Analyzing an Equity Mutual Fund Fact

Sheet, Risk & Performance Parameters

February, 2012

Fact Sheet

Important items in a Fact Sheet

Manager Review and Outlook ( Macro-Economic Review, Equity market overview and outlook, Fixed Income overview and outlook)

Fund Managers profile

Scheme Details ( Investment objective, Inception date, NAV, AUM, Minimum investment amount, Loads and Expense ratio,
Redemption process)

Performance

Portfolio and asset Allocation

Risk Statistics

Market Overview & Outlook

This section equips you

with the broader macroeconomic parameters and
updates with the overview
and outlook of Equity and
Fixed Income Market

Disclaimer: This is for illustrative purpose only and no investment decision should be made from it .There could be various sources for the above information.

How to Read a Fact Sheet

Ranking by rating agencies

Fund Manager
experience

profile

and

The
investment
objective
provides an overview of the
scheme to the prospective
investor i.e. investing for
growth, income or capital
protection as stated in the SID
of the respective scheme

It gives the proportion of assets

allocated to different classes
such as debt, equity or money
market instrument stated in the
SID of the respective scheme.

Net Asset Value (NAV) is the

value per unit at current market
prices computed as net assets
divided by units outstanding

It lists the individual stocks in which the

fund has invested its corpus. The
market value and percentage of net
assets hold by the fund is also
mentioned.

Size of the fund

Sector wise break down of

the portfolio and gives the
percentage
holding
in
respective sector

Key portfolio statistics or performance ratios

should be used to screen and compare mutual
funds to find those are worthy of consideration for
inclusion in ones portfolio

Performance & Dividend History

Standard Benchmark
Period for which the performance of the
scheme is mentioned against its benchmark
and standard benchmark

Scheme Benchmark
Value of Investment of Rs 10,000
made at inception

NAV of scheme as of month end

Investors may note that the difference in dividend per unit for 'Individuals'
and 'Others', in the case of debt oriented Schemes, is due to differential
rate of applicable Dividend Distribution Tax (DDT)
Pursuant to payments of dividend, the NAV of the Schemes would fall
to the extent of payout, and statutory levy, if any

Disclaimer: This is for illustrative purpose only and no investment decision should be made from it. Past performance may or may not be sustained in future and should not be used as a basis for
comparison with other investments.

Risk & Performance Parameters

Portfolio Turnover Ratio

Volatility measure
Standard deviation
Beta
R-Square

Sharpe Ratio

Portfolio Turnover Ratio

Portfolio turnover is the ratio of amount of sales or purchases ( which ever is lower ) divided by the net asset of the
fund.

E.g. Suppose the net asset value of a scheme in the last 12 months is 100 Cr. The value of the total purchase amount
is 50 Cr which is lower of sales and purchase during the same period. The Turn over ratio is 50 Cr/100 Cr = 0.50 or
50%. This indicates that fund manager has shuffled 50% of the portfolio in the last one year.

Higher the portfolio turnover, greater the amount of sales or purchase of assets done by fund manager. It may also
indicate timing and momentum trading as strategies to generate return.

Turnover ratio would be most relevant to analyze in case of equity and balanced fund, particularly those funds that
derive large party of their income from actively trading. It would not be relevant for equity funds, with a value based,
long term investment philosophy.

Volatility Measures

Volatility is the relative rate at which the price of a security moves up and down. If the price of a stock moves up and
down rapidly over short time periods, it has high volatility. If the price almost never changes, it has low volatility.

Volatility is an inherent part of all securities market

Normally fact sheet of mutual funds scheme carries the following measures
Standard Deviation
Beta
R-Square

Consider Scheme A and Scheme B over the given period of time.

Scheme A is more volatile in nature than scheme B

Standard Deviation

Standard deviation measures the fluctuation of a funds return around a mean

Higher the standard deviation, riskier the security

Standard deviation gives an idea of how volatile the earnings are.

The above example is just for illustrative purpose.

Beta

Beta measures the sensitivity of a portfolio against its benchmark. Its is also called the sensitivity with respect to the
market movement.

Equity funds can have beta values as 1, >1 or <1.

Beta of 1.0 indicates that the fund NAV will move in same direction as that of benchmark index. The fund will move up
and down in tandem with the movement of the markets (as indicated by the benchmark)

A Beta of less than 1.0 indicates that the fund NAV will be less volatile than the benchmark index.

A Beta of more than 1.0 indicates that the investment will be more volatile than the benchmark index. It is an
aggressive fund that will move up more than the benchmark, but the fall will also be steeper.
For example, if the beta of XYZ-Equity (G) fund is 1.2 - then its considered as 20% more volatile than the benchmark
index (beta of benchmark index being 1). If the market is expected to move up by ten per cent, the fund should move
by 12 per cent (obtained as 1.2 multiplied by 10). Similarly if the market loses ten per cent, the fund should lose 12 per
cent (obtained as 1.2 multiplied by minus 10)
Similarly, if the beta of ABC-Equity (G) fund as 0.70 - this means the mutual fund scheme will be less volatile than its
benchmark index.

R- Squared

R Square is an indicator of the confidence in estimating Beta.

While considering the beta of any fund, an investor also needs to consider R-squared that measures the correlation
between beta and its benchmark index. The beta of a fund has to be seen in conjunction with the R-squared for better
understanding the risk of the fund.

In other words R-Square indicated how closely the funds performance correlates to its benchmark.

R-Squared value ranges between 0 to 1

R-squared=0 indicated no correlation and R-squared=1 indicates perfect correlation.

Sharpe Ratio

Sharpe Ratio measures the excess return that a fund has generated relative to the risk taken.

Risk in Sharpe ratio is measured by standard deviation.

Sharpe Ratio= (Rp-Rf)/ Standard deviation. It measures the excess return over risk free return for a unit of risk taken
( Rp : Return of the portfolio ; Rf : risk free return)

The higher the Sharpe ratio , the better a funds return relative to the amount of risk taken. A mutual fund with a higher
SR is better because it implies that it has generated higher returns for every unit of risk that was taken. On the
contrary, a negative Sharpe ratio indicates that a risk-free asset would perform better than the fund being analyzed.

Mutual Fund Evaluation Criteria

Consistent Performer

Volatile Performer

Lower standard deviation, higher Sharpe Ratio ( Higher Ranked Fund)

Higher standard deviation, Lower Sharpe Ratio ( Lower Ranked Fund)

Expense Ratio

The expenses incurred in managing a mutual fund scheme, which is borne by the investor.

Those expenses include investment management and advisory fees, legal and audit fees, custodial and transfer fees,
fund administration expenses, marketing, and other costs of offering the fund .

SEBI regulates over the maximum expenses that can be charged to the schemes.

Net Assets

Equity Scheme

First Rs 100 Cr

2.50%

Next Rs 300 Cr

2.25%

Next rs 300 Cr

2.00%

On the balance of Assets

1.75%

Assuming that an equity scheme generating 15% returns has net assets of Rs 100 crore. With the operating expense
ratio at 2.50%, the effective return would be 12.5% (i.e. 15-2.5).

Tutorial

There are two equity schemes with similar investment objectives.

Scheme

Return

Risk Free Return

Standard Deviation

ABC Equity (G)

22%

6%

24.60%

XYX Equity (G)

20%

6%

22.10%

Assuming other parameters remain same, which Scheme would you choose?
Option A- ABC Equity (G)

OR

Option B- XYZ equity (G)

Disclaimer: The above example is just for illustrative purpose and is not meant to represent the performance of any particular investments

Tutorial

Sharpe ratio of ABC= (22-6)/24.60=0.65

Sharpe ratio of XYZ = (20-6)/22.10=0.63

Expense ratio for both the scheme is same.

Therefore the risk adjusted return is better for scheme ABC and hence choose option A.

Disclaimer: The above example is just for illustrative purpose and is not meant to represent the performance of any particular investments

Disclaimer

Statutory Details: DSP BlackRock Mutual Fund was set up as a Trust and the settlors/sponsors are DSP ADIKO Holdings Pvt. Ltd. & DSP HMK Holdings Pvt. Ltd.
(collectively) and BlackRock Inc. (Combined liability restricted to Rs. 1 lakh). Trustee: DSP BlackRock Trustee Company Pvt. Ltd. Investment Manager: DSP BlackRock
Investment Managers Pvt. Ltd. Risk Factors: Mutual funds, like securities investments, are subject to market and other risks and there can be no assurance that
the Schemes objectives will be achieved. As with any investment in securities, the NAV of Units issued under the Schemes can go up or down depending on the
factors and forces affecting capital markets. Past performance of the sponsor/AMC/mutual fund does not indicate the future performance of the Schemes.
Investors in the Schemes are not being offered a guaranteed or assured rate of return. Investors in the Schemes are not being offered a guaranteed or assured rate of
return. The Schemes is required to have (i) minimum 20 investors and (ii) no single investor holding>25% of the corpus of the Schemes. In case of non-fulfillment of the
condition of minimum 20 investors, the investors money would be refunded, in full, immediately after the close of the New Fund Offer Period. In case of non-fulfillment with
the condition of 25% holding by a single investor on the date of allotment, the application to the extent of exposure in excess of the 25% limit would be rejected, and the
allotment would be effective only to the extent of 25% limit would be refunded/redeemed. The name of the Scheme do not in any manner indicate the quality of the
Schemes, its future prospects or returns. For Scheme specific risk factors, please refer the relevant SID. For more details, please refer the Key Information Memorandum
cum Application Forms, which are available on the website, www.dspblackrock.com, and at the ISCs/Distributors.. Please read the Scheme Information Document and
Statement of Additional Information carefully before investing.