Portfolio Management

We offer an integrated end to end customized asset management solution for
institutions by:
Understanding the client needs and requirements in terms of risk and returns Providing asset portfolio recommendations. The different approaches in offering Portfolio Management Services;

Pure Advisory Services where we offer
» Portfolio Recommendation
» Portfolio Monitoring
» Portfolio Reporting

Non Discretionary Portfolio Management Services where
» We offer the above advisory plus Trade Execution and Custodial services
Discretionary Portfolio Management Services » All investment related decisions, back office, Fund Accounting and Custodian services are undertaken. The entire management of the portfolio is done by the AMC.

Advantages of Using a Portfolio Management Service (PMS)
» Lower cost as compared to a mutual fund
» Tailor-made solutions & services
» Privileged access to the Fund Manager
» Detailed analysis and review of your portfolio
» Regular Reporting and communications
» Control of Portfolio is ultimately in the Client's hands.

Vikalpa Comments: We have one of the highest individual relationships PAN India with Prudential and we service clients across the globe. Our positive traits being to assist the clients in Scheme selection and completing the necessary documentation which includes account opening formalities, PAN card assistance, Tax audit at year end and moreover all these formalities are completed in your very own country without you visiting INDIA.

Prudential ICICI Portfolio Managers (PMS)

There is someone just as interested in growing your wealth as you. Your personal portfolio manager.

Genesis

Prudential ICICI Asset Management Company, a joint venture between ICICI Bank Ltd, India’s one of the largest private sector banks and Prudential, U.K.'s leading insurance company, is the investment manager for Prudential ICICI Mutual Fund. Prudential ICICI Mutual Fund is the largest and amongst the fastest growing mutual funds in the country with a rapidly growing family of over 8.83 lakh investors as on March 31st 2006. Prudential ICICI Portfolio Managers, a division of Prudential ICICI Asset Management Company, is created especially to meet the investment needs of a select clientele who require focused portfolios.

Portfolio Management with a difference

As Portfolio Managers, we endeavour that every portfolio created by us reflects the values on which Prudential ICICI has been built. A commitment towards transparency and service. Add to that, a strong research driven investment process.

Since the aim is to create a portfolio that suits your requirements, we will first try and understand your needs and investment objectives and on that basis offer you portfolios that best suit your objectives.

Information and accessibility is the key

By providing you with information that is updated on a daily basis and unmatched interactivity, a whole new era in portfolio management has now been ushered in. A first in the industry; via a password protected website, you will have access to :

• ★ A portfolio disclosure statement where the entire portfolio will be disclosed.
• ★ A financial summary comprising the Income Statement and Balance Sheet.
• ★ A detailed client account statement that allows you to track your inflows and outflows.
• ★ A transaction statement listing all the transactions made.
• ★ Calculations of capital gains
• ★ Comprehensive performance tracking

Convenience and customization through our services
One more advantage of being with us is that you will have a team to support you. Initially, you will interface with a Customer Relationship Manager - your one point contact, and a personal Portfolio Manager - your portfolio investment guide, to discuss in depth and understand your investment objectives, your risk-return appetite and establish required service levels. On the basis of this, we shall evolve a portfolio that is best-suited for you.

Thereafter, your Customer Relationship Manager will periodically interact with you for any other clarifications and services that you may require.

You may review your portfolio with your personal Portfolio Manager and your Customer Relationship Manager at least once every quarter. They will always be accessible to you to answer any queries that you may have.

Our Product Range (as per latest disclosure documents)
i) Aggressive Portfolio:
This portfolio is aimed at investors who are looking for higher returns. The portfolio is constructed with a value-orientation and with adequate diversification, but which will at times take on certain aggressive positions. Depending on the market conditions these could include a greater exposure to high beta / mid-cap / illiquid stocks, an exposure in momentum stocks etc.

ii) Dividend Yield Portfolio:
This portfolio endeavors to generate superior risk-adjusted returns through a combination of dividend income and capital appreciation. This portfolio may be considered appropriate for investors with a relatively low risk appetite, who wish to earn potentially higher returns offered through the equity markets. It is also suitable for investors looking for tax-efficient investment options that offer the scope for high-returns. Investments are proposed to be made primarily in stocks that offer an attractive dividend yield. Portfolio Manager seeks to pay particular attention to the dividend track record, sustainability of free cash flows / dividends, industry prospects, management quality, business fundamentals etc., with an attempt to include only high-quality companies in the portfolio.

iii) Deep Value Portfolio:
The objective of the portfolio is to generate returns over the long term, by investing in a diversified portfolio of undervalued stocks. Various parameters may be used to judge the degree of under valuation of the stocks including, but not limited to, price/earnings (p/e), price/book (p/book), dividend yield (DY), price/cash flow, replacement cost, valuations relative to history/sector/markets, etc. Due attention will be paid to qualitative parameters such as management quality, industry prospects, liquidity etc.

iv) The Focused Portfolio:
The Focused Portfolio endeavors to generate capital appreciation by taking concentrated positions in stocks and sectors. Greater concentration of the portfolio will increase both the risks and potential returns from the portfolio. The Focused Portfolio is not limited by any particular theme / sector / market capitalization and has the flexibility to choose between stocks across themes / sectors / investment styles.

v) Preservation of Investment Amount (Asset Shield):
In addition to the above portfolios, the Portfolio Manager also offers products to meet specific objectives such as products endeavouring to preserve Investment Amount. Portfolio Manager would endeavour preservation of a certain percentage of the Investment Amount by investing in a mix of fixed income and equity derivatives (these could include both call and put options on indices or individual stocks) in such a manner so that the same endeavours to preserve the stated percentage of the Investment Amount while attempting to enhance returns by the use of equity derivatives. The options component could also be invested in foreign securities with respect to Resident Individuals under enabling provisions of the RBI circular dated February 4, 2004 viz. RBI USD 25,000 route, which will be subject to modification as permitted by RBI from time to time. Arbitrage opportunities between the cash and futures market may also be undertaken (more specifically described in the section below) as part of the fixed income component. Herein the portfolio is invested in a mix of fixed income mutual funds / securities and equity derivatives in such a manner so that the same endeavours to preserve the stated percentage of the Investment Amount while at the same time an attempt would be made to enhance returns by the use of equity derivatives.

vi) Cash future arbitrage:
The cash futures arbitrage strategy can be employed when the price of the futures exceeds the price of the underlying stock. Two simultaneous transactions are undertaken: (a) Selling the futures (b) Buying the underlying stock. The sale of the futures would require a payment of an initial margin (of which 50% can be paid in the form of securities i.e. the stock purchased) to the exchange and also mark to market margins which are a function of market movements. The position may be held till expiry of the futures contracts. By definition, the price of the futures will equal the closing price of the stock. Thus, the price differential between the futures and the stock is realized. However, the position could even be closed earlier in case the price differential is realised before expiry or better opportunities are available in other stocks.

vii) Only Options Portfolio:
The objective of the portfolio is to earn capital appreciation on the clients capital, by investing in a mix of stock options and index options. The investment in options could include pure long positions in call and put options as well as spreads where the total liability is limited to the premium paid. The total capital to be invested will be staggered over the investment tenure, so as to spread the exposure to the option premiums through the investment tenure (i.e. only a proportion of the total clients capital will be invested in stock option premium in any month). In no month will an amount greater than the clients initial capital be invested in options. Returns on the portfolio will be generated through capital appreciation on the options investments. For the purchase of options, while the upside is unlimited, losses are limited to the premium paid. Thus under all possible circumstances, the losses on the portfolio will be limited to the clients initial capital.

viii) Infrastructure Portfolio
The Prudential ICICI PMS Infrastructure portfolio endeavors to generate long-term capital appreciation by taking advantage of the opportunities created by increased infrastructure spend. The Infrastructure portfolio may be considered suitable for investors with a medium to high-risk appetite and an investment horizon of 18 to 24 months. The Infrastructure portfolio will identify sectors which are beneficiaries of increased infrastructure spend such as construction, capital goods, engineering, oil and gas, power and other related industries. Subsequently, a detailed fundamental research within each sector will be carried out to identify stocks with strong earnings visibility and reasonable valuations. The infrastructure portfolio will comprise of 18-25 stocks. The portfolio is completely leveraged to the infrastructure theme and the performance of stocks chosen with the infrastructure theme as the underlying concept. Given that the portfolio is concentrated on select sectors, the portfolio has higher risk in case the theme proves disappointing giving it a high-risk return reward ratio. On the other hand, if the infrastructure scenario unfolds as expected, the portfolio will enjoy enhanced gains vis-à-vis a conventional diversified portfolio.

ix) Absolute Returns Portfolio
The Prudential ICICI PMS Absolute Return Portfolio endeavours to deliver positive absolute returns with lower volatility across all market conditions by investing in a combination of buy and sale positions The Absolute Return Portfolio may be considered suitable for investors with a medium / high risk appetite and an investment horizon of 18 to 24 months. While stock prices tend to move up and down, in a traditional diversified equity fund the Portfolio Manager only has the option to buy stocks and hence earn returns if stock prices rise. This leads to traditional equity funds delivering high returns in bull markets while earning sub-par / negative returns in bear markets. The Absolute Return Portfolio provides the Portfolio Manager the flexibility to both buy and sell stocks, and hence earn returns by both stock price appreciation and depreciation. A diversified portfolio comprising both buy and sale positions helps provide the potential for earnings returns in all market conditions as well as reduces return volatility as compared to a traditional equity portfolio. The portfolio aims to capitalize on the fundamental stock picking ability of the Portfolio Manager. The Portfolio Manager will follow a long-term fundamental approach while choosing which stocks to buy and which stocks to sell. The Portfolio Manager will attempt to buy stocks that are reasonably valued in relation to earnings growth, while selling those stocks whose valuations appear to have run ahead of fundamentals.

x) Alpha Portfolio
The Alpha Portfolio seeks to capture Alpha - which is out performance to the index on the client’s portfolio. The Alpha Portfolio is suitable for investors with a low to medium risk profile and an investment horizon of more than 12 months The portfolio seeks to capture Alpha – which is out performance to the index. Thus, entire portfolio will be hedged against overall market movements by using Nifty futures. A hedged portfolio aims to reduce market risk (beta) by seeking to insulate the portfolio against market movements. The portfolio seeks to remain fully hedged at all times. It seeks only to gain from out performance vis-à-vis market while eliminating beta.

xi) Principal Protected Portfolio
The portfolio aims to achieve capital growth along with relatively low capital risk. The portfolio would have a defined tenure and principal protection level. This objective is achieved by investing a part of the capital in an actively managed equity portfolio, while rest of the capital is invested in fixed income, which forms the floor for capital preservation. The portfolio aims to provide capital preservation with the help of a third party guarantee. The third party guarantee would get invoked if the portfolio falls below a certain threshold level.

xii) Non-Discretionary Portfolio:
In the case of non-discretionary portfolios, the investment objectives and the securities to be invested would be entirely decided by the Portfolio Manager based on the Agreement executed with the Client. The same could vary widely between client to client.

Risk Factors

• Securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Portfolio will be achieved.
  
  
• Past performance of the Portfolio Manager does not indicate the future performance of the portfolio.
  
  
• Investors are not being offered any guaranteed or assured return/s i.e. either of Principal or appreciation on the portfolio.
  
  
• Investors may note that Portfolio Manager’s investment decisions may not be always profitable, as actual market movements may be at variance with anticipated trends.
  
  
• The liquidity of the Portfolio’s investments is inherently restricted by trading volumes in the securities in which it invests.
  
  
• The valuation of the Portfolio’s investments, may be affected generally by factors affecting securities markets, such as price and volume volatility in the capital markets, interest rates, currency exchange rates, changes in policies of the Government, taxation laws or any other appropriate authority policies and other political and economic developments which may have an adverse bearing on individual securities, a specific sector or all sectors including equity and debt markets. There will be no prior intimation or prior indication given to the Clients when the composition/ asset allocation pattern changes.
  
  
• Trading volumes, settlement periods and transfer procedures may restrict the liquidity of the investments made by the Portfolio. Different segments of the Indian financial markets have different settlement periods and such periods may be extended significantly by unforeseen circumstances. The inability of the Portfolio to make intended securities purchases due to settlement problems could cause the Portfolio to miss certain investment opportunities. By the same rationale, the inability to sell securities held in the portfolio due to the absence of a well developed and liquid secondary market for debt securities would result, at times, in potential losses to the Portfolio, in case of a subsequent decline in the value of securities held in the Portfolio.
  
  
• The Portfolio Manager may, considering the overall level of risk of the portfolio, invest in lower rated/ unrated securities offering higher yields. This may increase the risk of the portfolio. Such investments shall be subject to the scope of investments as laid down in the Agreement.
  
  
• In case of Dividend Yield Portfolios, returns of the Portfolio could depend on the dividend earnings and capital appreciation, if any, from the underlying investments in various dividend yield companies. The dividend earnings of the portfolio may, vary from year to year based on the philosophy and other consideration of each of the high-dividend yield companies. Further, it should be noted that the actual distribution of dividends and frequency thereof - by the high-dividend yield companies in future would depend on the quantum of profits available for distribution by each of such companies. Dividend declaration by such companies will be entirely at the discretion of the shareholders of such companies, based on the recommendations of its Board of Directors. Past track record of dividend distribution may not be treated as indicative of future dividend declarations. Further the dividend yield stocks may be relatively less liquid as compared to growth stocks.
  
  
• Securities, which are not quoted on the stock exchanges, are inherently illiquid in nature and carry a larger amount of liquidity risk, in comparison to securities that are listed on the exchanges or offer other exit options to the investor, including a put option. The Portfolio Manager may choose to invest in unlisted securities that offer attractive yields. This may however increase the risk of the portfolio. Such investments shall be subject to the scope of investments as laid down in the Agreement.
  
  
• While securities that are listed on the stock exchange carry lower liquidity risk, the ability to sell these investments is limited by the overall trading volume on the stock exchanges. Money market securities, while fairly liquid, lack a well-developed secondary market, which may restrict the selling ability of the Portfolio(s) and may lead to the investment(s) incurring losses till the security is finally sold.
  
  
• The Portfolio Manager may, subject to authorisation by the Client in writing, participate in securities lending. The Portfolio Manager may not be able to sell / lend out securities, which can lead to temporary illiquidity. There are risks inherent in securities lending, including the risk of failure of the other party, in this case the approved intermediary to comply with the terms of the agreement. Such failure can result in a possible loss of rights to the collateral, the inability of the Approved Intermediary to return the securities deposited by the lender and the possible loss of corporate benefits accruing thereon.
  
  
• To the extent that the portfolio will be invested in securities denominated in foreign currencies, the Indian Rupee equivalent of the net assets, distributions and income may be adversely affected by changes in regulations concerning exchange controls or political circumstances as well as the application to it of other restrictions on investment.
  
  
• Interest Rate Risk: As with all debt securities, changes in interest rates may affect valuation of the Portfolios, as the prices of securities generally increase as interest rates decline and generally decrease as interest rates rise. Prices of long-term securities generally fluctuate more in response to interest rate changes than prices of short-term securities. Indian debt markets can be volatile leading to the possibility of price movements up or down in fixed income securities and thereby to possible movements in the valuations of Portfolios.
  
  
• Liquidity or Marketability Risk: This refers to the ease with which a security can be sold at or near to its valuation yield-to-maturity (YTM). The primary measure of liquidity risk is the spread between the bid price and the offer price quoted by a dealer. Liquidity risk is today characteristic of the Indian fixed income market.
  
  
• Credit Risk: Credit risk or default risk refers to the risk that an issuer of a fixed income security may default (i.e., will be unable to make timely principal and interest payments on the security). Because of this risk corporate debentures are sold at a higher yield above those offered on Government Securities which are sovereign obligations and free of credit risk. Normally, the value of a fixed income security will fluctuate depending upon the changes in the perceived level of credit risk as well as any actual event of default. The greater the credit risk, the greater the yield required for someone to be compensated for the increased risk.
  
  
• Reinvestment Risk: This risk refers to the interest rate levels at which cash flows received from the securities under a particular Portfolio are reinvested. The additional income from reinvestment is the “interest on interest” component. The risk is that the rate at which interim cash flows can be reinvested may be lower than that originally assumed.
  
  
• Currency Risk: The Portfolio Manager may also invest in overseas Fixed Income or other Securities/ instruments as permitted by the concerned regulatory authorities in India. To the extent that the portfolio of the Scheme will be invested in securities/ instruments denominated in foreign currencies, the Indian Rupee equivalent of the net assets, distributions and income may be adversely affected by changes/fluctuation in the value of certain foreign currencies relative to the Indian Rupee. The repatriation of capital to India may also be hampered by changes in regulations concerning exchange controls or political circumstances as well as the application to it of other restrictions on investment.
  
  
• The Portfolio Manager may use various derivative products as permitted by the Regulations. Use of derivatives requires an understanding of not only the underlying instrument but also of the derivative itself. Other risks include, the risk of mispricing or improper valuation and the inability of derivatives to correlate perfectly with underlying assets, rates and indices.
  
  
• The Portfolio Manager may use derivatives instruments like Stock Index Futures, Interest Rate Swaps, Forward Rate Agreements or other derivative instruments, as permitted under the Regulations and guidelines. Usage of derivatives will expose the Portfolio to certain risks inherent to such derivatives.

As and when the Portfolio Manager trade in the derivatives market there are risk factors and issues concerning the use of derivatives that investors should understand. Derivative products are specialized instruments that require investment techniques and risk analysis different from those associated with stocks and bonds. The use of a derivative requires an understanding not only of the underlying instrument but of the derivative itself. Derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the portfolio and the ability to forecast price or interest rate movements correctly. There is the possibility that a loss may be sustained by the portfolio as a result of the failure of another party (usually referred to as the “counter party”) to comply with the terms of the derivatives contract. Other risks in using derivatives include the risk of mispricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. Thus, derivatives are highly leveraged instruments. Even a small price movement in the underlying security could have a large impact on their value. Also, the market for derivative instruments is nascent in India.