ANALYSIS OF ASSET ALLOCATION UNDER WEALTH MANAGEMENT

Abstract

This report examines the role of a Wealth Manager in determining appropriate asset allocation for an investor based on his/ her risk profile, corpus he/ she wants to invest and the time frame for which they want to remain invested in the assets. Traditionally, wealth management services were meant to be only for millionaires, who required help to manage substantial sums of money and grow them over time. But now every individual who has handsome earning salary wants to invest it in different assets and want to multiply it.“Wealth management is both an art and science. It involves understanding the requirements of the investors fairly well. The advancement of World Wide Web has opened up the world of financial management to a much wider audience and one doesn’t have to be a millionaire to take advantage of these sorts of services. Other than managing stocks and portfolios of the investor, a wealth manager can also help him in picking those collective funds in which they may be interested. He can also help investor in selecting from a range of wealth – management plans, tailor – made to the needs and criteria of specific individuals. One may choose to invest purely for the purpose of increasing long – term capital or wish to take a more balanced position between long – term gains and immediate income. He could also help with minimizing risks, tax planning, etc. A wealth manager must be able to help investors to lock or unlock money in current investments by continually monitoring direction of the market and making quick adjustments in investment portfolio. Some wealth managers also provide online research tools, investment calculators and access to wealth management reports.” This project includes two part of analyses. Part 5.1 of analysis and discussion includes analysis of different portfolios prepared by me to compare performances of different mix of assets in the portfolio and to find out the optimal one. For the purpose of this study I have chosen all asset classes i.e. Equity based funds, Debt based Funds, Gold ETF to represent Gold and Housing Price Index to represent investment returns in Real Estate. Housing price index measures the price changes of residential housing as a percentage change from some specific start date. To limit the scope of this study I have VI taken HPI that measures price change index of residential housing only assuming that investors whenever invest in real estate they go for Residential housing investment and not for commercial property investment. The funds chosen for the preparation of portfolios has been collected from top performing funds list of a well-known source platform Moneycontrol.com. With the help of different proportion mixes of funds and assets 10 portfolio plans has been prepared and then their performances has been compared & ranked using different performance measuring parameters such as Sharpe Ratio, Treynor’s Ratio and Jensen’s Alpha. Part 5.2 of this study tries to explain the perception of High Networth Investors (HNIs) towards the wealth management services. The study has been done using a Survey conducted by Edelweiss and Campden Research. It explains what percentage of people are actually aware of such services, how many of them actually opt for these services, what asset allocation they like etc.