Financial Markets

  • Pension Funds

    • The objective of Social Security System is to provide a socially adequate and equitable retirement protection system on a sustainable basis.
    • Defined Benefit plans usually involve a pension trust where there is a promise to pay a definite level of pension, and which are not directly related to the contributions they make or their employer makes on their behalf to the fund.
    • In defined contribution plans, the contributions made by or on behalf of the employee are accumulated and paid on retirement along with such returns as may be generated by the fund on the investments made.
    • The process of pension movement normally involves the investment objective, development of asset class, selecting optimal portfolio, risk sensitive analysis etc.
    • The Employee Benefits Security Administration is responsible for administering and enforcing the fiduciary, reporting and disclosure provisions of Title I of the Employee Retirement Income Security Act of 1974 (ERISA).
    • The EPS 1995 is a non-contributory (only the employer contributes) defined benefit scheme. It provides for the payment of a member's pension upon the member's superannuation/retirement, disability, and widow/widower pension, and children's pension upon the member's death.
    • The Public Provident Fund (PPF), a defined contributory was started in 1968-69 with the aim to provide a financial instrument to workers in the unorganized sector to ensure old age income security by accumulating sufficient savings.
    • Life Insurance Corporation (LIC) of India provides pension plans, which can be bought by both individuals and companies. A company may provide superannuation benefits by starting a privately administered superannuation fund or by buying a superannuation policy from LIC.
    • Employees Provident Fund Organization (EPFO) run under the Ministry of Labor is a primary organization for retirement income for private employees in India.

     

    Hedge Funds

    • The Hedge Fund was started in the year 1949 by Alfred W. Jones which marked the evolution of Hedge Fund industry
    • The term Hedge Fund refers to any pooled investment vehicle that is privately organized, administered by professional investment managers, and not widely available to the public.
    • The factors driving the growth of Hedge Fund industry are: Low Barrier to Entry, Attractive Compensations System, Intellectual Freedom, and Improved Industry Infrastructure.
    • Participants in the Hedge Funds industry are: The sponsor and the investors, The manager or management company, Board of directors, Investment Advisor, Administrator, Distributors, Registrar/Transfer Agent , Custodian , Executive brokers, Prime brokers, Auditors, Legal Advisors and Tax consultants.
    • Hedge Funds use different types of strategies such as: Relative Value of Strategies, Event-Driven Strategies, and Directional Strategies.
    • Fund of Funds (FoFs) is a portfolio of Hedge Funds offering small investors with minimal investment exposure to a wide range of alternative Hedge Funds investment styles and strategies.