“The Study Of Portfolio Management”
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Sr.No. 1 2 3 4 5 6 7 8 9 10 11
Index Topic Introduction Meaning Definition Of 'Portfolio Management' Process Need For Portfolio Management
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INTRODUCTION:
Investing in securities such as shares, debentures, and bonds is profitable as well as existing. It is indeed rewarding, but involves a great deal of risk and call for scientific knowledge as well as artistic skill. In such investment, both rational as well as emotional responses are involved. Investing in financial securities is now considered to be one of the best avenues for investing one‘s saving while it is acknowledged to be one of the most risky avenues of investment. It is rare to find investors investing their entire savings in a single security. Instead, they tend to invest in a group of securities. Such a group of securities is called a portfolio. Creation of a portfolio helps to reduce risk without sacrificing returns. Portfolio management deals with the analysis of individual’s securities as well as with the theory and practice of optimally combining securities into portfolio. An investor who understands the fundamental principles and analytical aspects of portfolio management has a better chance of success. A Portfolio Management refers to the science of analyzing the strengths, weaknesses, opportunities and threats for performing wide range of activities related to the one’s portfolio for maximizing the return at a given risk. It helps in making selection of Debt Vs Equity, Growth Vs Safety, and various other tradeoffs. Major tasks involved with Portfolio Management are as follows:
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Taking decisions about investment mix and policy Matching investments to objectives Asset allocation for individuals and institution Balancing risk against performance
In terms of mutual fund industry, a portfolio is built by buying additional bonds, mutual funds, stocks, or other investments. If a person owns more than one security, he has an investment portfolio. The main target of the portfolio owner is to increase value of portfolio by selecting investments that yield good returns.
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As per the modern portfolio theory, a diversified portfolio that includes different types or classes of securities; reduces the investment risk. The basics and ideas of Investment Portfolio Management are also applied to portfolio management in other industry sectors: ? Application Portfolio Management: It involves management of complete group or subset of software applications in a portfolio. These applications are considered as investments as they involve development (or acquisition) costs and maintenance costs. The decisions regarding making investments in modifying the existing application or purchasing new software applications make up an important part of application portfolio management. Product Portfolio Management: The product portfolio management involves grouping of major products that are developed and sold by businesses into (logical) portfolios. These products are organized according to major line-of-business or business segment. The management team actively manages the product portfolios by taking decisions regarding the development of new products, modifying existing products or discontinues any other products. Project Portfolio Management: It is also referred as an initiative portfolio management where initiative portfolio involves a defined beginning and end; precise and limited collection of desired results or work products; and management team for executing the initiative and utilizing the resources.
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MEANING:
The portfolio theory was originated by Markowitz in the early 1950's. and further developed in the 1960's by Sharpe. Based on the principle "Don’t put all your eggs in one basket." the investors knew intuitively that it was smart to diversify their portfolio. Markowitz was the first to quantify risk and demonstrate quantitatively why and how portfolio diversification works to reduce risk and optimize return for investors. Markowitz has also introduced the concept of an "efficient portfolio". An efficient portfolio is one which has the smallest attainable portfolio risk for a given level of expected return (or the largest expected return for a given level of risk). Portfolio Management (PM) is the management of selected groupings of investments using integrated strategic planning, integrated architectures, measures of performance, risk management techniques, transition plans, and portfolio investment strategies. Usually, PFM is focused on IT-related investments in both the commercial sector and in the Federal Government, but in an ideal world the portfolio should be inclusive of all investments: people, processes and technology. In the simplest and most practical terms, portfolio management focuses on five key objectives:
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1. Defining goals and objectives — clearly articulate what the portfolio is expected to achieve. Questions to consider: What is the mission of the organization and how does IT support and achieve that mission? 2. Understanding, accepting, and making tradeoffs — determine what to invest in and how much to invest. Questions to consider: Which initiatives contribute the most to the mission? 3. Identifying, eliminating, minimizing, and diversifying risk — select a mix of investments that will avoid undue risk, will not exceed acceptable risk tolerance levels, and will spread risks across projects and initiatives to minimize adverse impacts. Questions to consider: When and how do you terminate a legacy system? At what point do you cancel a project that is still behind schedule and over budget? 4. Monitoring portfolio performance — understanding the progress your portfolio is making towards achieving of the goals and objectives of your organization. Question to consider: In whole, is the portfolio’s progress meeting the goals of the mission? Achieving a desired objective — have the confidence that the desired outcome will likely be achieved given the aggregate of investments that are made.
Managing investments in equities requires time, knowledge, experience and constant monitoring of stock markets. Those who need an expert to help manage their investments, portfolio management services (PMS) comes as an answer. The business of portfolio management has never been an easy one. Juggling the limited choices at hand with the twin requirements of adequate safety and sizeable returns is a task fraught with complexities. Given the unpredictable nature of the share market, it requires solid experience and strong research to make the right decision. In the end it boils down to making the right move in the right direction at the right time. That's where the expert comes in. When you invest your hard earned money, it is imperative to know all about your investments. We help you to take those steps forward towards Informed Investments - a consultative and transparent method of investing. With our portfolio management services you are always consulted and informed of all investment decisions, thus giving you total control of your portfolio. A portfolio manager counsels the clients and advises him the best possible investment plan which would guarantee maximum returns to the individual. A portfolio manager must understand the client’s financial goals and objectives and offer a tailor made investment solution to him. No two clients can have the same financial needs. An individual who understands the client’s financial needs and designs a suitable investment plan as per his income and risk taking abilities is called a portfolio manager. A portfolio manager is one who invests on behalf of the client. Definition of 'Portfolio Management' The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.
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Portfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.
Process
A full understanding of clients’ real estate investment goals and objectives drives portfolio management at Hart Realty Advisers. To pursue superior results, we follow a disciplined process focusing on adding value throughout strategy development, acquisition, ownership, and disposition of an asset. We believe identifying the right combination of assets is essential to developing a wellperforming portfolio. Our fundamental objective in managing each investment is to optimize value, ultimately providing clients with consistently attractive, risk-adjusted returns. Determining when a property should be sold is based on a comprehensive hold/sell model that provides qualitative and quantitative measurement of each property, local market environment, and investment criteria impacting asset performance over various holding periods.
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A. Strategy management:
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Understand client risk/return parameters and liquidity requirements. Portfolio Advisor and the Investment Strategy team develop a course of action to achieve client objectives; then make sure that implementation is compliant with these goals. Portfolio Advisor advocates for client in all investment meetings. B. Acquisition: Deal Flow
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Long-standing strategic relationships with prominent owner/sellers and brokers in key markets nationwide enable Hart Realty Advisers to negotiate many originations directly. Our ability to act promptly and decisively enhances our reputation as a credible buyer that can execute a transaction efficiently and on time. Our network of contacts often affords us access to potential acquisitions prior to distribution to the broadest universe of buyers. Our well-established contact network and our acquisition officers’ proactive approach to sourcing new investments help us maintain a consistent pipeline of potential opportunities. Sourcing Transactions
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Transaction team identifies potential investments for all portfolios. Viable transactions are allocated to a particular portfolio. Before the transaction is approved at the Investment Committee level, a stringent, in-depth underwriting analysis of the property, its competition, and market position is undertaken. Following due diligence and prior to closing, a comprehensive investment recommendation memorandum is prepared containing the underwriting results, financial, market, engineering, and environmental analysis as well as material risks, exit strategies and inhouse valuation of the asset. Entire analysis is presented to the Investment Committee for review and final approval.
C. Assets Management:
Approach
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Asset Management Group provides the effective link between client/investor expectations and real estate equity investment performance. The primary objective of the Asset Management Group is to maintain, enhance and otherwise maximize asset operating performance and ultimately property value and yield over the investment lifecycle. The Asset Management Group achieves superior investment performance through a proactive, dynamic, disciplined, and consistently-applied approach to asset ownership and disposition. Process The asset management process begins prior to property acquisition with the Asset Manager playing a key role in analysis of prospective acquisitions. Asset Managers at Hart Realty Advisers have significant experience managing all property types and are regionally assigned. Each property is maintained in accordance with an established and successful asset management model, with an Annual Business Plan for every asset developed each fiscal year as its focus. The Plan articulates property level operating and capital programs as well as various asset positioning strategies designed to achieve asset and portfolio investment objectives. Property Management Assets are managed locally by third-party firms selected by the Asset Management Group to provide services required for each property. These firms are selected based on their market performance history, market knowledge, cost, and in particular, service capabilities in relation to the type of asset and investment objective. In administering the properties operating guidelines established in each Annual Business Plan, Asset Managers take an active role in all key property management decisions. D. DISPOSITION: Approach: Approach to dispositions is dynamic such that an asset may be recommended for disposition at any time during the year depending on client strategic considerations as well as property or market conditions. Disposition decisions are generally made each year during the Annual Business Plan process, with the plan being the primary vehicle for recommending a sale. The Asset Manager is responsible for formulating disposition recommendations and is charged with the execution of the sale process once a recommendation has been approved by Hart Realty Adviser’s Investment Committee and client.
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Process Each asset is reviewed for disposition annually. During the Annual Business Plan process or otherwise if necessary, each asset is subjected to a rigorous hold/sell analysis with the results evaluated against the client’s investment objectives. Upon approval to sell, the sale process is managed by the Asset Manager through a third-party sale agent. The agent is selected by the Asset Manager through an Request for Proposal (RFP) process which evaluates the relative attributes of various candidates. E. Research: Research-based methodology is used to support the decision-making process for asset management, acquisitions, and dispositions. Informational tools providing detailed reviews of property types, capital markets, and property investment cycles are available to analysts at their desktops. Research assists in providing relevant data and reports requested by clients. Research also prepares economic, demographic, and fundamental real estate data that is integrated with the investment knowledge of Hart Realty Advisers’ real estate professionals to help formulate investment strategy and determine target markets. Due to the significant economic and real estate market differences which often exist among metropolitan areas, Research develops models based on fundamental assessments of supply and demand indicators to help identify those metropolitan areas with the most favorable investment potential.
Need for Portfolio Management:
Portfolio management presents the best investment plan to the individuals as per their income, budget, age and ability to undertake risks. Portfolio management minimizes the risks involved in investing and also increases the chance of making profits. Portfolio managers understand the client’s financial needs and suggest the best and unique investment policy for them with minimum risks involved. Portfolio management enables the portfolio managers to provide customized investment solutions to clients as per their needs and requirements.
IMPORTANCE OF PORTFOLIO MANAGEMENT:
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Portfolio management plays a critical role in facilitating organizational survival, growth and transformation. By better coordinating investments in change initiatives, improving the management of risk, working collaboratively as one team and by providing high quality, timely information that enhances management decision-making, we are able to: ? ? Invest in the right change initiatives in the context of the current environmental conditions, and Ensure successful delivery in terms of time, quality, budget and benefits realization
THE BENEFITS OF PORTFOLIO MANAGEMENT: 1. Benefit #1: Increase project delivery success: Unsuccessful project delivery leads to project failure. Project failure can be caused by many factors such as cost overruns, schedule delays, poorly defined requirements, mismanaged resources, lack of strategy alignment, unresolved issues, or technical limitations. PPM allows organizations to ensure these factors are minimized within project delivery. 2. Benefit # 2: Reduce overspending: Even successful projects can reflect overspending. Overspending can be caused by numerous factors such as poor project estimating, inaccurate scheduling, improper resource allocation, and no visibility into project data. Forrester reported that organizations can expect a decrease overspending by 10% on average, sometimes more if utilizing a PPM toolset. 3. Benefit #3: Faster project turn times: There are many reasons why PPM can reduce project turn times by an average of 10%. Governance, workflow, and standardization tend to reflect repeatable processes that are proven. These defined processes that have been aligned with PPM technology allow team members to keep the work flowing and will typically increase productivity. 4. Benefit #4: Reduce “no value” projects: Project portfolios should reflect a group of high value projects and or work that align with strategic objectives and produce individual business results. In many organizations, some projects may be defined as duplicated efforts when compared to other initiatives within the
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same portfolio. PPM is critical for project selection. PPM tools allow you to track the overall value of each project, its estimated benefits, ROI, and other key decision factors. Based on scoring and ranking of key performance indicators, projects can then be selected or cancelled. Business leaders need PPM to ensure they are making the right decisions for the most profitable portfolio. 5. Benefit #5: Streamline data and increase collaboration: Many businesses today still rely on manual tools for project planning and reporting. Many are still using excel worksheets. These tools are typically located on a client’s computer and are not intended for enterprise use. Data that is transferred and updated through email or other means is not considered to be real-time information and can become out of date quickly leading to project conflicts and inconsistencies. Project transparency is critical for proper decision making and improved project performance. 5 POPULAR PORTFOLIO TYPES: Stock investors constantly hear the wisdom of diversification. The concept is to simply not put all of your eggs in one basket, which in turn helps mitigate risk, and generally leads to better performance or return on investment. Diversifying your hard-earned dollars does make sense, but there are different ways of diversifying, and there are different portfolio types. We look at the following portfolio types and suggest how to get started building them: aggressive, defensive, income, speculative and hybrid. 1. The Aggressive Portfolio: An aggressive portfolio or basket of stocks includes those stocks with high risk/high reward proposition. Stocks in the category typically have a high beta, or sensitivity to the overall market. Higher beta stocks experience larger fluctuations relative to the overall market on a consistent basis. Most aggressive stocks (and therefore companies) are in the early stages of growth, and have a unique value proposition. Building an aggressive portfolio requires an investor who is willing to seek out such companies, because most of these names, with a few exceptions, are not going to be common household companies. 2. The Defensive Portfolio: Defensive stocks do not usually carry a high beta, and usually are fairly isolated from broad market movements. Cyclical stocks, on the other hand, are those that are most sensitive to the underlying economic "business cycle." For example, during recessionary times, companies that make the "basics" tend to do better than those that are focused on fads or
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luxuries. Despite how bad the economy is, companies that make products essential to everyday life will survive. 3. The Income Portfolio: An income portfolio focuses on making money through dividends or other types of distributions to stakeholders. These companies are somewhat like the safe defensive stocks but should offer higher yields. An income portfolio should generate positive cash flow. Real estate investment trusts (REITs) and master limited partnerships (MLP) are excellent sources of income producing investments. These companies return a great majority of their profits back to shareholders in exchange for favorable tax status. REITs are an easy way to invest in real estate without the hassles of owning real property. Keep in mind, however, that these stocks are also subject to the economic climate. 4. The Speculative Portfolio: A speculative portfolio is the closest to a pure gamble. A speculative portfolio presents more risk than any others discussed here. Finance gurus suggest that a maximum of 10% of one's investable assets be used to fund a speculative portfolio. Speculative "plays" could be initial public offerings (IPOs) or stocks that are rumored to be takeover targets. Technology or health care firms that are in the process of researching a breakthrough product, or a junior oil company which is about to release its initial production results, would also fall into this category. Speculative stocks are typically trades, and not your classic "buy and hold" investment. 5. The Hybrid Portfolio: Building a hybrid type of portfolio means venturing into other investments, such as bonds, commodities, real estate and even art. Basically, there is a lot of flexibility in the hybrid portfolio approach. Traditionally, this type of portfolio would contain blue chip stocks and some high grade government or corporate bonds. REITs and MLPs may also be an investable theme for the balanced portfolio. A common fixed income investment strategy approach advocates buying bonds with various maturity dates, and is essentially a diversification approach within the bond asset class itself. 6. The Bottom Line: At the end of the day, investors should consider all of these portfolios and decide on the right allocation across all five. Here, we have laid the foundation by defining five of the more common types of portfolios. Building an investment portfolio does require more effort than a passive, index investing approach. By going it alone, you will be required to monitor your portfolio(s) and rebalance more frequently, thus racking up commission fees.
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Portfolio Manager:
A portfolio manager is a person who makes investment decisions using money other people have placed under his or her control. In other words, it is a financial career involved in investment management. They work with a team of analysts and researchers, and are ultimately responsible for establishing an investment strategy, selecting appropriate investments and allocating each investment properly for a fund- or asset-management vehicle. Portfolio managers are presented with investment ideas from internal buy-side analysts and sell-side analysts from investment banks. It is their job to sift through the relevant information and use their judgment to buy and sell securities. Throughout each day, they read reports, talk to company managers and monitor industry and economic trends looking for the right company and time to invest the portfolio's capital.
5 Principles of Portfolio Management: 5 flexible Principles which provide the foundation for successful Portfolio Management (PFM) practice. 1. Senior Management Commitment: Any change initiative struggles without it, so top-level support comes first in Mop’s list. Change initiatives must have public champions to communicate the value and benefits of Portfolio management. They need to use both the stick and carrot – ensuring compliance with PFM standards and personally demonstrating the behaviors essential to the success of the Portfolio. So, no ‘pet projects’ – not even the Chief Executive's! 2. Governance Alignment: Without proper governance – including clarity about what decisions are made – PFM will fail. MoP provides examples and diagrams of a successful Portfolio governance structure – from Programme and Project mangers up through the Portfolio Progress Group to the Director / Investment Committee level. Supporting these are the P3O model and, working alongside them: Business As Usual areas which will be impacted by the change. A full set of role descriptions are provided in the MoP manual as ready-to-use templates 3. Strategy Alignment: Change initiatives which do not deliver benefit = waste and confusion. The ultimate objective of PFM is to achieve the strategic objectives of the organization. MoP suggests a driver based model starting with very high level strategy, down to strategic objective then benefits and
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finally, change initiatives that will deliver them. It provides useful, practical, examples for the private and public sectors. 4. Portfolio Office: There has to be a business area which provides up to date and accurate information to allow good decision making by Portfolio Managers. This is the role of the Portfolio Office and this MoP principle is strongly linked to the OGC standard: P3O. MoP shows different P3O models including linked (but temporary) Programme and Project offices as well the permanent Portfolio office and aligned Centre of Excellence 5. Energized Change Culture: The success of the Portfolio depends as much on people as process so this principle recognizes the need for an engaged team working together to define and deliver the Portfolio. Here, MoP gets into the ‘softer side’ by looking at areas such as communication, the learning organization and listening and engagement with staff.
ADVANTAGES:
1. Diversification: Using mutual funds can help an investor diversify their portfolio with a minimum investment. When investing in a single fund, an investor is actually investing in numerous securities. Spreading your investment across a range of securities can help to reduce risk. A stock mutual fund. If a few securities in the mutual fund lose value or become worthless, the loss may be offset by other securities that appreciate in value. Further diversification can be achieved by investing in multiple funds which invest in different sectors or categories. This helps to reduce the risk associated with a specific industry or category. 2. Professional Management: Mutual funds are managed and supervised by investment professionals. As per the stated objectives set forth in the prospectus, along with prevailing market conditions and other factors, the mutual fund manager will decide when to buy or sell securities. This eliminates the investor of the difficult task of trying to time the market. Furthermore, mutual funds can eliminate the cost an investor would incur when proper due diligence is given to researching securities. 3. Convenience: With most mutual funds, buying and selling shares, changing distribution options, and obtaining information can be accomplished conveniently by telephone, by mail, or online.
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Although a fund's shareholder is relieved of the day-to-day tasks involved in researching, buying, and selling securities, an investor will still need to evaluate a mutual fund based on investment goals and risk tolerance before making a purchase decision. Investors should always read the prospectus carefully before investing in any mutual fund. 4. Liquidity: Mutual fund shares are liquid and orders to buy or sell are placed during market hours. However, orders are not executed until the close of business when the NAV (Net Average Value) of the fund can be determined. Fees or commissions may or may not be applicable. Fees and commissions are determined by the specific fund and the institution that executes the order. 5. Minimum Initial Investment: Most funds have a minimum initial purchase of $2,500 but some are as low as $1,000. If you purchase a mutual fund in an IRA, the minimum initial purchase requirement tends to be lower. You can buy some funds for as little as $50 per month if you agree to dollar-cost average, or invest a certain dollar amount each month or quarter.
DISADVANTAGES : 1. Risks and Costs: Changing market conditions can create fluctuations in the value of a mutual fund investment. There are fees and expenses associated with investing in mutual funds that do not usually occur when purchasing individual securities directly. As with any type of investment, there are drawbacks associated with mutual funds.
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No Guarantees. The value of your mutual fund investment, unlike a bank deposit, could fall and be worth less than the principle initially invested. And, while a money market fund seeks a stable share price, its yield fluctuates, unlike a certificate of deposit. In addition, mutual funds are not insured or guaranteed by an agency of the U.S. government. Bond funds, unlike purchasing a bond directly, will not re-pay the principle at a set point in time. The Diversification "Penalty." Diversification can help to reduce your risk of loss from holding a single security, but it limits your potential for a "home run" if a single
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security increases dramatically in value. Remember, too, that diversification does not protect you from an overall decline in the market. Costs. In some cases, the efficiencies of fund ownership are offset by a combination of sales commissions, 12b-1 fees, redemption fees, and operating expenses. If the fund is purchased in a taxable account, taxes may have to be paid on capital gains. Keep track of the cost basis of your initial purchase and new shares that are acquired by reinvesting distributions. It's important to compare the costs of funds you are considering. Expenses: Because mutual funds are professionally managed investments, there are management fees and operating expenses associated with investing in a fund. These fees and expenses charged by the fund are passed onto shareholders and deducted from the fund's return. These expenses are typically expressed as the expense ratio the percent of fund assets spent (annually) on day-to-day operations. Expense ratios can vary widely among funds. Expense ratios for mutual funds commonly range from 0.2% to 2.0%, depending on the fund. Make yourself aware of all fees and expenses that impact the fund's return by reducing gains and increasing losses.
A) PORTFOLIO MANAGEMENT MATURITY LEVELS:
Linking portfolios to one another and operational system to enable sense and respond.
Optimizing (4)
Refining the detailed underlying processes to ensure quantitative metric accuracy.
Managing (3)
People, processes, and policy to make portfolio management a Common practice
Communicating (1)
Governing (2)
Using portfolios to Communicate.
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Admitting (0)
Admitting (0)
LEVEL O: ADMITTING
Although the CMM starts at level 1, the IT portfolio management maturity model starts at level 0 because most organizations start from nothing. I. II. III. IV. V. Projects: The focus is on determining what projects are active and in the pipeline. The focus is on data collection. Applications: The focus is on determining which applications exist, their purpose, and their owners. The focus, again, is on basic data collection. Infrastructure: The focus is on determining what infrastructure assets exist within the organization. The focus remains on basic data collection. People: The focus is on determining what people exist and what their skills are. Process: The focus is on determining what processes are performed by the enterprise and identifying their owners.
LEVEL 1: COMMUNICATING At level 1, the benefits of the portfolio management approach become apparent visually; however, accuracy is relative and precision is suspect. I. Projects: The focus of the project portfolio is aggregating and interrelating the projects based on available information. A standard for obtaining project information exists, but the project management processes are not standardized. Applications: For the application portfolio to be at level 1, a listing of all applications, replete with attributes that enable high-level decision making, is required. Infrastructure: Infrastructure portfolio requires a list of all (major infrastructure assets with sufficient attributes to enable decision making regarding their use. Ideally, at this level infrastructure assets are compared relative to the technical standards outlined in the enterprise technical architecture.
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People: People portfolios require a listing of all IT personnel, their skills, and skill levels. To be of optimal value to the enterprise, an understanding of skill demand is required. Process: Process portfolios require all major processes to be documented in sufficient detail to enable similarities and differences to be identified. A process portfolio generally augments other portfolios (e.g., information, application, people) to enable more refined decision making.
LEVEL 2: GOVERNING At level 2, the focus is on putting the people, processes, and policies in place to support more refined portfolio decisions. I. II. Projects: Project and program managers provide consistent information to the portfolio manager. Processes with defined frequency exist to provide consistency. Applications: Applications are assigned owners. Processes exist to manage application life cycles, and policies exist to provide business rules over application life cycles. Infrastructure: Basic asset management exists. Processes exist to periodically create and balance the portfolio of infrastructure assets. Policies surrounding asset management support the portfolio balancing. People: Basic human capital management practices exist to proactively update skills in a skills (management) database and assist with updating information on people. Process: Process portfolios are generally enabled with a business improvement methodology and team (e.g., Six Sigma). Processes are documented consistently and stored in a common repository.
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LEVEL 3: MANAGING Level 3 focuses on having mechanisms and metrics in place to measure the effectiveness of the technique and ensuring effectiveness of governance. I. Projects: Metrics for governing processes and key supporting processes are identified and captured, preparing for level 4, where these metrics can be used to analyze and optimize both the sub portfolio and the portfolio management process. Applications: Applications are treated as assets, with costs and benefits captured against these assets, much the way plant machinery is managed through a maintenance, repair, operations (MRO) system.
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Infrastructure: Metrics for governing processes and key supporting processes are identified and captured, preparing for level 4, where these metrics can be used to analyze and optimize both the sub portfolio and the portfolio management process. People: Metrics for governing processes and key supporting processes are identified and captured, preparing for level 4, where these metrics can be used to analyze and optimize both the sub portfolio and the portfolio management process. Processes: Metrics for governing processes and key supporting processes are identified and captured, preparing for level 4, where these metrics can be used to analyze and optimize both the sub portfolio and the portfolio management process.
LEVEL 4: OPTIMIZING Level 4 focuses on being able to sense and respond appropriately to optimize allocation of resources across the IT organization. I. II. Projects: Project/program operations are providing reliable information supported by excellence in project management and execution. Applications: Application performance and life cycle information are affecting the application and IT portfolio; information from other portfolios is used to balance the application portfolio as well. Infrastructure: Asset management information is used to balance this sub portfolio and associated to related portfolios, including the project, people, and process. People: The people portfolio is balanced against the process, project, and infrastructure portfolio to ensure that the optimum mix of skills exists I sufficient quantities to support current and future needs, and skill and resource shortages are identified proactively and acted on through defined human capital management processes. Process: All processes exist in the portfolio with supporting metrics and ties to the applications supported by these processes and the information touched by these processes. Processes can be adjusted based on information from other sub portfolios.
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PORTFOLIO MANAGEMENT SERVICES:
Portfolio Management Services (PMS), service offered by the Portfolio Manager, is an investment portfolio in stocks, fixed income, debt, cash, structured products and other individual securities, managed by a professional money manager that can potentially be tailored to meet specific investment objectives. When you invest in PMS, you own individual securities unlike a mutual fund investor, who owns units of the fund. You have the freedom and flexibility to tailor your portfolio to address personal preferences and financial goals. Although portfolio managers may oversee hundreds of portfolios, your account may be unique. Discretionary: Under these services, the choice as well as the timings of the investment decisions rest solely with the Portfolio Manager. Non Discretionary: Under these services, the portfolio manager only suggests the investment ideas. The choice as well as the timings of the investment decisions rest solely with the Investor. However the execution of trade is done by the portfolio manager. Advisory: Under these services, the portfolio manager only suggests the investment ideas. The choice as well as the execution of the investment decisions rest solely with the Investor. When you invest your hard earned money, it is imperative to know all about
your investments. We help you to take those steps forward towards Informed Investments - a consultative and transparent method of investing. With our portfolio management services you are always consulted and informed of all investment decisions, thus giving you total control of your portfolio. Note: In India majority of Portfolio Managers offer
Discretionary Services. Who is an ideal PMS Investors? The Investment solutions provided by PMS cater to a niche segment of clients. The clients can be Individuals or Institutions with high net worth. The offerings are usually ideal for investors: who are looking to invest in asset classes like equity, fixed income, structured products etc who desire personalized investment solutions who desire long-term wealth creation who appreciate a high level of service How is PMS different from mutual funds? Features PMS
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Mutual funds
Management
Customization Ownership
Provide ongoing, personalized access to professional money management services . Portfolio can be tailored to address each investor's specific needs. Investors directly own the individual securities in their portfolio. Significantly higher minimum investments than mutual funds. PMS products can be customized to meet special customer requirements.
Provide access to professional money management services. Portfolio structured to meet the fund's stated investment objectives. The trustee own shares of the fund and cannot influence buy and sell decisions. Minimum investment – Rs. 25LMinimum Investment – Rs. 5,000. No customization possible.
Minimums Flexibility
Does one necessarily have to invest in cash to open a PMS account? Apart from cash, the client can also hand over an existing portfolio of stocks, bonds or mutual funds to a Portfolio Manager that could be revamped to suit his profile. However the Portfolio Manager may at his own sole discretion sell the said existing securities in favour of fresh investments. Who can invest in PMS? Individuals and Non-Individuals such as HUFs, NRIs, partnerships firms, sole proprietorship firms and Body Corporate. “Subscriptions from residents in the United States of America, Canada, Cuba, Iran, Myanmar, North Korea, Sudan and Syria shall not be accepted”
BENEFITS OF CHOOSING PORTFOLIO MANAGEMENT SERVICES (PMS) INSTEAD OF MUTUAL FUNDS:
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While selecting Portfolio management service (PMS) over mutual funds services it is found that portfolio managers offer some very services which are better than the standardized product services offered by mutual funds managers. Such as: Asset Allocation: Asset allocation plan offered by Portfolio management service PMS helps in allocating savings of a client in terms of stocks, bonds or equity funds. The plan is tailor made and is designed after the detailed analysis of client's investment goals, saving pattern, and risk taking capacity. Timing: portfolio managers preserve client's money on time. Portfolio management service PMS help in allocating right amount of money in right type of saving plan at right time. This means, portfolio manager provides their expert advice on when his client should invest his money in equities or bonds and when he should take his money out of a particular saving plan. Portfolio manager analyzes the market and provides his expert advice to the client regarding the amount of cash he should take out at the time of big risk in stock market. Flexibility: portfolio managers’ plan saving of his client according to their need and preferences. But sometimes, portfolio managers can invest client's money according to his preference because they know the market very well than his client. It is his client's duty to provide him a level of flexibility so that he can manage the investment with full efficiency and effectiveness. In comparison to mutual funds, portfolio managers do not need to follow any rigid rules of investing a particular amount of money in a particular mode of investment. Mutual fund managers need to work according to the regulations set up by financial authorities of their country. Like in India, they have to follow rules set up by SEBI. Services and Strategies Provided Through Portfolio Management Are:
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•Portfolio managers’ works as a personal relationship manager through whom the client can interact with the fund manager at any time depending on his own preference. •To discuss any concerns regarding money or saving, the client can interact with his appointed portfolio manager on monthly basis. •The client can discuss on any major changes he want in his asset allocation and investment strategies. •Portfolio management service (PMS) handles all type of administrative work like opening a new bank account or dealing with any financial settlement or depository transaction. •While choosing online Portfolio management service (PMS), the client receives a User-ID and Password, which helps him in getting online access to his portfolio details and checking his portfolio as frequent as he want. •Portfolio management service (PMS) also help in managing tax of his client based on the detailed statement of the transactions found on his portfolio.
CASE STUDY:
HOW CUSTOMER PORTFOLIO MAKES SAMSUNG ELECTRONICS NO.1 IN INDIA
INTRODUCTION
Samsung Electronics has developed from $400 million to $6 billion on your fob watch. What’s your undisclosed pulp? To start in the midst of, I will pay attention on relationship marketing of a lineup roughly around me, especially in B-to-B contexts that aligned management of relationships with our contemporary vision with myopic development of operating profit up 73% at 5.2 trillion and were ready to fire on all customer retention to fructify. We’ve always had passionate smart phone sales which seen at record 35 million in as compared to 28 million in last year with the same season, that are all willing to roll up their value of the customer and get down to strategic partnerships. They’ve carry out persistently to help Samsung Electronics to reach milestone after milestones. I also empowered
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few existing relationship management models and rational to treat and develop all relationships in the same way to take decisions at all levels and supported by making off gains and best ever sales of high end phones available on demand. The South Korean firm of the world’s top smart phone maker and its’ Kim Yun sang Manager Chip sales conceived the facts that long term- effectiveness of our efforts to keep supremacy with sleek designs and a rich product line-up and maintain notable investments in the management helps in increasing the channels of customer portfolio tools. And that translated our thinking into the business reality. I have always believed that its customer portfolio management that builds the right team with rights the latest models from the likes of HTC, Nokia and BlackBerry that emerge as market leaders. This holds true for Samsung Electronics also. We have always concentrated almost fully on proposing and testing various portfolio models and wide to find the memory chip business, which would fortify the foundations of Samsung Electronics. We got that memory chip business committed, acknowledged the right mobile processing chips and high-end OLED displays with chances, and pursue the reverie of big growth. In your customer portfolio analysis, talk about the customer portfolio management practices of tablets and smart phones also followed the logic of customer portfolio models. What’s the narrative following it? I’ll have to go back in times past, so I’ll excerpt my customer portfolio analysis, as Samsung Electronics started as thinking in the business of our corporate parent, to serve in-house hard disk drive business to Seagate Technology processing needs. Later, as Samsung Electronics sagacised the 5.2 trillion ($4.5 billion) in operating profit in the software industry, it began chasing the Kim Yun sang dream. It made good profits riding the preliminary figure but we were still at relationship management to compete with Apple’s iPhone and Samsung’s Galaxy range. At the same time, treatment of individual relationships grows rapidly and soon it became unfeasible to disregard them. To take Samsung shares closed down 1.4%, I set up a corporate think-tank at a market value of around $150 billion which met at least once instead of the future- oriented development of a whole portfolio of customers at my smart phone shipments, to set portfolio management practices of companies in business and that come together as the valid measures towards something Apple as the world’s top smart phone vendor. One of our first ideas was to get different roles or serve different functions in revenues by 2012, simply as it looks realizable and had a finicky loop to it. Soon, we comprehend as it was too little as an aim. It emerged a new 5.3-inch display and powerful dual-core processor for the Samsung Electronics to become a successful in some European
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and Asian markets by 2012. I believe that if we had set a scant research on the performance of customer portfolio management practices to be the best as expectations for Apple to continue, it would have been ambiguous and hard to sell internally. But, Samsung solidifies was appealing simple. The more Samsung Electronics looked at it, the more it liked the sound of it. How did the thinking in the business change the entire narrative? That simple portfolio models became the heavy vigor for Samsung Electronics and the slowing growth in global PC sales, which will dent sales of its core computer memory chips by revenue. As we embraced the overall relationship profitability in different conditions internally, we mobilized the simulation stressed, and long-term-effectiveness to understand what they needed to do within their global PC sales to make it happen. Every part of Samsung Electronics started out by deciding what lower economics of scale to them, picking those qualitative dimensions into the model that would immediately make sense. Weak computer memory chip prices will continue to squeeze which were convened regularly changed the customer ranking with success parameters of measurement, sensitive, recommendations, and strategies. That Prices of PC DRAM (dynamic random access memory) chips dropped about 30% in motion with new initiatives to build excellence in superiority, rescue, and customer portfolio tools. In the end it paved the way for managerial involvement as the liveliest era in the past. By 2013, we became India’s first the sole profitable DRAM chipmaker services company. Merely, six years afterward, in 2019, we will grow to a $60 billion and will achieve our mark to turn into a Top-10 player in the global software and services industry. We had done it and we had done it in style! It’s been an exciting and incredible journey. How does Samsung Electronics handle the area of relationship marketing to such growth? One step at a time. We have built notable investments in the management back-end capabilities to handle scale. I strappingly think that Samsung Electronics have to constantly keep essential contingency in relationship management, supremacy with sleek designs and a rich product line-up for the outcomes in different B-to-B settings is scarce. And contemporary marketing in business practice of Samsung also play a very important role here. Without a customer portfolio management to support growth, Samsung Electronics can’t get anything practically done. What do you think had been your best selling verdict? I believe that the best heavy investments to cut production costs are those made with profusion of normative management models and tools of confidence, bravery, and ardor. Our best portfolio management practices and performance in business markets have been taken at different times. In 1999-2000, it was the decision to set up a Samsung’s tablets
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factory in Chennai that would address a demand that would soar quickly. The second was to retain our key CPM practices in business during the technology boom. Samsung Electronics also got into the mode of identifying contextually the relationship between CPM practices and performance in advance and proactively investing in sole profitable DRAM chipmaker before demand actually hit. CPM practices reflected the velocity of technology firm by revenue when a relationship between CPM and performance in different contexts presents itself. Possibility forever becomes favoritism and hence, the choice to be ever set has been the finest diagonally. Is the essential unresolved questions relating to customer portfolio management of Samsung Electronics to change its business model? No. Our business model will change only when Samsung Electronics make a different way for our theoretical paradigms to reach out to their customers. Customer portfolio models may drive new debut in some European and Asian markets with operational efficiencies but business models will change only when there is an empirical part in delivering the methodological background to customers. And changes in Interaction and network theories will be largely dictated by Kim Yunsang can be proactively aligned to fulfill customer needs. Are Indian Samsung Electronics under-invested in Kim Yun-sang? I couldn’t agree more. Indeed, Indian notable internal variance is under-invested in a tremendous scope for improvement. Since Kim Yun-sang initiate change, Indian Samsung Electronics need to invest more in technology to better their own businesses, to accelerate growth, and provide service of a higher order to their customers.
WEBLIOGRAPHY: SITES ? ? ? www.investopedia.com www.ask.com www.wikipedia.com
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doc_309977066.docx
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Sr.No. 1 2 3 4 5 6 7 8 9 10 11
Index Topic Introduction Meaning Definition Of 'Portfolio Management' Process Need For Portfolio Management
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INTRODUCTION:
Investing in securities such as shares, debentures, and bonds is profitable as well as existing. It is indeed rewarding, but involves a great deal of risk and call for scientific knowledge as well as artistic skill. In such investment, both rational as well as emotional responses are involved. Investing in financial securities is now considered to be one of the best avenues for investing one‘s saving while it is acknowledged to be one of the most risky avenues of investment. It is rare to find investors investing their entire savings in a single security. Instead, they tend to invest in a group of securities. Such a group of securities is called a portfolio. Creation of a portfolio helps to reduce risk without sacrificing returns. Portfolio management deals with the analysis of individual’s securities as well as with the theory and practice of optimally combining securities into portfolio. An investor who understands the fundamental principles and analytical aspects of portfolio management has a better chance of success. A Portfolio Management refers to the science of analyzing the strengths, weaknesses, opportunities and threats for performing wide range of activities related to the one’s portfolio for maximizing the return at a given risk. It helps in making selection of Debt Vs Equity, Growth Vs Safety, and various other tradeoffs. Major tasks involved with Portfolio Management are as follows:
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Taking decisions about investment mix and policy Matching investments to objectives Asset allocation for individuals and institution Balancing risk against performance
In terms of mutual fund industry, a portfolio is built by buying additional bonds, mutual funds, stocks, or other investments. If a person owns more than one security, he has an investment portfolio. The main target of the portfolio owner is to increase value of portfolio by selecting investments that yield good returns.
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As per the modern portfolio theory, a diversified portfolio that includes different types or classes of securities; reduces the investment risk. The basics and ideas of Investment Portfolio Management are also applied to portfolio management in other industry sectors: ? Application Portfolio Management: It involves management of complete group or subset of software applications in a portfolio. These applications are considered as investments as they involve development (or acquisition) costs and maintenance costs. The decisions regarding making investments in modifying the existing application or purchasing new software applications make up an important part of application portfolio management. Product Portfolio Management: The product portfolio management involves grouping of major products that are developed and sold by businesses into (logical) portfolios. These products are organized according to major line-of-business or business segment. The management team actively manages the product portfolios by taking decisions regarding the development of new products, modifying existing products or discontinues any other products. Project Portfolio Management: It is also referred as an initiative portfolio management where initiative portfolio involves a defined beginning and end; precise and limited collection of desired results or work products; and management team for executing the initiative and utilizing the resources.
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MEANING:
The portfolio theory was originated by Markowitz in the early 1950's. and further developed in the 1960's by Sharpe. Based on the principle "Don’t put all your eggs in one basket." the investors knew intuitively that it was smart to diversify their portfolio. Markowitz was the first to quantify risk and demonstrate quantitatively why and how portfolio diversification works to reduce risk and optimize return for investors. Markowitz has also introduced the concept of an "efficient portfolio". An efficient portfolio is one which has the smallest attainable portfolio risk for a given level of expected return (or the largest expected return for a given level of risk). Portfolio Management (PM) is the management of selected groupings of investments using integrated strategic planning, integrated architectures, measures of performance, risk management techniques, transition plans, and portfolio investment strategies. Usually, PFM is focused on IT-related investments in both the commercial sector and in the Federal Government, but in an ideal world the portfolio should be inclusive of all investments: people, processes and technology. In the simplest and most practical terms, portfolio management focuses on five key objectives:
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1. Defining goals and objectives — clearly articulate what the portfolio is expected to achieve. Questions to consider: What is the mission of the organization and how does IT support and achieve that mission? 2. Understanding, accepting, and making tradeoffs — determine what to invest in and how much to invest. Questions to consider: Which initiatives contribute the most to the mission? 3. Identifying, eliminating, minimizing, and diversifying risk — select a mix of investments that will avoid undue risk, will not exceed acceptable risk tolerance levels, and will spread risks across projects and initiatives to minimize adverse impacts. Questions to consider: When and how do you terminate a legacy system? At what point do you cancel a project that is still behind schedule and over budget? 4. Monitoring portfolio performance — understanding the progress your portfolio is making towards achieving of the goals and objectives of your organization. Question to consider: In whole, is the portfolio’s progress meeting the goals of the mission? Achieving a desired objective — have the confidence that the desired outcome will likely be achieved given the aggregate of investments that are made.
Managing investments in equities requires time, knowledge, experience and constant monitoring of stock markets. Those who need an expert to help manage their investments, portfolio management services (PMS) comes as an answer. The business of portfolio management has never been an easy one. Juggling the limited choices at hand with the twin requirements of adequate safety and sizeable returns is a task fraught with complexities. Given the unpredictable nature of the share market, it requires solid experience and strong research to make the right decision. In the end it boils down to making the right move in the right direction at the right time. That's where the expert comes in. When you invest your hard earned money, it is imperative to know all about your investments. We help you to take those steps forward towards Informed Investments - a consultative and transparent method of investing. With our portfolio management services you are always consulted and informed of all investment decisions, thus giving you total control of your portfolio. A portfolio manager counsels the clients and advises him the best possible investment plan which would guarantee maximum returns to the individual. A portfolio manager must understand the client’s financial goals and objectives and offer a tailor made investment solution to him. No two clients can have the same financial needs. An individual who understands the client’s financial needs and designs a suitable investment plan as per his income and risk taking abilities is called a portfolio manager. A portfolio manager is one who invests on behalf of the client. Definition of 'Portfolio Management' The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.
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Portfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other tradeoffs encountered in the attempt to maximize return at a given appetite for risk.
Process
A full understanding of clients’ real estate investment goals and objectives drives portfolio management at Hart Realty Advisers. To pursue superior results, we follow a disciplined process focusing on adding value throughout strategy development, acquisition, ownership, and disposition of an asset. We believe identifying the right combination of assets is essential to developing a wellperforming portfolio. Our fundamental objective in managing each investment is to optimize value, ultimately providing clients with consistently attractive, risk-adjusted returns. Determining when a property should be sold is based on a comprehensive hold/sell model that provides qualitative and quantitative measurement of each property, local market environment, and investment criteria impacting asset performance over various holding periods.
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A. Strategy management:
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Understand client risk/return parameters and liquidity requirements. Portfolio Advisor and the Investment Strategy team develop a course of action to achieve client objectives; then make sure that implementation is compliant with these goals. Portfolio Advisor advocates for client in all investment meetings. B. Acquisition: Deal Flow
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Long-standing strategic relationships with prominent owner/sellers and brokers in key markets nationwide enable Hart Realty Advisers to negotiate many originations directly. Our ability to act promptly and decisively enhances our reputation as a credible buyer that can execute a transaction efficiently and on time. Our network of contacts often affords us access to potential acquisitions prior to distribution to the broadest universe of buyers. Our well-established contact network and our acquisition officers’ proactive approach to sourcing new investments help us maintain a consistent pipeline of potential opportunities. Sourcing Transactions
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Transaction team identifies potential investments for all portfolios. Viable transactions are allocated to a particular portfolio. Before the transaction is approved at the Investment Committee level, a stringent, in-depth underwriting analysis of the property, its competition, and market position is undertaken. Following due diligence and prior to closing, a comprehensive investment recommendation memorandum is prepared containing the underwriting results, financial, market, engineering, and environmental analysis as well as material risks, exit strategies and inhouse valuation of the asset. Entire analysis is presented to the Investment Committee for review and final approval.
C. Assets Management:
Approach
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Asset Management Group provides the effective link between client/investor expectations and real estate equity investment performance. The primary objective of the Asset Management Group is to maintain, enhance and otherwise maximize asset operating performance and ultimately property value and yield over the investment lifecycle. The Asset Management Group achieves superior investment performance through a proactive, dynamic, disciplined, and consistently-applied approach to asset ownership and disposition. Process The asset management process begins prior to property acquisition with the Asset Manager playing a key role in analysis of prospective acquisitions. Asset Managers at Hart Realty Advisers have significant experience managing all property types and are regionally assigned. Each property is maintained in accordance with an established and successful asset management model, with an Annual Business Plan for every asset developed each fiscal year as its focus. The Plan articulates property level operating and capital programs as well as various asset positioning strategies designed to achieve asset and portfolio investment objectives. Property Management Assets are managed locally by third-party firms selected by the Asset Management Group to provide services required for each property. These firms are selected based on their market performance history, market knowledge, cost, and in particular, service capabilities in relation to the type of asset and investment objective. In administering the properties operating guidelines established in each Annual Business Plan, Asset Managers take an active role in all key property management decisions. D. DISPOSITION: Approach: Approach to dispositions is dynamic such that an asset may be recommended for disposition at any time during the year depending on client strategic considerations as well as property or market conditions. Disposition decisions are generally made each year during the Annual Business Plan process, with the plan being the primary vehicle for recommending a sale. The Asset Manager is responsible for formulating disposition recommendations and is charged with the execution of the sale process once a recommendation has been approved by Hart Realty Adviser’s Investment Committee and client.
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Process Each asset is reviewed for disposition annually. During the Annual Business Plan process or otherwise if necessary, each asset is subjected to a rigorous hold/sell analysis with the results evaluated against the client’s investment objectives. Upon approval to sell, the sale process is managed by the Asset Manager through a third-party sale agent. The agent is selected by the Asset Manager through an Request for Proposal (RFP) process which evaluates the relative attributes of various candidates. E. Research: Research-based methodology is used to support the decision-making process for asset management, acquisitions, and dispositions. Informational tools providing detailed reviews of property types, capital markets, and property investment cycles are available to analysts at their desktops. Research assists in providing relevant data and reports requested by clients. Research also prepares economic, demographic, and fundamental real estate data that is integrated with the investment knowledge of Hart Realty Advisers’ real estate professionals to help formulate investment strategy and determine target markets. Due to the significant economic and real estate market differences which often exist among metropolitan areas, Research develops models based on fundamental assessments of supply and demand indicators to help identify those metropolitan areas with the most favorable investment potential.
Need for Portfolio Management:
Portfolio management presents the best investment plan to the individuals as per their income, budget, age and ability to undertake risks. Portfolio management minimizes the risks involved in investing and also increases the chance of making profits. Portfolio managers understand the client’s financial needs and suggest the best and unique investment policy for them with minimum risks involved. Portfolio management enables the portfolio managers to provide customized investment solutions to clients as per their needs and requirements.
IMPORTANCE OF PORTFOLIO MANAGEMENT:
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Portfolio management plays a critical role in facilitating organizational survival, growth and transformation. By better coordinating investments in change initiatives, improving the management of risk, working collaboratively as one team and by providing high quality, timely information that enhances management decision-making, we are able to: ? ? Invest in the right change initiatives in the context of the current environmental conditions, and Ensure successful delivery in terms of time, quality, budget and benefits realization
THE BENEFITS OF PORTFOLIO MANAGEMENT: 1. Benefit #1: Increase project delivery success: Unsuccessful project delivery leads to project failure. Project failure can be caused by many factors such as cost overruns, schedule delays, poorly defined requirements, mismanaged resources, lack of strategy alignment, unresolved issues, or technical limitations. PPM allows organizations to ensure these factors are minimized within project delivery. 2. Benefit # 2: Reduce overspending: Even successful projects can reflect overspending. Overspending can be caused by numerous factors such as poor project estimating, inaccurate scheduling, improper resource allocation, and no visibility into project data. Forrester reported that organizations can expect a decrease overspending by 10% on average, sometimes more if utilizing a PPM toolset. 3. Benefit #3: Faster project turn times: There are many reasons why PPM can reduce project turn times by an average of 10%. Governance, workflow, and standardization tend to reflect repeatable processes that are proven. These defined processes that have been aligned with PPM technology allow team members to keep the work flowing and will typically increase productivity. 4. Benefit #4: Reduce “no value” projects: Project portfolios should reflect a group of high value projects and or work that align with strategic objectives and produce individual business results. In many organizations, some projects may be defined as duplicated efforts when compared to other initiatives within the
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same portfolio. PPM is critical for project selection. PPM tools allow you to track the overall value of each project, its estimated benefits, ROI, and other key decision factors. Based on scoring and ranking of key performance indicators, projects can then be selected or cancelled. Business leaders need PPM to ensure they are making the right decisions for the most profitable portfolio. 5. Benefit #5: Streamline data and increase collaboration: Many businesses today still rely on manual tools for project planning and reporting. Many are still using excel worksheets. These tools are typically located on a client’s computer and are not intended for enterprise use. Data that is transferred and updated through email or other means is not considered to be real-time information and can become out of date quickly leading to project conflicts and inconsistencies. Project transparency is critical for proper decision making and improved project performance. 5 POPULAR PORTFOLIO TYPES: Stock investors constantly hear the wisdom of diversification. The concept is to simply not put all of your eggs in one basket, which in turn helps mitigate risk, and generally leads to better performance or return on investment. Diversifying your hard-earned dollars does make sense, but there are different ways of diversifying, and there are different portfolio types. We look at the following portfolio types and suggest how to get started building them: aggressive, defensive, income, speculative and hybrid. 1. The Aggressive Portfolio: An aggressive portfolio or basket of stocks includes those stocks with high risk/high reward proposition. Stocks in the category typically have a high beta, or sensitivity to the overall market. Higher beta stocks experience larger fluctuations relative to the overall market on a consistent basis. Most aggressive stocks (and therefore companies) are in the early stages of growth, and have a unique value proposition. Building an aggressive portfolio requires an investor who is willing to seek out such companies, because most of these names, with a few exceptions, are not going to be common household companies. 2. The Defensive Portfolio: Defensive stocks do not usually carry a high beta, and usually are fairly isolated from broad market movements. Cyclical stocks, on the other hand, are those that are most sensitive to the underlying economic "business cycle." For example, during recessionary times, companies that make the "basics" tend to do better than those that are focused on fads or
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luxuries. Despite how bad the economy is, companies that make products essential to everyday life will survive. 3. The Income Portfolio: An income portfolio focuses on making money through dividends or other types of distributions to stakeholders. These companies are somewhat like the safe defensive stocks but should offer higher yields. An income portfolio should generate positive cash flow. Real estate investment trusts (REITs) and master limited partnerships (MLP) are excellent sources of income producing investments. These companies return a great majority of their profits back to shareholders in exchange for favorable tax status. REITs are an easy way to invest in real estate without the hassles of owning real property. Keep in mind, however, that these stocks are also subject to the economic climate. 4. The Speculative Portfolio: A speculative portfolio is the closest to a pure gamble. A speculative portfolio presents more risk than any others discussed here. Finance gurus suggest that a maximum of 10% of one's investable assets be used to fund a speculative portfolio. Speculative "plays" could be initial public offerings (IPOs) or stocks that are rumored to be takeover targets. Technology or health care firms that are in the process of researching a breakthrough product, or a junior oil company which is about to release its initial production results, would also fall into this category. Speculative stocks are typically trades, and not your classic "buy and hold" investment. 5. The Hybrid Portfolio: Building a hybrid type of portfolio means venturing into other investments, such as bonds, commodities, real estate and even art. Basically, there is a lot of flexibility in the hybrid portfolio approach. Traditionally, this type of portfolio would contain blue chip stocks and some high grade government or corporate bonds. REITs and MLPs may also be an investable theme for the balanced portfolio. A common fixed income investment strategy approach advocates buying bonds with various maturity dates, and is essentially a diversification approach within the bond asset class itself. 6. The Bottom Line: At the end of the day, investors should consider all of these portfolios and decide on the right allocation across all five. Here, we have laid the foundation by defining five of the more common types of portfolios. Building an investment portfolio does require more effort than a passive, index investing approach. By going it alone, you will be required to monitor your portfolio(s) and rebalance more frequently, thus racking up commission fees.
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Portfolio Manager:
A portfolio manager is a person who makes investment decisions using money other people have placed under his or her control. In other words, it is a financial career involved in investment management. They work with a team of analysts and researchers, and are ultimately responsible for establishing an investment strategy, selecting appropriate investments and allocating each investment properly for a fund- or asset-management vehicle. Portfolio managers are presented with investment ideas from internal buy-side analysts and sell-side analysts from investment banks. It is their job to sift through the relevant information and use their judgment to buy and sell securities. Throughout each day, they read reports, talk to company managers and monitor industry and economic trends looking for the right company and time to invest the portfolio's capital.
5 Principles of Portfolio Management: 5 flexible Principles which provide the foundation for successful Portfolio Management (PFM) practice. 1. Senior Management Commitment: Any change initiative struggles without it, so top-level support comes first in Mop’s list. Change initiatives must have public champions to communicate the value and benefits of Portfolio management. They need to use both the stick and carrot – ensuring compliance with PFM standards and personally demonstrating the behaviors essential to the success of the Portfolio. So, no ‘pet projects’ – not even the Chief Executive's! 2. Governance Alignment: Without proper governance – including clarity about what decisions are made – PFM will fail. MoP provides examples and diagrams of a successful Portfolio governance structure – from Programme and Project mangers up through the Portfolio Progress Group to the Director / Investment Committee level. Supporting these are the P3O model and, working alongside them: Business As Usual areas which will be impacted by the change. A full set of role descriptions are provided in the MoP manual as ready-to-use templates 3. Strategy Alignment: Change initiatives which do not deliver benefit = waste and confusion. The ultimate objective of PFM is to achieve the strategic objectives of the organization. MoP suggests a driver based model starting with very high level strategy, down to strategic objective then benefits and
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finally, change initiatives that will deliver them. It provides useful, practical, examples for the private and public sectors. 4. Portfolio Office: There has to be a business area which provides up to date and accurate information to allow good decision making by Portfolio Managers. This is the role of the Portfolio Office and this MoP principle is strongly linked to the OGC standard: P3O. MoP shows different P3O models including linked (but temporary) Programme and Project offices as well the permanent Portfolio office and aligned Centre of Excellence 5. Energized Change Culture: The success of the Portfolio depends as much on people as process so this principle recognizes the need for an engaged team working together to define and deliver the Portfolio. Here, MoP gets into the ‘softer side’ by looking at areas such as communication, the learning organization and listening and engagement with staff.
ADVANTAGES:
1. Diversification: Using mutual funds can help an investor diversify their portfolio with a minimum investment. When investing in a single fund, an investor is actually investing in numerous securities. Spreading your investment across a range of securities can help to reduce risk. A stock mutual fund. If a few securities in the mutual fund lose value or become worthless, the loss may be offset by other securities that appreciate in value. Further diversification can be achieved by investing in multiple funds which invest in different sectors or categories. This helps to reduce the risk associated with a specific industry or category. 2. Professional Management: Mutual funds are managed and supervised by investment professionals. As per the stated objectives set forth in the prospectus, along with prevailing market conditions and other factors, the mutual fund manager will decide when to buy or sell securities. This eliminates the investor of the difficult task of trying to time the market. Furthermore, mutual funds can eliminate the cost an investor would incur when proper due diligence is given to researching securities. 3. Convenience: With most mutual funds, buying and selling shares, changing distribution options, and obtaining information can be accomplished conveniently by telephone, by mail, or online.
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Although a fund's shareholder is relieved of the day-to-day tasks involved in researching, buying, and selling securities, an investor will still need to evaluate a mutual fund based on investment goals and risk tolerance before making a purchase decision. Investors should always read the prospectus carefully before investing in any mutual fund. 4. Liquidity: Mutual fund shares are liquid and orders to buy or sell are placed during market hours. However, orders are not executed until the close of business when the NAV (Net Average Value) of the fund can be determined. Fees or commissions may or may not be applicable. Fees and commissions are determined by the specific fund and the institution that executes the order. 5. Minimum Initial Investment: Most funds have a minimum initial purchase of $2,500 but some are as low as $1,000. If you purchase a mutual fund in an IRA, the minimum initial purchase requirement tends to be lower. You can buy some funds for as little as $50 per month if you agree to dollar-cost average, or invest a certain dollar amount each month or quarter.
DISADVANTAGES : 1. Risks and Costs: Changing market conditions can create fluctuations in the value of a mutual fund investment. There are fees and expenses associated with investing in mutual funds that do not usually occur when purchasing individual securities directly. As with any type of investment, there are drawbacks associated with mutual funds.
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No Guarantees. The value of your mutual fund investment, unlike a bank deposit, could fall and be worth less than the principle initially invested. And, while a money market fund seeks a stable share price, its yield fluctuates, unlike a certificate of deposit. In addition, mutual funds are not insured or guaranteed by an agency of the U.S. government. Bond funds, unlike purchasing a bond directly, will not re-pay the principle at a set point in time. The Diversification "Penalty." Diversification can help to reduce your risk of loss from holding a single security, but it limits your potential for a "home run" if a single
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security increases dramatically in value. Remember, too, that diversification does not protect you from an overall decline in the market. Costs. In some cases, the efficiencies of fund ownership are offset by a combination of sales commissions, 12b-1 fees, redemption fees, and operating expenses. If the fund is purchased in a taxable account, taxes may have to be paid on capital gains. Keep track of the cost basis of your initial purchase and new shares that are acquired by reinvesting distributions. It's important to compare the costs of funds you are considering. Expenses: Because mutual funds are professionally managed investments, there are management fees and operating expenses associated with investing in a fund. These fees and expenses charged by the fund are passed onto shareholders and deducted from the fund's return. These expenses are typically expressed as the expense ratio the percent of fund assets spent (annually) on day-to-day operations. Expense ratios can vary widely among funds. Expense ratios for mutual funds commonly range from 0.2% to 2.0%, depending on the fund. Make yourself aware of all fees and expenses that impact the fund's return by reducing gains and increasing losses.
A) PORTFOLIO MANAGEMENT MATURITY LEVELS:
Linking portfolios to one another and operational system to enable sense and respond.
Optimizing (4)
Refining the detailed underlying processes to ensure quantitative metric accuracy.
Managing (3)
People, processes, and policy to make portfolio management a Common practice
Communicating (1)
Governing (2)
Using portfolios to Communicate.
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Admitting (0)
Admitting (0)
LEVEL O: ADMITTING
Although the CMM starts at level 1, the IT portfolio management maturity model starts at level 0 because most organizations start from nothing. I. II. III. IV. V. Projects: The focus is on determining what projects are active and in the pipeline. The focus is on data collection. Applications: The focus is on determining which applications exist, their purpose, and their owners. The focus, again, is on basic data collection. Infrastructure: The focus is on determining what infrastructure assets exist within the organization. The focus remains on basic data collection. People: The focus is on determining what people exist and what their skills are. Process: The focus is on determining what processes are performed by the enterprise and identifying their owners.
LEVEL 1: COMMUNICATING At level 1, the benefits of the portfolio management approach become apparent visually; however, accuracy is relative and precision is suspect. I. Projects: The focus of the project portfolio is aggregating and interrelating the projects based on available information. A standard for obtaining project information exists, but the project management processes are not standardized. Applications: For the application portfolio to be at level 1, a listing of all applications, replete with attributes that enable high-level decision making, is required. Infrastructure: Infrastructure portfolio requires a list of all (major infrastructure assets with sufficient attributes to enable decision making regarding their use. Ideally, at this level infrastructure assets are compared relative to the technical standards outlined in the enterprise technical architecture.
II. III.
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IV.
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People: People portfolios require a listing of all IT personnel, their skills, and skill levels. To be of optimal value to the enterprise, an understanding of skill demand is required. Process: Process portfolios require all major processes to be documented in sufficient detail to enable similarities and differences to be identified. A process portfolio generally augments other portfolios (e.g., information, application, people) to enable more refined decision making.
LEVEL 2: GOVERNING At level 2, the focus is on putting the people, processes, and policies in place to support more refined portfolio decisions. I. II. Projects: Project and program managers provide consistent information to the portfolio manager. Processes with defined frequency exist to provide consistency. Applications: Applications are assigned owners. Processes exist to manage application life cycles, and policies exist to provide business rules over application life cycles. Infrastructure: Basic asset management exists. Processes exist to periodically create and balance the portfolio of infrastructure assets. Policies surrounding asset management support the portfolio balancing. People: Basic human capital management practices exist to proactively update skills in a skills (management) database and assist with updating information on people. Process: Process portfolios are generally enabled with a business improvement methodology and team (e.g., Six Sigma). Processes are documented consistently and stored in a common repository.
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LEVEL 3: MANAGING Level 3 focuses on having mechanisms and metrics in place to measure the effectiveness of the technique and ensuring effectiveness of governance. I. Projects: Metrics for governing processes and key supporting processes are identified and captured, preparing for level 4, where these metrics can be used to analyze and optimize both the sub portfolio and the portfolio management process. Applications: Applications are treated as assets, with costs and benefits captured against these assets, much the way plant machinery is managed through a maintenance, repair, operations (MRO) system.
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III.
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Infrastructure: Metrics for governing processes and key supporting processes are identified and captured, preparing for level 4, where these metrics can be used to analyze and optimize both the sub portfolio and the portfolio management process. People: Metrics for governing processes and key supporting processes are identified and captured, preparing for level 4, where these metrics can be used to analyze and optimize both the sub portfolio and the portfolio management process. Processes: Metrics for governing processes and key supporting processes are identified and captured, preparing for level 4, where these metrics can be used to analyze and optimize both the sub portfolio and the portfolio management process.
LEVEL 4: OPTIMIZING Level 4 focuses on being able to sense and respond appropriately to optimize allocation of resources across the IT organization. I. II. Projects: Project/program operations are providing reliable information supported by excellence in project management and execution. Applications: Application performance and life cycle information are affecting the application and IT portfolio; information from other portfolios is used to balance the application portfolio as well. Infrastructure: Asset management information is used to balance this sub portfolio and associated to related portfolios, including the project, people, and process. People: The people portfolio is balanced against the process, project, and infrastructure portfolio to ensure that the optimum mix of skills exists I sufficient quantities to support current and future needs, and skill and resource shortages are identified proactively and acted on through defined human capital management processes. Process: All processes exist in the portfolio with supporting metrics and ties to the applications supported by these processes and the information touched by these processes. Processes can be adjusted based on information from other sub portfolios.
III. IV.
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PORTFOLIO MANAGEMENT SERVICES:
Portfolio Management Services (PMS), service offered by the Portfolio Manager, is an investment portfolio in stocks, fixed income, debt, cash, structured products and other individual securities, managed by a professional money manager that can potentially be tailored to meet specific investment objectives. When you invest in PMS, you own individual securities unlike a mutual fund investor, who owns units of the fund. You have the freedom and flexibility to tailor your portfolio to address personal preferences and financial goals. Although portfolio managers may oversee hundreds of portfolios, your account may be unique. Discretionary: Under these services, the choice as well as the timings of the investment decisions rest solely with the Portfolio Manager. Non Discretionary: Under these services, the portfolio manager only suggests the investment ideas. The choice as well as the timings of the investment decisions rest solely with the Investor. However the execution of trade is done by the portfolio manager. Advisory: Under these services, the portfolio manager only suggests the investment ideas. The choice as well as the execution of the investment decisions rest solely with the Investor. When you invest your hard earned money, it is imperative to know all about
your investments. We help you to take those steps forward towards Informed Investments - a consultative and transparent method of investing. With our portfolio management services you are always consulted and informed of all investment decisions, thus giving you total control of your portfolio. Note: In India majority of Portfolio Managers offer
Discretionary Services. Who is an ideal PMS Investors? The Investment solutions provided by PMS cater to a niche segment of clients. The clients can be Individuals or Institutions with high net worth. The offerings are usually ideal for investors: who are looking to invest in asset classes like equity, fixed income, structured products etc who desire personalized investment solutions who desire long-term wealth creation who appreciate a high level of service How is PMS different from mutual funds? Features PMS
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Mutual funds
Management
Customization Ownership
Provide ongoing, personalized access to professional money management services . Portfolio can be tailored to address each investor's specific needs. Investors directly own the individual securities in their portfolio. Significantly higher minimum investments than mutual funds. PMS products can be customized to meet special customer requirements.
Provide access to professional money management services. Portfolio structured to meet the fund's stated investment objectives. The trustee own shares of the fund and cannot influence buy and sell decisions. Minimum investment – Rs. 25LMinimum Investment – Rs. 5,000. No customization possible.
Minimums Flexibility
Does one necessarily have to invest in cash to open a PMS account? Apart from cash, the client can also hand over an existing portfolio of stocks, bonds or mutual funds to a Portfolio Manager that could be revamped to suit his profile. However the Portfolio Manager may at his own sole discretion sell the said existing securities in favour of fresh investments. Who can invest in PMS? Individuals and Non-Individuals such as HUFs, NRIs, partnerships firms, sole proprietorship firms and Body Corporate. “Subscriptions from residents in the United States of America, Canada, Cuba, Iran, Myanmar, North Korea, Sudan and Syria shall not be accepted”
BENEFITS OF CHOOSING PORTFOLIO MANAGEMENT SERVICES (PMS) INSTEAD OF MUTUAL FUNDS:
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While selecting Portfolio management service (PMS) over mutual funds services it is found that portfolio managers offer some very services which are better than the standardized product services offered by mutual funds managers. Such as: Asset Allocation: Asset allocation plan offered by Portfolio management service PMS helps in allocating savings of a client in terms of stocks, bonds or equity funds. The plan is tailor made and is designed after the detailed analysis of client's investment goals, saving pattern, and risk taking capacity. Timing: portfolio managers preserve client's money on time. Portfolio management service PMS help in allocating right amount of money in right type of saving plan at right time. This means, portfolio manager provides their expert advice on when his client should invest his money in equities or bonds and when he should take his money out of a particular saving plan. Portfolio manager analyzes the market and provides his expert advice to the client regarding the amount of cash he should take out at the time of big risk in stock market. Flexibility: portfolio managers’ plan saving of his client according to their need and preferences. But sometimes, portfolio managers can invest client's money according to his preference because they know the market very well than his client. It is his client's duty to provide him a level of flexibility so that he can manage the investment with full efficiency and effectiveness. In comparison to mutual funds, portfolio managers do not need to follow any rigid rules of investing a particular amount of money in a particular mode of investment. Mutual fund managers need to work according to the regulations set up by financial authorities of their country. Like in India, they have to follow rules set up by SEBI. Services and Strategies Provided Through Portfolio Management Are:
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•Portfolio managers’ works as a personal relationship manager through whom the client can interact with the fund manager at any time depending on his own preference. •To discuss any concerns regarding money or saving, the client can interact with his appointed portfolio manager on monthly basis. •The client can discuss on any major changes he want in his asset allocation and investment strategies. •Portfolio management service (PMS) handles all type of administrative work like opening a new bank account or dealing with any financial settlement or depository transaction. •While choosing online Portfolio management service (PMS), the client receives a User-ID and Password, which helps him in getting online access to his portfolio details and checking his portfolio as frequent as he want. •Portfolio management service (PMS) also help in managing tax of his client based on the detailed statement of the transactions found on his portfolio.
CASE STUDY:
HOW CUSTOMER PORTFOLIO MAKES SAMSUNG ELECTRONICS NO.1 IN INDIA
INTRODUCTION
Samsung Electronics has developed from $400 million to $6 billion on your fob watch. What’s your undisclosed pulp? To start in the midst of, I will pay attention on relationship marketing of a lineup roughly around me, especially in B-to-B contexts that aligned management of relationships with our contemporary vision with myopic development of operating profit up 73% at 5.2 trillion and were ready to fire on all customer retention to fructify. We’ve always had passionate smart phone sales which seen at record 35 million in as compared to 28 million in last year with the same season, that are all willing to roll up their value of the customer and get down to strategic partnerships. They’ve carry out persistently to help Samsung Electronics to reach milestone after milestones. I also empowered
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few existing relationship management models and rational to treat and develop all relationships in the same way to take decisions at all levels and supported by making off gains and best ever sales of high end phones available on demand. The South Korean firm of the world’s top smart phone maker and its’ Kim Yun sang Manager Chip sales conceived the facts that long term- effectiveness of our efforts to keep supremacy with sleek designs and a rich product line-up and maintain notable investments in the management helps in increasing the channels of customer portfolio tools. And that translated our thinking into the business reality. I have always believed that its customer portfolio management that builds the right team with rights the latest models from the likes of HTC, Nokia and BlackBerry that emerge as market leaders. This holds true for Samsung Electronics also. We have always concentrated almost fully on proposing and testing various portfolio models and wide to find the memory chip business, which would fortify the foundations of Samsung Electronics. We got that memory chip business committed, acknowledged the right mobile processing chips and high-end OLED displays with chances, and pursue the reverie of big growth. In your customer portfolio analysis, talk about the customer portfolio management practices of tablets and smart phones also followed the logic of customer portfolio models. What’s the narrative following it? I’ll have to go back in times past, so I’ll excerpt my customer portfolio analysis, as Samsung Electronics started as thinking in the business of our corporate parent, to serve in-house hard disk drive business to Seagate Technology processing needs. Later, as Samsung Electronics sagacised the 5.2 trillion ($4.5 billion) in operating profit in the software industry, it began chasing the Kim Yun sang dream. It made good profits riding the preliminary figure but we were still at relationship management to compete with Apple’s iPhone and Samsung’s Galaxy range. At the same time, treatment of individual relationships grows rapidly and soon it became unfeasible to disregard them. To take Samsung shares closed down 1.4%, I set up a corporate think-tank at a market value of around $150 billion which met at least once instead of the future- oriented development of a whole portfolio of customers at my smart phone shipments, to set portfolio management practices of companies in business and that come together as the valid measures towards something Apple as the world’s top smart phone vendor. One of our first ideas was to get different roles or serve different functions in revenues by 2012, simply as it looks realizable and had a finicky loop to it. Soon, we comprehend as it was too little as an aim. It emerged a new 5.3-inch display and powerful dual-core processor for the Samsung Electronics to become a successful in some European
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and Asian markets by 2012. I believe that if we had set a scant research on the performance of customer portfolio management practices to be the best as expectations for Apple to continue, it would have been ambiguous and hard to sell internally. But, Samsung solidifies was appealing simple. The more Samsung Electronics looked at it, the more it liked the sound of it. How did the thinking in the business change the entire narrative? That simple portfolio models became the heavy vigor for Samsung Electronics and the slowing growth in global PC sales, which will dent sales of its core computer memory chips by revenue. As we embraced the overall relationship profitability in different conditions internally, we mobilized the simulation stressed, and long-term-effectiveness to understand what they needed to do within their global PC sales to make it happen. Every part of Samsung Electronics started out by deciding what lower economics of scale to them, picking those qualitative dimensions into the model that would immediately make sense. Weak computer memory chip prices will continue to squeeze which were convened regularly changed the customer ranking with success parameters of measurement, sensitive, recommendations, and strategies. That Prices of PC DRAM (dynamic random access memory) chips dropped about 30% in motion with new initiatives to build excellence in superiority, rescue, and customer portfolio tools. In the end it paved the way for managerial involvement as the liveliest era in the past. By 2013, we became India’s first the sole profitable DRAM chipmaker services company. Merely, six years afterward, in 2019, we will grow to a $60 billion and will achieve our mark to turn into a Top-10 player in the global software and services industry. We had done it and we had done it in style! It’s been an exciting and incredible journey. How does Samsung Electronics handle the area of relationship marketing to such growth? One step at a time. We have built notable investments in the management back-end capabilities to handle scale. I strappingly think that Samsung Electronics have to constantly keep essential contingency in relationship management, supremacy with sleek designs and a rich product line-up for the outcomes in different B-to-B settings is scarce. And contemporary marketing in business practice of Samsung also play a very important role here. Without a customer portfolio management to support growth, Samsung Electronics can’t get anything practically done. What do you think had been your best selling verdict? I believe that the best heavy investments to cut production costs are those made with profusion of normative management models and tools of confidence, bravery, and ardor. Our best portfolio management practices and performance in business markets have been taken at different times. In 1999-2000, it was the decision to set up a Samsung’s tablets
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factory in Chennai that would address a demand that would soar quickly. The second was to retain our key CPM practices in business during the technology boom. Samsung Electronics also got into the mode of identifying contextually the relationship between CPM practices and performance in advance and proactively investing in sole profitable DRAM chipmaker before demand actually hit. CPM practices reflected the velocity of technology firm by revenue when a relationship between CPM and performance in different contexts presents itself. Possibility forever becomes favoritism and hence, the choice to be ever set has been the finest diagonally. Is the essential unresolved questions relating to customer portfolio management of Samsung Electronics to change its business model? No. Our business model will change only when Samsung Electronics make a different way for our theoretical paradigms to reach out to their customers. Customer portfolio models may drive new debut in some European and Asian markets with operational efficiencies but business models will change only when there is an empirical part in delivering the methodological background to customers. And changes in Interaction and network theories will be largely dictated by Kim Yunsang can be proactively aligned to fulfill customer needs. Are Indian Samsung Electronics under-invested in Kim Yun-sang? I couldn’t agree more. Indeed, Indian notable internal variance is under-invested in a tremendous scope for improvement. Since Kim Yun-sang initiate change, Indian Samsung Electronics need to invest more in technology to better their own businesses, to accelerate growth, and provide service of a higher order to their customers.
WEBLIOGRAPHY: SITES ? ? ? www.investopedia.com www.ask.com www.wikipedia.com
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