Treynor Ratio  =  (Portfolio Return − Risk-Free Rate) / Portfolio Beta 

0.09 = (0.12 - 0.07) / Beta

0.09 = 0.05 / Beta

Beta = 0.05 / 0.09

Beta = 0.55

If regular income is the investment objective, funds will be invested in asset classes generating periodical income like dividend paying stocks, interest paying bond or/and rent paying realty.

(If the investment objective is capital appreciation, then investments need to be high return investments (like equity). If capital preservation is the primary investment objective, asset allocation will be tilted towards safe bonds and debt securities)

Offer for Sale (OFS) is a mechanism by which existing shareholders of a listed company can sell their shares to the public through the stock exchange.

It is only for listed companies and is mainly used to comply with SEBI regulations for disinvestment by promoters or large shareholders.

Unlisted companies or startups cannot use OFS, they typically raise capital via IPO, private placement or other fundraising methods.

The Holding Period Return (HPR) is calculated using the formula:

HPR = [(Ending Price − Beginning Price) + Dividends]  /  Beginning Price 

= [( 240 - 200 ) + 10] / 200

= (40 + 10) / 200

= 50 / 200

= 0.25  =  25%

High Water Mark is the highest value that the portfolio/account has reached. The portfolio manager charges performance based fee only on increase in portfolio value in excess of the previously achieved high water mark.

Under the High Water Mark (HWM) principle, performance fees are charged only on gains made above the previous highest value of the portfolio.

In this case:

• Initial contribution = Rs. 2 crores
• Portfolio value after 1 year = Rs. 2.30 crores
• Gain above HWM = Rs. 30 lakhs

So, the performance fee is chargeable only on Rs. 30 lakhs, the amount exceeding the previous HWM.

Performance fees are usually charged only if the portfolio's return exceeds the hurdle rate. If the portfolio does not exceed the hurdle rate, no performance fee is charged.

In this case:

• Hurdle rate: 11% per year
• Portfolio return in Year 1: 8%

Since the portfolio return (8%) is less than the hurdle rate (11%), the portfolio did not meet the required threshold for a performance fee to be charged. Therefore, no performance fee is charged for Year.

The key difference is Customization.

PMS : Offers highly customized investment portfolios tailored to individual investor's specific needs, risk tolerance, and financial goals. 

Mutual Funds : Provide standardized investment portfolios that follow a predetermined investment objective.

"Finding a buyer for the portfolio" is not part of the portfolio management process because portfolio management focuses on managing investments, not selling them to customers.

The investor has deposited Rs 50 lakhs. So the effective return has to be calculated on the total amount deposited

Return on Investment = Net Return on Investment / Cost of Investment × 100%

= 3,40,000 / 50,00,000 x 100%

= 6.8%

Portfolio management services can be classified on the basis of product class such as –

1. Equity based PMS 2. Fixed Income based PMS 3. Commodity PMS 4. Mutual Fund PMS 5. Multi Asset based PMS

There is no product class such as Forex PMS.