Portfolio Management

What is Portfolio Management ?

The up’s and down’s in the capital market have always been of great concern to investors who have exposure to the stock market. Factors such as economic development, overall growth of the industries, political situation the country is passing through, war and weather conditions have always influenced the price fluctuations in the stock market. The common problems faced by every investor in the stock market is to ascertain the profit/loss on their investment due to the fluctuations mentioned above. The desire to grow money is a natural instinct. But as simple as the desire is, the process to do so is just as complex. Growing money depends on the natural instinct and experience of a financial master.

Finding the time to manage investments effectively and keep up with everything that is going on in the world of investing can be difficult in today’s fast-moving markets.

The term asset management is often used to refer to the investment management of collective investments, whilst the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors. Investment managers who specialize in advisory or discretionary management on behalf of private investors may often refer to their services as wealth management or portfolio management.

Any person who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise), the management or administration of a portfolio of securities or the funds of the client, is a portfolio manager. Their main aim is to maximise shareholder value.

What do I have to do ?

Portfolio Managers act as buyers, sellers and managers of risk. They improve credit / risk and product delivery processes to transform the traditional lending business into an issuer and investor-driven business.

Each portfolio contains individually selected securities, which are not co-mingled (pooled) with those of other investors, ensuring transparency and flexibility in operations. There is also the benefit of investing in other asset classes to suit a client’s needs like Mutual Funds, Derivatives, Insurance and even Real Estate.

Some responsibilities include : Investing in capital markets, investment analysis, valuation, portfolio selection, global asset allocation and allied areas.

Portfolio Management leads to increased transparency, reduces cross subsidization, and leads to sharper risk-return discipline. The portfolio manager is required to accept funds or securities having a minimum worth of five lakh rupees from the client while opening the account for the purpose of rendering portfolio management service to the client. The capital adequacy requirement of a portfolio manager is a minimum net worth of fifty lakh rupees. Every portfolio manager is required to pay a sum of ten lakh rupees as registration fees at the time of grant of certificate of registration by SEBI.

Banks like Citibank, ABN Amro and HSBC Portfolio Management Services help you grow and protect your wealth.

What should I study?

You should be a graduate in any discipline from a recognised university with a minimum of 50% marks to pursue the course as part of  any Management (MBA) programme.

The following categories of applicants are eligible for admission into the Certified Portfolio Management (CPM) Programme.

  • CFAs, CAs, CWAs, CSs, CTMs and CIBs.
  • PG qualifications like PGDBA/MBA/MMS/MFC (Master of Finance & Control)/MIB (Master of International Business)/MBE (Master of Business Economics)/MCom/MA (Eco)/MSc (Maths), MSc (Stats) etc.

The following categories of candidates are also eligible to enroll into the CPM Program, provided they are graduates :

  • Candidates who passed CFA (Level I),CA (Inter),CWA (Inter), CS (Inter) or CAIIB (Part I).
  • Bankers with CAIIB qualification.
  • Full-time students of MCom/MA (Eco)/MSc (Maths)/MSc (Stats).
  • Executives who have a minimum of five years working experience in executive capacity in finance/commercial banking/portfolio management sector.
  • Full-time students of the PGDBA/ MBA/ MMS/ MFC/ MIB/ MBE/ MCom programmes with business schools/ University Departments, IIMs and other reputed institutions.

The surge of activity in portfolio management requires constant monitoring and managing. To succeed in these areas, you should possess the following skills : Acumen for finance, analytical dexterity, lateral thinking and quick decision-making, excellent interpersonal skills, and ability to withstand pressure.

What are the prospects?

Economic liberalization and decontrol have transformed the economic landscape of India. Globalization of the economy is at the forefront of the reforms agenda of the Government. The reforms process initiated in the early nineties had far reaching implications for capital markets too. Free pricing of securities and entry of the private sector and foreign mutual funds has instilled competition and market orientation in the capital markets. Global fund management giants like Merrill Lynch, Templeton, Morgan Stanley, Alliance, Threadneedle and Jardine Fleming, among others have set up mutual fund operations in India. Nucleus Netsoft and GIS (India) Ltd, Kotak Securities and numerous banks employ portfolio managers.

Other developments like permitting mutual funds to participate in the call markets and GDR market as well as the introduction of index funds, factor funds and sector funds mean that the Indian mutual fund segment has come of age. The emergence of internet trading is likely to drastically change existing portfolio management paradigms.

With the significant investments required to develop new products and the risks involved, Portfolio Management is becoming an increasingly important tool to make strategic decisions about product development and the investment of company resources. In many companies, current year revenues are increasingly based on new products developed in the last one to three years. Therefore, these portfolio decisions are the basis of a company’s profitability and even its continued existence over the next several years.

With an increase in the number of high net worth investors, the opportunities for private equity fund management has also proliferated. In an emerging information age the role of an investment consultant who can adeptly interpret economic and corporate developments is likely to be at a premium. With imminent deregulation of the insurance and pension sector, huge investable surpluses are likely to come into the capital markets. This is likely to open up new vistas for investment analysts and portfolio managers.


Where should I study ?

Some of the Institutes offering courses in Portfolio Management are :

IIM Kolkata www.iimcal.ac.in
Course : Elective on Security Analysis and Portfolio Management

IIM Kozhikode, Kerala – 673 570 www.iimk.ac.in
Course : Elective on Security Analysis and Portfolio Management

BITS, Pilani www.bits-pilani.ac.in
Course : Security Analysis and Portfolio Management

Dept of Management Studies, IIT Madras www.doms.iitm.ac.in
Course : Elective on Security Analysis and Portfolio Management

Dept of Management Studies, IIT Roorkee www.iitr.ac.in
Course : Elective on Security Analysis and Portfolio Management

Indian Institute of Rural Management, Anand, Gujarat www.irma.ac.in
Course : optional subjects of Rural Enterprise Management Group (Sales and Distribution Management; Investment Analysis and Portfolio Management).

Dept of Commerce, University of Calcutta, Kolkata  www.caluniv.ac.in
Course : Elective on Security Analysis and Portfolio Management

SP Jain Institute of Management and Research, Mumbai www.spjimr.org
Course : PGDM, specialisation in Finance has a core course on Portfolio Management and Security Analysis

MS University, Baroda www.msubaroda.ac.in
Course : The PG Diploma in Applied Corporate Finance provides a package for
learning the skills necessary to pursue a career in the financial sector in the corporate finance and treasury departments of companies, financial institutions, stock broking firms, investment and  portfolio management companies and mutual fund management.

Lucknow University, Lucknow 226007 www.lkouniv.ac.in
Course : Post Graduate Diploma in Financial Markets and Portfolio Management (PGDFMPM)

The Association of Certified International Investment Analyst (CIIA) London has a campus in India at CPMR. www.aciia.org

The Council for Portfolio Management & Research (CPMR), 52, Nagarjuna Hills, Punjagutta, Hyderabad – 500 082   www.cpmrindia.org

Those who successfully complete all the three examinations of the National Level (Examination I, Examination II & Examination III) are awarded the PG Diploma in Investment Analysis by the Icfai University. The Council for Portfolio Management and Research (CPMR) confers the designation of “Certified Portfolio Manager” (in full) and “CPM” (in brief) on them, subject to fulfillment of requisite membership criteria.