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BUY NOW.
IT S CHEAP
STOCKS?
MFs? GOLD?
WAIT.
How can I make sure I make money but not lose any?
New or experienced investors get equally confused with market ups and downs
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Market sentiment affects investor behavior: Many investors buy high, sell low!
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Asset allocation is more important than market timing. But how important is it?
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*Source: From the study titled Determinants of Portfolio Performance, published by Gary P. Brinson, L. Randolph Hood and Gilbert L. Beebower in Financial Analysts Journal in 1986. This study covered 91 large U.S pension plans over the period 1974-1983 and concluded that investment policy (asset classes chosen and their proportion) dominated investment strategy (market timing and security selection), explaining on average 93.60% of the variation in total plan return.
Brinson, Hood & Beebower said this in 1986. Many more said it afterwards.
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Simple principle: Higher the earning potential of an asset class, higher the allocation towards it
The Yield Gap helps in identifying the relative attractiveness between equity and fixed income to determine the appropriate asset allocation
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Jan
30% 30% 30% 20% 80% 30% 50% 80% 90% 90% 90% 80% 10%
Feb
30% 30% 40% 20% 90% 30% 50% 80% 90% 90% 90% 70% 10%
Mar
30% 30% 40% 20% 90% 10% 50% 70% 90% 90% 90% 70% 10%
Apr
30% 30% 50% 20% 90% 10% 60% 60% 90% 90% 90% 70% 10%
May
30% 30% 50% 30% 90% 20% 50% 60% 90% 90% 90% 70% 20%
Jun
30% 30% 50% 30% 90% 20% 50% 50% 90% 90% 90% 70% 40%
Jul
30% 40% 20% 40% 80% 20% 50% 50% 90% 90% 90% 80% 40%
Aug
20% 40% 20% 40% 70% 20% 50% 50% 90% 90% 90% 90% 50%
Sep
20% 30% 20% 30% 50% 20% 50% 50% 90% 90% 90% 90% 60%
Oct
10% 30% 30% 30% 40% 30% 50% 50% 90% 90% 90% 90% 70%
Nov
10% 30% 30% 30% 30% 40% 40% 50% 90% 90% 90% 90% 70% 10%
Dec
10% 30% 30% 30% 20% 60% 30% 50% 90% 90% 90% 90% 70% 10%
This slide exhibits equity allocation as recommended by the Yield Gap Ratio Model. The colors in the table above depict increase (green) /decrease (red) /no change (white) in allocation from previous month. Data source: Internal.
If one managed asset allocation according to the Yield Gap ratio, what would have happened?
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0 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Dec-13 CY Returns* YG Model PE Model CRISIL Bal F NIFTY 2013 3.1% 3.7% 6.0% 6.8% 2012 16.1% 2011 0.7% 2010 9.6% 7.6% 2009 2008 2007 2006 2005 2004 2003 2002 9.6% N.A. 3.3% 2001 8.2% -5.0% N.A. -16.2% Nov - Dec 2000 1.8% 1.3% N.A. 2.2% 63.9% -12.4% 33.6% 30.9% 46.5% 26.3% 113.6% 8.3% 43.4% 71.9%
22.8% -10.5%
This slide exhibits long term performance figures from Nov 2000 to Dec 2013. The performance of the YG and PE models is based on select DSP BlackRock Mutual Fund (DSPBR) schemes. Schemes considered for equity allocation: (i) Nov 2000 - March 2003: DSPBR Equity Fund (ii) March 2003 till Dec 2013; DSPBR Equity Fund and DSPBR Top 100 Equity Fund (in equal proportion); for fixed income allocation: (i) Nov 2000 - May 2007: DSPBR Bond Fund (ii) May 2007 till Dec 2013: DSPBR Strategic Bond Fund and DSPBR Short Term Bond Fund (in equal proportion). These figures, however, do not in any manner indicate the future returns/performance of DSP BlackRock Dynamic Asset Allocation Fund. The CRISIL Balanced Fund Index commenced from April 1, 2002 and hence the graph for it has been plotted accordingly. *Calendar Year (CY) performance. Data source: Internal.
The Yield Gap not only provides investors a superior way of investing, but also endeavors to limit downside during market downturns
Note: An exit load of 1% has been considered whenever the asset allocation changes from equity to debt or debt to equity. Past performance may or may not be sustained in future.
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13%
Minimum
8% 5% -1%
Yield Gap Model Price Earnings Model
-1%
Nifty
3%
5%
4% -7%
Nifty
-1%
CRISIL CRISIL Bal F Short Term Index Index
Minimum
This slide exhibits the maximum & minimum returns (rolling CAGR returns) generated by investment made on any date for a 5 and 3 year period during the past 10 years period ending on Dec 31, 2013. The performance of the YG and PE models is based on select DSP BlackRock Mutual Fund (DSPBR) schemes. Schemes considered for equity allocation from Nov 2003 till Dec 2013: DSPBR Equity Fund and DSPBR Top 100 Equity Fund (in equal proportion); for fixed income allocation: (i) Nov 2003 - May 2007: DSPBR Bond Fund (ii) May 2007 till Dec 2013: DSPBR Strategic Bond Fund and DSPBR Short Term Bond Fund (in equal proportion). These figures, however, do not in any manner indicate the future returns/performance of DSP BlackRock Dynamic Asset Allocation Fund. Data source: Internal.
An investment product that utilizes an auto asset allocation strategy based on the Yield Gap Model can be a strong addition to any investors core portfolio
Note: An exit load of 1% has been considered whenever the asset allocation changes from equity to debt or debt to equity. Past performance may or may not be sustained in future.
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This slide exhibits the consistent performance of Yield Gap from May 2004 to Oct 2008. The performance of the YG and PE models is based on select DSP BlackRock Mutual Fund (DSPBR) schemes. Schemes considered for equity allocation from May 2004 till Oct 2008: DSPBR Equity Fund and DSPBR Top 100 Equity Fund (in equal proportion); for xed income allocation: (i) May 2004 - May 2007: DSPBR Bond Fund (ii) May 2007 till Oct 2008: DSPBR Strategic Bond Fund and DSPBR Short Term Bond Fund (in equal proportion). These gures, however, do not in any manner indicate the future returns/performance of DSP BlackRock Dynamic Asset Allocation Fund. Data source: Internal.
Following the Yield Gaps recommendations results in low volatility over any market cycle and helps in protecting wealth during market downturns
Note: An exit load of 1% has been considered whenever the asset allocation changes from equity to debt or debt to equity. Past performance may or may not be sustained in future.
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Note:
DSP BlackRock Mutual Fund (DSPBR) Equity Schemes considered for equity allocation from Jan 2004 till Dec 2013: DSPBR Equity Fund and DSPBR Top 100 Equity Fund (in equal proportion). Industry Top 2 equity schemes considered for equity allocation: From all the diversied Equity Funds in the industry with AUM greater than Rs. 1,000 crore as at Dec 31, 2013, the Top 2 equity schemes were selected every year based on last one year performance. Thus, Top 2 equity schemes in every calendar year were included in the model on January 1st of the succeeding year. DSPBR Fixed income schemes considered for debt allocation: (i) Jan 2004 - May 2007: DSPBR Bond Fund (ii) May 2007 till Dec 2013: DSPBR Strategic Bond Fund and DSPBR Short Term Bond Fund (in equal proportion). Performance is in CAGR terms for the period ending Dec 31, 2013. These gures, however, do not in any manner indicate the future returns/ performance of DSP BlackRock Dynamic Asset Allocation Fund. Data source: Internal
16.7% 15.7%
10 Years
8 Years
5 Years
3 Years
2 Years
1 Year
The chart above shows that as long as investors implement an asset allocation based investment strategy, the choice of the underlying mutual fund schemes is not the most critical factor dening portfolio performance. If one considers the performance above, even having selected the Industry Top 2 perfoming equity schemes at all times would not have resulted in better portfolio performance over a long term investment horizon.
Over the long term, asset allocation neutralizes the impact of the choice of funds
Note: An exit load of 1% has been considered whenever the asset allocation changes from equity to debt or debt to equity. Past performance may or may not be sustained in future.
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For the rst time in Indian mutual fund history, the question isnt Who can. It is Who cant!
We believe that the product construct of this Scheme is simple and effective enough to appeal to any investor, whether amateur or experienced
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Solution focused
1 2
Active approach
Achieves tactical asset allocation based on the relative attractiveness of equity and debt markets Automatic rebalancing of portfolios to not only aim for better returns but also to limit downside for investors during market downturns Uses the superior Yield Gap metric to assess market valuations Suitable for investors looking at long-term wealth creation, irrespective of market conditions
3 4 5
All-weather fund
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Scheme Features
Features
Name of the Scheme Type of Scheme Underlying Equity Schemes* Underlying Fixed Income Schemes* Fund Managers NFO dates Benchmark Entry load Exit load DSP BlackRock Dynamic Asset Allocation Fund Open-ended Fund of Funds Scheme DSP BlackRock Equity Fund DSP BlackRock Top 100 Equity Fund DSP BlackRock Strategic Bond Fund DSP BlackRock Short Term Fund Apoorva Shah & Dhawal Dalal 17 January 2014 31 January 2014 CRISIL Balanced Fund Index Not Applicable Holding period <= 1 year: 1% Holding period >1 year; <=2 years : 0.5% Holding period >2 years: Nil Regular Plan Direct Plan Growth (default option) Dividend Payout; Dividend Reinvest
Plans Options
*DSP BlackRock Dynamic Asset Allocation Fund also has a provision to invest in three other equity schemes (DSP BlackRock Focus 25 Fund, DSP BlackRock Opportunities Fund and DSP BlackRock India T.I.G.E.R. Fund (The Infrastructure Growth and Economic Reforms Fund) and three other xed income schemes (DSP BlackRock Money Manager Fund, DSP BlackRock Banking & PSU Debt Fund and DSP BlackRock Income Opportunities Fund) of DSP BlackRock Mutual Fund. Please read the SID carefully for more details on these schemes and also for more details on risk factors before investment.
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Disclaimer: In the preparation of the material contained in this document, DSP BlackRock Investment Managers Pvt. Ltd. (the AMC) has used information that is publicly available, including information developed in-house. Information gathered and material used in this document is believed to be from reliable sources. The AMC however does not warrant the accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as will, expect, should, believe and similar expressions or variations of such expressions that are forward looking statements. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, etc. All figures and other data given in this document are dated and the same may or may not be relevant in future. Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to the units of the Scheme. Investment Objective: The investment objective of the Scheme is to seek capital appreciation by managing the asset allocation between specified equity mutual funds schemes and debt mutual funds schemes of DSP BlackRock Mutual Fund. The Scheme will dynamically manage the asset allocation between the specified equity mutual funds schemes and debt mutual funds schemes of DSP BlackRock Mutual Fund based on the relative valuation of equity and debt markets. The Scheme may also invest a certain portion of its corpus in money market securities and/ or money market/liquid schemes of DSP BlackRock Mutual Fund, in order to meet liquidity requirements from time to time. However, there is no assurance that the investment objective of the Scheme will be realized. Asset Allocation: Units of DSP BlackRock Equity Fund and/or DSP BlackRock Top 100 Equity Fund and/or other specified schemes of DSP BlackRock Mutual Fund: 10% - 90%, b) Units of DSP BlackRock Strategic Bond Fund and/or DSP BlackRock Short Term Fund and/or other specified schemes of DSP BlackRock Mutual Fund: 10%-90% and c) Money market securities and/or units of money market/liquid schemes of DSP BlackRock Mutual Fund: 0%-10%. Investment Strategy: The asset allocation of the Scheme shall be based on the Yield Gap Ratio Model. Exit load: Holding period from date of allotment : Less than or equal to one year: 1%; Greater than one year and less than or equal to two years: 0.5%; Greater than two years: Nil. The expenses of the scheme will be over and above the expenses charged by the underlying schemes. For complete details on risk factors, event of suspension of subscriptions and more details, investors are requested to read the Scheme Information Document (SID) of the Scheme. For risk factors and product labeling details of the Underlying Schemes, investors are requested to read the respective SIDs of the Underlying Schemes. Past performance may or may not be sustained in the future.
Mutual fund investments are subject to market risks, read all scheme related documents carefully before investing.
Note: Images used in slides 2,3,7 and 16 of this document are stock images utilized for illustrative purposes only, and statements mentioned next to the images may or may not necessarily reect the actual, real life views of the people appearing on these images.
Debt Markets
Equity Markets
VS
Equity Allocation 90% 80% 70% 60% 50% 40% 30% 20% 10%
Modied Yield Gap Ratio <0.7 0.7 - 0.8 0.8 - 0.9 0.9 - 1 1 - 1.1 1.1 - 1.2 1.2 - 1.3 1.3 - 1.4 >1.4
Equity Allocation 90% 80% 70% 60% 50% 40% 30% 20% 10%
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Price Earnings (PE) Model CRISIL Balanced Fund Index (CRISIL Bal F)
9.3%
12%
7.1%
7.9%
8.4%
6%
0%
Last 10 years
Last 5 years
Last 3 years
The above charts assume monthly SIP investments of Rs. 1000 on the last day of each month. The XIRR returns are for the period ending Dec 2013. The performance of the YG and PE models is based on select DSP BlackRock Mutual Fund (DSPBR) schemes. Schemes considered for equity allocation from Jan 2004 till Dec 2013: DSPBR Equity Fund and DSPBR Top 100 Equity Fund (in equal proportion); for xed income allocation: (i) Jan 2004 - May 2007: DSPBR Bond Fund (ii) May 2007 till Dec 2013: DSPBR Strategic Bond Fund and DSPBR Short Term Bond Fund (in equal proportion). These gures, however, do not in any manner indicate the future returns/performance of DSP BlackRock Dynamic Asset Allocation Fund. An exit load of 1% has been considered whenever the asset allocation changes from equity to debt or debt to equity. Past performance may or may not be sustained in future. Data source: Internal.
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Note: This slide exhibits the CAGR returns generated by investments made for the above mentioned time periods ending Dec 2013. The performance of the YG and PE models is based on select DSP BlackRock Mutual Fund (DSPBR) schemes. Schemes considered for equity allocation from Jan 2004 till Dec 2013: DSPBR Equity Fund and DSPBR Top 100 Equity Fund (in equal proportion); for xed income allocation: (i) Jan 2004 - May 2007: DSPBR Bond Fund (ii) May 2007 till Dec 2013: DSPBR Strategic Bond Fund and DSPBR Short Term Bond Fund (in equal proportion). These gures, however, do not in any manner indicate the future returns/performance of DSP BlackRock Dynamic Asset Allocation Fund. An exit load of 1% has been considered whenever the asset allocation changes from equity to debt or debt to equity. Past performance may or may not be sustained in future. Data source: Internal.
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Note: This slide shows the history of negative returns generated by investments made for the above mentioned holding periods, during the period Jan 2004 to Dec 2013. The performance of the YG and PE models is based on select DSP BlackRock Mutual Fund (DSPBR) schemes. Schemes considered for equity allocation from Jan 2004 till Dec 2013: DSPBR Equity Fund and DSPBR Top 100 Equity Fund (in equal proportion); for fixed income allocation: (i) Jan 2004 - May 2007: DSPBR Bond Fund (ii) May 2007 till Dec 2013: DSPBR Strategic Bond Fund and DSPBR Short Term Bond Fund (in equal proportion). These figures, however, do not in any manner indicate the future returns/performance of DSP BlackRock Dynamic Asset Allocation Fund. An exit load of 1% has been considered whenever the asset allocation changes from equity to debt or debt to equity. Past performance may or may not be sustained in future. Data source: Internal.
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