AN ASSIGNMENT

ON
THE OBJECTIVE, PORTFOLIO COMPOSITION
AND
THE PERFORMANCE EVALUATION
OF
DSP BLACKROCK GOVERNMENT SECURITIES
MUTUAL FUND

Submitted To:
Prof. Kapil Gupta

Submitted By:
Arnab Sengupta
Enrollment N0: 09BS0000411
Section: A
 DSP BlackRock Mutual Fund-Short Term Income (G)
Fund Name DSP BlackRock Mutual Fund 
Scheme Name DSPBR ST(G)
AMC DSP BlackRock Investment Managers Private Limited
Type Open ended scheme
Category Short Term Income Plans
Launch Date 11-Sep-02
Fund Manager Dhawal Dalal
Face Value 10
Custodian Citibank N.A
Net Assets (Rs. cr) 781.87

NAV Date 03-Jan-11 Max Entry Load % 0.00

NAV [Rs] 16.44 Max Exit Load % 0.00
Buy/Resale Price [Rs] 16.44 52 Week High[Rs] 16.44 (03-Jan-11)
Sell/Repurchase Price [Rs] 16.44 52 Week Low[Rs] 15.58 (05-Jan-10)

Objective of the scheme:

 To generate income commensurate with prudent risk from a portfolio constituted of

money market securities, floating rate debt securities and debt securities.
 To provide regular income from an open ended income scheme to the investors.

Scheme Facts:

Scheme AUM Rs. 781.87 cr

Launch date 09 Sep, 2002
Benchmark CRISIL Liquid Fund Index
Min. Initial Investment Rs. 5000
Incremental Investment Rs. 1000
SIP Min. Investment Rs. 500
SIP Incremental Investment Rs. 1
Cut-off time 3 pm
Modified Duration 0.21 yrs
Average maturity 0.26 yrs
Total Expense Ratio 0.49%
Fund Manager Mr. Dhawal Dalal
Portfolio Composition of the scheme (as on Nov 30, 2010):
 Portfolio Composition (Fund Size 781.87cr)

Cash & Cash Equivalent

20%
Securitised Debt Instruments
1%
Certificate of Deposit Bond & NCDs
51% 1%

Commercial paper
27%

Maturity Distribution (as on Nov 30, 2010):

30%

25%

20%

15%

10%

5%

0%
Less than 1 month 30 to 60 days 60 to 90 days 90 to 180 days 180 to 365 days

Portfolio Composition as on Nov 30, 2009

 Others
7%

GOI Securities
93%

Reason for changes in the portfolio:

 To provide and generate income to the investors by diversifying the portfolio.
 To invest in short term money market securities, floating rate debt securities rather than
investing in only T-bills and other securities, in order to generate more returns in short
time.
 To get the exposure of Bond market by investing in Bond & NCDs.
 To provide more liquidity.
 To attract more potential investors.

Fund management style of Mr. Dhawal Dalal, the Fund Manager

 Portfolio as on Nov 30, 2010

Sr. No. Name of Instrument Market value % to Net

(Rs. In lakhs) Assets
  MONEY MARKET INSTRUMENT    
  Certificate of Deposit    
1 State Bank of Bikaner & Jaipur 9,408.34 12.04%
2 Punjab National Bank 7,349.34 9.40%
3 Oriental Bank of Commerce 6,932.26 8.87%
4 State Bank of Patiala 5,419.57 6.94%
5 Syndicate Bank 2,497.16 3.19%
6 UCO Bank 2,454.25 3.14%
7 HDFC Bank 1,495.90 1.91%
8 Kotak Mahindra Bank 1,454.63 1.86%
9 IDBI Bank 976.54 1.25%
10 Yes Bank 488.11 0.62%
11 Bank of India 465.22 0.60%
12 ICICI Bank 463.88 0.59%
13 State Bank of Mysore 281.89 0.36%
14 Bank of Baroda 98.26 0.13%
15 Union Bank of India 23.86 0.03%
16 Bank of India 9.74 0.01%
  Total 39,818.97 50.94%
       
  Commercial Paper    
17 NABARD 13,063.62 16.70%
18 Morgan Stanley India Capital 2,786.66 3.56%
19 Rural Electrification Corporation 2,497.63 3.19%
20 Fullerton India Credit Company 2,366.43 3.03%
21 Housing Development Finance Corporation 477.79 0.61%
  Total 21,192.14 27.09%
       
  SECURITISED DEBT INSTRUMENTS    
22 Royal Trust PTC Series A2 - May2004 - (Citibank 792.07 1.01%
N.A.)
23 Royal Trust PTC Series A1 - May2004 - (Citibank 38.52 0.05%
N.A.)
  Total 830.58 1.06%
       
  BONDS & NCDs    
  Listed / awaiting listing on the stock exchanges    
24 Rural Electrification Corporation 1,012.52 1.30%
  Total 1,012.52 1.30%
       
  CBLO / Reverse Repo Investments 15,207.40 19.45%
  Total 15,207.40 19.45%
       
  Cash & Cash Equivalents    
  Net Receivable/Payable 125.10 0.16%
  Total 125.10 0.16%
  Grand Total 78,186.71

Portfolio as on Oct 31, 2010

Sr. Name of Instrument Market % to

No. value Net
(Rs. In Assets
lakhs)
DEBT INSTRUMENTS    
BOND & NCD's    
Listed / awaiting listing on the stock exchanges **    
1 Central Bank of India 7,498.62 9.94%
2 State Bank of Bikaner & Jaipur 6,417.52 8.50%
3 Punjab & Sind Bank 4,992.90 6.62%
4 Oriental Bank of Commerce 4,935.09 6.54%
5 State Bank of Patiala 4,922.83 6.52%
6 Punjab National Bank 4,860.85 6.44%
7 State Bank of Travancore 4,488.57 5.95%
8 State Bank of Bikaner & Jaipur 2,934.16 3.89%
9 Oriental Bank of Commerce 2,495.04 3.31%
10 Syndicate Bank 2,482.95 3.29%
11 Punjab National Bank 2,451.40 3.25%
12 UCO Bank 2,438.95 3.23%
13 Oriental Bank of Commerce 1,956.11 2.59%
14 HDFC Bank 1,487.12 1.97%
15 Kotak Mahindra Bank 1,449.92 1.92%
16 IDBI Bank 972.51 1.29%
17 Yes Bank 486.07 0.64%
18 Bank of Baroda 97.69 0.13%
19 Union Bank of India 23.79 0.03%
20 Bank of India 9.71 0.01%
  Total 57,401.77 76.06%
  Commercial Paper    
21 Morgan Stanley India Capital 2,774.91 3.68%
22 Rural Electrification Corporation 2,483.43 3.29%
23 NABARD 2,431.16 3.22%
24 Fullerton India Credit Company 2,360.44 3.13%
25 Housing Development Finance Corporation 476.33 0.63%
  Total 10,526.26 13.95%
  SECURITISED DEBT INSTRUMENTS    
26 Royal Trust PTC Series A2 - May2004 - (Citibank N.A.) 780.93 1.03%
27 Royal Trust PTC Series A1 - May2004 - (Citibank N.A.) 41.92 0.06%
  Total 822.85 1.09%
  BONDS & NCDs    
  Listed / awaiting listing on the stock exchanges    
28 Rural Electrification Corporation 1,017.87 1.35%
29 DSP Merrill Lynch Capital 278.84 0.37%
  Total 1,296.71 1.72%
  CBLO / Reverse Repo Investments 2,842.72 3.77%
  Total 2,842.72 3.77%
  Cash & Cash Equivalents    
  Net Receivable/Payable 2,579.03 3.41%
  Total 2,579.03 3.41%
  Grand Total 75,469.33 100.00
%

Instruments Nov 30, 2010 Oct 31, 2010

Certificate of Deposits 50.94% 76.06%
Commercial Papers 27.09% 13.95%
Securitised Debt Instruments 1.06% 1.09%
Bonds & NCDs 1.30% 1.72%
Cash and cash equivalents 0.16% 3.41%

From the composition of the portfolio as managed by Mr. Dhawal Dalal, it is evident that he is
an active fund manager. He changes the composition of the portfolio as and when required to
cope up with the liquidity, objective and present macro economic situations in order to provide
the investors liquidity and to generate income commensurate with prudent risk from a portfolio
constituted of money market securities, floating rate debt securities and debt securities by
changing the required composition.

Turnover Ratio of the scheme:

The turnover ratio represents the percentage of a fund's holdings that change every year. In other
words, a turnover rate of 100 per cent implies that the fund manager has replaced his entire
portfolio during the period given. Technically, the turnover ratio is the lower of the total sales or
total purchases over the period divided by the average of the net assets. Higher the turnover ratio,
greater is the volume of trading carried out by the fund.

The turnover ratio of the scheme is 0, which implies that the fund manager had not replaced the
entire portfolio during the period. Mr. Dhawal Dalal had only changed the composition of the
portfolio as and when required but he had not replaced it entirely.

Portfolio Performance
For periods more than 1 year-Compounded Annualized
Period Return
DSP BlackRock Short Term Crisil Liquid Fund Index
Fund (Growth)
Last 1 year 5.55% 5.16%

Last 3 years 6.35% 6.11%

Last 5 years 6.45% 6.38%

Since inception 6.16% 5.63%

From the above comparison of the performance of the portfolio, DSP BlackRock ST (G), as
compared to its benchmark, CRISIL, it is observed that the scheme has been performing very
well in the market, outperforming and beating its benchmark since its inception from September,
2002. The composite performance of DSP BlackRock Short Term Fund is “Very Good
performance" performance in the Open End Debt Short Schemes category, and ranks within Top
10 percentile of the 31 schemes ranked in this category. The criteria used in computing the
CRISIL Composite Performance Rank are Superior Return Score based on NAVs over the 1-
year period ended Sep 30, 2010, Sectoral concentration, Company concentration and Liquidity of
the scheme. The methodology does not take into account the entry and exit loads levied by the
scheme. The CRISIL Mutual Fund Rank is no indication of the performance that can be expected
from the scheme in future.

Suggestions for a Hedge Portfolio

A hedge portfolio means an aggressively managed portfolio of investments that uses advanced

investment strategies such as leveraged, long, short and derivative positions in both domestic and
international markets with the goal of generating high returns.
 
Portfolio managers, individual investors and corporations use hedging techniques to reduce their
exposure to various risks. Hedging against investment risk means strategically using instruments
in the market to offset the risk of any adverse price movements. In other words, investors hedge
one investment by making another. It is important to note that hedging is actually the practice of
attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment. 

DSP BlackRock ST(G) is an Open Ended income Scheme, seeking to generate income
commensurate with prudent risk, from a portfolio constituted of money market securities,
floating rate debt securities and debt securities.

The standard deviation of the scheme is 12.51%. It tells us how much the return on the fund is
deviating from the expected normal return. In order to reduce the risk further and to maximize
the return on investment, I, as a portfolio manager, think that the current fund manager should
invest more in Securitized Debt Instruments and in Bond & NCDs as compared to the present
composition of 1.30% and 0.16% respectively, and to reduce the compositions in Certificate of
Deposits and Commercial papers. This would reduce the risk and increase the return.

From the portfolio performance, it is visible that this scheme has been outperforming the
benchmark and has been generating returns above the benchmark return. If the hedging
technique is followed, I think that it would further increase the return.