2. PORTFOLIO
Portfolio is a collection of a wide
range of assets that are owned by
investors. The said collection of
financial assets may also be
valuables ranging from gold, stocks,
funds, derivatives, property, cash
equivalents, bonds, etc.
Portfolios may be held by
individual investors or managed by
financial professionals, hedge
funds, banks and other financial
institutions.
3. PORTFOLIO MANAGER
• A portfolio manager (PM) is a professional responsible for making investment
decisions and carrying out investment activities on behalf of vested individuals or
institutions. The investors invest their money into the PM’s investment policy for
future fund growth such as retirement fund, endowment fund, education fund, or for
other purposes. Portfolio manager works with a team of analysts and researchers,
and are responsible for establishing an investment strategy, selecting appropriate
investments and allocating each investment properly towards an investment fund or
asset management vehicle.
• Portfolio managers can take an active or passive management role.
• The ability to originate ideas and to employ excellent research skills are the factors
that influence a portfolio manager's success.
4. ROLES AND RESPONSIBILITIES
• Customization of clients portfolio
• Formulation of portfolio strategy
• Making client aware of each investment option
• Being updated with financial market
• Safety and security of clients wealth
• Sensible asset allocation
• Diversification of clients portfolio
• Rebalancing the portfolio
5. BENIFITS OF PORTFOLIO
MANAGEMENT
• Improved project selection process
• Better view of the big picture
• Focus on objective
• More efficient use of resources
• More accurate project performance data
• Increased ROI
• More informed decision-making
• Decreased risk
6. CODE OF CONDUCT FOR
PORTFOLIO MANAGERS
1. Be fair in all dealings with clients and staff with higher standard of
integrity.
2. Deploy the money received from a client as soon as
possible.
3. Render at all times high standards of services and exercise
due diligence.
4. Ensure proper care and exercise independent professional judgment.
5. Avoid any conflict of interest in his investment or disinvestment
decision.
6. Ensure fair treatment to all his customers.
7. Provide unbiased service by disclosing all possible sources of
conflict of duties and
interest.
7. MERCHANT BANKER
“any person who is engaged in the business of issue
management either by making arrangement regarding
buying, selling or subscribing to securities or acting as
manager, consultant or rendering corporate advisory
services in relation to such issue management”
8. SERVICES PROVIDED BY
MERCHANT BANKER
• Project counseling
• Market survey and forecasting
• Estimating the amount of funds required
• Raising funds from capital market
• Raising of funds through new instruments
• Bought out deals
• OTC market operations
• Mergers and amalgamations
• Loan syndication
• Technology tie-ups
• Venture Capital
• Fixed deposit management
• Portfolio management of mutual funds
• Rehabilitation of sick units
9. REGULATIONS OF MERCHANT
BANKERS
Merchant banking activity in India is regulated by the SEBI (Merchant Bankers) Rules, 1992.
The rules provide that No person shall carry on any activity as a merchant banker unless he holds a
certificate granted by SEBI.
SEBI would grant the certificate on payment of the registration fee and on the conditions that :
• The merchant banker would redress investor grievances within 1 month of investors complaint and
would inform SEBI of all such complaints received.
• The applicant has the necessary infrastructure and manpower to carry out the functions as a
merchant banker.
• A minimum of two persons who have the experience to conduct the business of merchant banking
should be under the employment of the applicant.
• The applicant should be professionally qualified in law, business or management.
• The applicant should not have been involved in any litigation involving the securities market.
• The applicant should not have been convicted of any offense involving moral
turpitude.
10. CAPITAL ADEQUACY NORMS
• The securities and exchange
board of India (SEBI) has
prescribed capital adequacy norms
for merchant banker to register
under the various categories.
• The minimum net worth set by
SEBI for category: I of merchant
bankers was initially fixed at the
value of Rs. 1 crore and later
raised to the value of Rs. 5 crore
through an amendment of the
regulations in the year 1995.
Capital Adequacy Ratio also known as
Capital to Risk Assets Ratio, is the ratio
of a bank's capital to its risk. National
regulators track a bank's CAR to ensure
that it can absorb a reasonable amount
of loss and complies with statutory
Capital requirements. It is a measure of
a bank's capital.
11. CATEGORIES OF MERCHANT
BANKERS
Category Role Fee Charged
Category – I • Issue management
• Advisor
• Consultant
• Manager
• Underwriter
• Portfolio manager
• 2.5 lakhs for first two years
• 1.5 lakhs for third year
Category – II • Advisor
• Consultant
• Underwriter
• Portfolio manager
• Co – manager
• 1.5 lakhs for first two years
•50000 for third year
Category – III • Underwriter
• Advisor
• consultant
• Minimum 50000
Category - IV • Advisor
• consultant
• Minimum 50000
12. MERCHANT BANKING
Merchant Banking is a combination of Banking and Consultancy services.
It provides consultancy to its clients for financial, marketing, managerial
and legal matters. Consultancy means to provide advice, guidance and
service for a fee. It helps a businessman to start a business. It helps to
raise (collect) finance. It helps to expand and modernize the business. It
helps in restructuring of a business. It helps to revive sick business units.
It also helps companies to register, buy and sell shares at the stock
exchange.
13. FUNCTIONS OF MERCHANT BANKING
1. Advisory Function
2. Capital Restructuring Services
3. Underwriting Function
4. Loans
5. Portfolio Management
