Assignment

Portfolio Management and Mutual Funds

HDFC Arbitrage Ret (G)

Objectives of the scheme

To generate income by investing predominantly in arbitrage opportunities between cash and derivative
market and arbitrage opportunities within the derivative segment and by deployment of surplus cash in
debt securities and money market instruments.

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Portfolio composition

Class %
Equity 67.69
Others / Unlisted 17.02
Debt N.A
Mutual Funds N.A
Money Market 4.47
Cash / Call 10.82
Net Receivable / Payable N.A

Top 10 Holdings (35.08% of Total Assets)  

Company % Assets

BANK OF INDIA 4.53

GTL LIMITED 4.26

ESSAR OIL LTD. 4.23

VIDEOCON IND 4.16

CENTURY TEXTILES AND INDUSTRIE 3.55

INDIAN HOTELS COMPANY LTD. 3.30

BHARAT FORGE 3.09

NEYVELI LIG 2.66

POWER GRID 2.65

RUCHI SOYA 2.65

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Portfolio (As on Nov 30, 2010)

Equity Value Qty %

(Rs in cr.)

Bank Of India 5.05 108,000.00 4.53

GTL 4.75 113,500.00 4.26

Videocon Industries 4.65 210,000.00 4.16

Century Textiles and Industries 3.97 91,000.00 3.55

Indian Hotels Company 3.68 404,000.00 3.30

Neyveli Lignite Corporation 2.97 230,000.00 2.66

Power Grid Corporation of India 2.96 312,000.00 2.65

Ruchi Soya Industries 2.95 248,000.00 2.65

Praj Industries 2.94 420,000.00 2.63

NTPC 2.76 150,000.00 2.47

Balrampur Chini Mills 2.52 332,000.00 2.26

Television Eighteen 2.48 348,000.00 2.22

Divis Laboratories 2.41 39,000.00 2.16

Bajaj Hindusthan 2.24 212,000.00 2.01

Mercator Lines 1.87 328,000.00 1.67

Dabur India 1.80 192,000.00 1.61

KS Oils 1.76 392,000.00 1.58

Indian Oil Corporation 1.77 51,000.00 1.58

Sterling Biotech 1.75 170,000.00 1.57

Moser Baer (India) 1.58 292,000.00 1.42

Tata Teleservices (Maharashtra) 1.58 810,000.00 1.42

Pantaloon Retail 1.42 36,000.00 1.27

Godrej Industries 1.38 73,000.00 1.23

Tata Global Beverage 1.33 117,500.00 1.19

Reliance Industries 1.23 12,500.00 1.10

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ICICI Bank 1.20 10,500.00 1.07

Cairn India 1.20 38,000.00 1.07

Aditya Birla Nuvo 1.10 14,750.00 0.99

Value
Money Market Rating %
(Rs in cr.)

Money Market Instruments - CPs / CDs 4.98 4.47

Export-Import Bank Of India 4.98 P1+ 4.47

Value
Others / Unlisted Rating %
(Rs in cr.)

Short Term Deposits as margin for Futures & Options 19.00 17.02

Cash / Call Value Rating %

(Rs in cr.)

Cash,Cash Equivalents and Net Current Assets 12.09 10.82

In / Out
 
What's in as on 30-Nov-2010 What's out as on 30-Nov-2010

Company Name Mkt Value Holdings Company Name Mkt Value Holdings

(Rs.Cr) % (Rs.Cr) %

Power Grid 2.96 2.65 ITC 1.40 1.21

PANTALBDVR 1.42 1.27 Bharat Electronics 0.88 0.76

ICICI Bank 1.19 1.07 Tata Chem 0.23 0.20

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 Lupin 1.03 0.92 Tech Mahindra 0.16 0.14

IVRCL Infra 0.28 0.25

Type of fund management

Active and passive

When you look at mutual funds, an actively managed large cap mutual fund will try to pick the
best 100-200 stocks listed in the S&P 500 Index. A passive fund, or index fund, would just own
all 500 stocks that are listed in the S&P 500 Index.

In this scheme of mutual fund active style is adopted as

1. Open ended fund type

2. Turnover ratio is 112.60% which states that portfolio is actively managed

Turnover ratio

The percentage of a mutual fund or other investment vehicle's holdings that have been "turned
over" or replaced with other holdings in a given year is called turnover ratio. The type of mutual
fund, its investment objective and/or the portfolio manager's investing style will play an
important role in determining its turnover ratio.

Here turnover ratio is 112.60%

Since the fund type is arbitrage fund hence an active management style and the consequent
high turnover ratio is justified.

Portfolio performance at different time scales

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 Absolute Returns (in %)
Year Qtr 1 Qtr 2 Qtr 3 Qtr 4 Annual
2010 0.7 1.2 2.0 - -
2009 1.5 1.3 1.1 0.8 4.6
2008 2.9 2.1 1.7 2.3 8.9
2007 - - - 0.8 0.8

Performance Overview  

Morningstar Return Rating: 4.00

Year-to-Date Return: 5.81%

Best 1 Yr Total Return (2008-12-31): 9.12%

Worst 1 Yr Total Return (2009-12-31): 4.40%

Statistical Ratios

Standard Deviation [%] 0.1237

Semi Standard Deviation [%] 0.0614

Beta [%] -0.0974

Sharpe Ratio [%] 0.0992

R-Square [%] -0.0754

Expense Ratio [%] 0.8300

AVG Ratio [%] 0.0246

Other Ratios

Jenson Ratio [%] 0.0135

Treynor Ratio [%] -0.1259

Turnover Ratio [%] 112.2600

FAMA Ratio [%] -0.0039

SORTINO Ratio [%] 0.1997

Risk analysis

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Historical Performance

Past Quarterly Returns (%)  

Q1 Q2 Q3 Q4

2010 0.80 1.17 2.06 N/A

2009 1.33 1.20 0.92 0.89

2008 3.06 1.78 1.67 2.32

3.5

2.5

2
2010
2009
1.5
2008
1

0.5

0
Q1 Q2 Q3 Q4

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The fund manager should be more active since the market conditions are bullish and there are more
opportunities. The fund manager should be able to achieve an even higher return on the portfolio.

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