 3/5 years. For such investor mutual fund have schemes like sector/theme funds, pure diversified funds, ELSS, index funds etc. 2. Reapers: Such investor look to reap the fruits from their existing investments, being income oriented, they may lack the need/appetite to invest for long duration &instead look to earn decent enough returns in medium term for their investment. For such investor mutual fund have schemes like balanced funds, MIPs etc 3. Protectors: their main concern is that their asset does not depreciate. They hate taking risks & they are quit happy to see the real income (Inflation adjusted) value of their investments stay intact. For such investor mutual fund have schemes like gilt/income funds, short term plans, floating rate funds, liquid funds etc.

The main difference between ULIP & mutual fund is the cost of life insurance, the reason for investment, the investment horizon and so on. Cost of life insurance In a ULIP, premium is divided into risk cover and investment. That means, out of the total premium that investor pay, a certain percentage will be deducted as risk cover to provide for insurance and the balance will be invested in a fund. risk cover charge will

increase every year with investor age. As a result the investment allocation will reduce. In a ULIP, costs and margins are recovered commonly between the investment portion and the insurance portion. However, if investor were to buy a term policy and a mutual fund, the insurance company will recover its costs of distribution and administration as well as margins. The mutual fund would again recover the same costs from investor investment portion. Flexibility A ULIP will give investor flexibility of increasing his life cover, while maintaining the same premium. This is done by simply reducing investor investment allocation. So suppose investor have a risk cover of Rs 5 lakh and would like to increase it to Rs 6 lakh, he can still continue to pay the same amount of premium. The only difference would be that the amount deducted towards the risk cover would be more and therefore, the amount invested would be less. Theres more to the flexibility. With a ULIP investor dont have fear that his policy will lapse if he is unable to pay the premium. The cost of insurance will be taken out of investor existing investment to keep the policy going. But if investor fails to pay premium on his term policy, it will lapse. Expenses There is the difference between expenses of a ULIP as compared with the expenses of a mutual fund. In a ULIP charges are front loaded, that is most of the charges are recovered within the first few years. So if investor are looking for a long-term investment avenue with an insurance cover that goes with it, then ULIP is the product for them and if they are looking at a product that helps investor to focus purely on investment and returns over a medium term, then go for a mutual fund.
ULIP attempts to fulfill investment needs of an investor with protection/insurance needs of an insurance seeker. It saves the investor/insurance-seeker the hassles of managing and tracking a portfolio or products. No investment is good or bad but what can potentially happen is a wrong selection of the investment or product against what investor really need.

Insurance and savings are two different goals and it is better to address them separately rather than bundle them into a single product. A combination of a term plan and a mutual fund could give better results over the long term. The free hand given to ULIPs might prove risky if the timing of exit happens to coincide with a bearish market phase, because of the inherently high equity component of these schemes.
The expense ratios in mutual fund case cannot exceed 2.5 per cent for an equity plan and 2.25 per cent for a debt plan respectively. The lack of regulation on the expense front works to the detriment of investors in ULIPs.