Axis Dynamic Equity Fund. (An open ended dynamic asset allocation fund)

Transcription

1 Axis Dynamic Equity Fund (An open ended dynamic asset allocation fund)

2 Net equity inflow --> Nifty 50 Index Emotions and Impact Manual market timing Emotions have impacted investment decisions 20.7% Value of 1 lac: 16.8 lacs Investors ended up investing at market peak and redeeming at market lows 40,000 12, % Value of 1 lac: 8.7 lacs 30,000 10,000 8,000 20,000 6,000 10,000 4,000 2, ,000-2,000-4,000 Average returns in the hands of equity investor Average returns given by equity mutual funds -20,000-6,000 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14 Dec-17 Nifty 50 Index Net equity inflow Data period : , Source: Internal Analysis.. Past performance may or may not be sustained in the future Analysis used regular growth plan returns for all actively managed diversified funds for which data was available during the period. All analysis was done using monthly AuM and return data. Equity Funds : All open-ended, actively managed diversified funds for which data was available during the period.. Fund Returns: Asset weighted returns for all funds. Investor Returns: Consolidated returns that were realized by all investors adjusting for their inflows/outflows into individual schemes. Returns are compounded annualized for >1yr period 2

3 Is there a scientific way to dynamically manage equity exposure? PE (Price to Earnings Ratio): Widely used measure to gauge the market status in terms of valuation. PE Buckets < >24 Average of Nifty 3 year hence return While PE is critical, only PE is not enough. It is also important to capture market trend and risk. Source: NSE, MFI Explorer, Internal Analysis. Data period : 1 st Jan 1999 to 30 th Jun Past performance may or may not be sustained in the future. Returns are compounded annualized for >1yr period 3

4 P/E Trend Volatility Holistic approach to dynamic equity investing The model throws net equity exposure based on the 3 factors (P/E, Trend and Volatility) Difference between the gross and net exposure is achieved through hedging Rebalancing happens after every 2 months (40 trading days) Measures market valuations Captures market direction 3 PILLAR APPROACH Captures market risk Total gross equity will be maintained at min 65% Please refer the investment strategy section of the SID for details of the model. 4

5 Benefits of the dynamic equity allocation approach Rational approach Eliminates human subjectivity while determining equity allocation Market Scenario Typical Behaviour of Model Avails equity taxation Factors inputs from multiple market variables Inexpensive/Cheap Equity Fund BENEFITS Dynamic behavior depending on market scenario Fair/ Reasonable Aggressive Hybrid Fund Removes the need for market timing for investors Protects downside by reducing drawdowns Expensive/Highly valued Conservative Hybrid Fund 5

6 Specifics of our dynamic equity Volatility Trend PE<15 PE PE PE PE>24 Hi % % % 50-75% 30-50% Low Mid % 65-85% 40-60% 30-35% 30-35% Low 50-85% 30-60% 30-35% 30-35% 30-35% Hi % % 50-75% 30-50% 30-35% Hi Mid 80-95% 55-70% 30-45% 30-35% 30-35% Low 50-75% 30-50% 30-35% 30-35% 30-35% The model is run on a 40 trading-day basis The gross equity exposure : 65% to 100% Net equity exposure: 30% to 100%. The difference between these exposure will be carried out using derivatives. Please ref SID for details 6

7 Specifics of our dynamic equity Valuation is represented by the trailing PE of Nifty 50 Volatility is represented by the 30 day standard deviation of Nifty 50 Hi: >17% Low: <= 17% Trend is represented by 2 variables i) difference between the 90 day and 15 day moving average of the Nifty 50, and ii) rate of change of the 90 day moving average of the Nifty 50 Assume: R = rate of change of the 90 day moving average 15DMA = 15 day moving average of the Nifty 50 90DMA = 90 day moving average of the Nifty 50 Hi: 15DMA > 90DMA and R > 0% Mid: 15DMA > 90DMA and R <= 0% OR 15DMA <= 90DMA and R >1% Low: 15DMA <= 90DMA and R <= 1% 7

8 Axis Dynamic Equity Fund Positioning & Investment approach 1. Uses back-tested model to decide equity exposure Instruments Typical Range of Investment Net Equity % Hedged Equity 0 35% Fixed Income/ Cash 0 35% 2. Once, the model throws the equity allocation, the fund manager, at his own discretion, will decide stock portfolio based on our philosophy 3. Rebalancing happens every ~2 months (40 trading days) Creating hedges using appropriate derivative instruments Multi-cap portfolio Bottom-up stock selection approach High quality portfolio Investment in short term spectrum of fixed income market to maintain liquidity High quality portfolio Please refer to SID for detailed asset allocation and Investment Strategy. Subject to provisions of SID, portfolio Allocation/Positioning will be based on the prevailing market conditions and may change depending on the fund manager s view. For equity high quality implies companies with Sound management pedigree and a track record to manage business in all economic cycles and Good corporate governance. 8

9 How has the approach done over time? 1,600 1,400 1,200 1,000 Equity* Balanced* Model* Return 12.3% 11.5% 15.6% Risk 23% 16% 14% Drawdown -60% -45% -22% Jun-99 Jun-01 Jun-03 Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Equity Balanced Model Source: Bloomberg, Internal Analysis. * Equity : Nifty 50 Index, Balanced: 70% Nifty 50 Index and 30% Crisil Composite Bond Fund Index,. ** Model refers to the quantitative model that determines equity allocation in the range of 30% - 100% using three parameters momentum, volatility and valuations. For complete details on the model refer to the SID. Returns are based on the back tested values. Model performance is calculated using Nifty 50 Index for equity and CRISL Short Term Bond Fund Index for debt. No expense/alpha is considered in the above illustration.. Past performance may or may not be sustained in the future. Returns are compounded annualized for >1yr period. Data as on 28th Mar

10 How does the model fare in different market scenarios? The model might not outperform in rising market, but it has beaten the market in all other market scenarios. Market Scenario Time Period Nifty 50 **Model Flat market Rising Market Falling Market Rising Market Jun 99 - Jul 03 0% 9% Jul 03 - Jan 08 46% 38% Jan 08 - Oct 08-60% -19% Oct 08 - Nov 10 52% 30% Out/Under Performance Over the long term, the model has shown 3.3% p.a. outperformance** Flat Market Volatile market Nov 10 - Dec 13 0% 3% Dec 13 - Mar 18 12% 13% Overall return (99-18) 12% 16% Source: MFI Explorer, Internal Analysis. ** Model refers to the quantitative model that determines equity allocation in the range of 30% - 100% using three parameters momentum, volatility and valuations. For complete details on the model refer to the SID. Returns are based on the back tested values. Model performance is calculated using Nifty 50 Index for equity and CRISL Short Term Bond Fund Index for debt. No expense/alpha is considered in the above illustration. Returns are compounded annualized for >1yr period. Past performance may or may not be sustained in the future. 10

11 Analysis of rolling 3-5 year periods Beats the balanced strategy with equal average equity exposure over the period Protects downside and reduces volatility as compared to pure equity strategy 3 Year Period 5 Year Period CRISIL Hybrid Aggressive Index Model* Nifty 50 CRISIL Hybrid Aggressive Index Model* Nifty 50 Minimum Return Maximum Return Average Return Average equity exposure 65% 65% 100% 65% 65% 100% Please note that no expense/alpha is considered in the above illustration, It is purely based on index values Source: MFI Explorer, Axis Research. Data period : ** Model refers to the quantitative model that determines equity allocation in the range of 30% - 100% using three parameters momentum, volatility and valuations. For complete details on the model refer to the SID. Returns are based on the back tested values. Model performance is calculated using Nifty 50 Index for equity and CRISL Short Term Bond Fund Index for debt. No expense/alpha is considered in the above illustration. Past performance may or may not be sustained in the future. Returns are compounded annualized for >1yr period 11

12 Corrections well-managed by dynamic equity strategy 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5 yr ret Volatility (last 5 yrs) Nifty 50 Index 12% 14.6% 70 Equity + 30 Debt 11% 10.3% Model** 12% 9.7% Nifty 50 Index movement 5,000 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Nifty 50 Index -22.1% -11.3% -8.8% 70 Equity + 30 Debt -14.0% -7.2% -5.8% DEF Model -8.6% -4.5% -3.9% Source: Bloomberg, Internal Analysis. * Equity : Nifty 50 Index, Balanced: 70% Nifty 50 Index and 30% Crisil Composite Bond Fund Index,. ** Model refers to the quantitative model that determines equity allocation in the range of 30% - 100% using three parameters momentum, volatility and valuations. For complete details on the model refer to the SID. Returns are based on the back tested values. Model performance is calculated using Nifty 50 Index for equity and CRISL Short Term Bond Fund Index for debt. No expense/alpha is considered in the above illustration.. Past performance may or may not be sustained in the future. Returns are compounded annualized for >1yr period. Data as on 28th Mar

13 Model* : Yearly returns Return date Nifty 50 Model* CY CY CY CY CY CY CY CY CY CY CY CY CY CY CY CY CY CY The model has given negative returns only in 2 out of 18 years whereas Nifty 50 Index has been negative in 5 years. Except rising market scenario, the model has outperformed Nifty 50 Index in all other market scenarios. Source: Bloomberg, Internal Analysis. * Model refers to the quantitative model that determines equity allocation in the range of 30% - 100% using three parameters momentum, volatility and valuations. For complete details on the model refer to the SID. Returns are based on the back tested values. Model performance is calculated using Nifty 50 Index for equity and CRISL Short Term Bond Fund Index for debt. No expense/alpha is considered in the above illustration.. Past performance may or may not be sustained in the future. 13

14 Model* : Monthly returns Downside protection Monthly returns Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Model** Nifty 50 Source: Bloomberg, Internal Analysis. * Model refers to the quantitative model that determines equity allocation in the range of 30% - 100% using three parameters momentum, volatility and valuations. For complete details on the model refer to the SID. Returns are based on the back tested values. Model performance is calculated using Nifty 50 Index for equity and CRISL Short Term Bond Fund Index for debt. No expense/alpha is considered in the above illustration.. Past performance may or may not be sustained in the future. Returns are compounded annualized for >1yr period. Data as on 31st March

15 Recent Equity Allocation Trend of the Model** Nifty PE was between Low volatility and favorable trend 75% Nifty PE increased to 24. Model suggested reduction in equity 50% 75% 75% Demonetization markets corrected. Volatility was relatively high in Dec which reduced gradually in Jan and Feb giving opportunity to add equity Increased valuation: PE: >26; However, trend and volatility were favorable. So 50% 50% 50% 50% 50% 50% Valuation remains high Trend not in favor ; volatility in spite of being in low range went up in the recent past, High PE, Trend favorable and Volatility lowered 50% 30% 30% 30% 30% Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Source: Bloomberg, MFI Explorer, Axis Internal Analysis. Data period : * Model refers to the quantitative model that determines equity allocation in the range of 30% - 100% using three parameters momentum, volatility and valuations. For complete details on the model refer to the SID. Returns are based on the back tested values. Model performance is calculated using Nifty 50 Index for equity and CRISL Short Term Bond Fund Index for debt. No expense/alpha is considered in the above illustration. Past performance may or may not be sustained in the future. Returns are compounded annualized for >1yr period 15

16 Model* update July 18 11, and Nifty Month Net Equity Exposure (%) Aug Sep Oct Nov Dec Jan Feb Low High >24 Target allocation: 50% Last rebalancing was done in July 18. Next rebalancing is in Sep 18 Mar Apr May Jun July Source: MFI Explorer, Axis Internal Analysis. * Model refers to the quantitative model that determines equity allocation in the range of 30% - 100% using three parameters momentum, volatility and valuations. For complete details on the model refer to the SID. Past performance may or may not be sustained in the future. Data as on 31 st July

17 Current Portfolio Update July 18 Current Asset Allocation Mix Debt Average Maturity 1.7 years 34.2% 49.6% Net Equity Modified Duration 1.4 years YTM^ 8.49% Hedged Equity Rating Mix (High Quality Portfolio) 16.2% Debt AAA 74% Below AAA 26% Market Cap Mix (Un-hedged Equity portion) 81% 19% Large Cap Mid & Small cap Instrument wise (Corp Bond Portfolio) Corporate Bonds 52% Money Market Instruments 43% G- Sec 5% Allocation & maturity is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. ^The yield to maturity given above is based on the portfolio of funds as on date given above. This should not be taken as an indication of the returns that maybe generated by the fund and the securities bought by the fund may or may not be held till their respective maturities. The calculation is based on the invested corpus. Sector(s) / Stock(s) / Issuer(s) mentioned above are for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation. The fund manager(s) may or may not choose to hold the stock mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). 17

18 Key themes Finance Structural growth story linked to low credit outstanding, GDP growth and market share gains for better quality players Consumer Low penetration with lower interest rate environment bodes well for the sector growth Top stocks Information Technology Increasing per capita income leading to improved standard of living and hence higher discretionary spends HDFC Bank Limited Britannia Industries Limited Tata Consultancy Services Limited Bajaj Finance Limited ITC Limited Wipro Limited Housing Development Finance Corporation Limited Hindustan Unilever Limited Infosys Limited Kotak Mahindra Bank Limited Page Industries Limited Infibeam Incorporation Limited Bandhan Bank Limited Asian Paints Limited Tech Mahindra Limited Portfolio biased towards large caps : 81% in Large Cap & 19% in Mid & Small cap Source: Axis. Data as on 31st July For detailed portfolio, please refer to Monthly Scheme Portfolios : Sector(s) / Stock(s) / Issuer(s) mentioned above are for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation. The fund manager(s) may or may not choose to hold the stock mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). The securities may or may not form part of portfolio. Investment is at discretion of the FM. 18

19 Features at glance Type Benchmark Exit Load Open-Ended Dynamic Asset Allocation Fund Nifty 50 Hybrid composite debt 50:50 Index If redeemed / switched out within 12 months from the date of allotment: For 10% of investments: Nil; For remaining investments: 1% If redeemed / switched out after 12 months from the date of allotment: NIL Fund Manager Minimum Investment Plan/Options Anupam Tiwari, Ashwin Patni & R. Sivakumar Rs. 5,000 and in multiples of Re. 1/- thereafter Growth, Dividend (Payout/ Reinvestment) 19

20 DEF approach for regular income For regular income, pure equity can be risky. Dynamic equity approach offers better risk-return tradeoff Investor can decide the amount and frequency of withdrawal and generate regular cash flows Regular Income: Works as secondary income, helps in booking profits Cost Efficient: No exit load on the first 10% of the units Tax Benefit: Withdrawals with SWP will be in smaller amounts and hence would cut down the taxes Source: Axis Internal Analysis. Initial Amount: 1 cr. Withdrawal rate: Pre-defined annual rate at which SWP amount is decided. Eg: With 1 cr of initial investment & 8% withdrawal rate, it means that 8% of 1cr (i.e. 8% * 10,000,000 = 800,000 yearly = 66,667 monthly) is redeemed. XIRR: Internal rate of return of the remaining value of investment post all monthly withdrawals. Value post withdrawal: Total market value of units available after all withdrawals. Taxation: Equity taxation is assumed. 20

21 Riskometer, Statutory Details and Risk Factors Fund Name Riskometer Product Labelling Axis Dynamic Equity Fund (An open ended dynamic asset allocation fund) This product is suitable for investors who are seeking* Capital appreciation while generating income over medium to long term Investment in equity and equity related instruments as well as debt and money market instruments while managing risk through active asset allocation Disclaimer: Past performance may or may not be sustained in the future. Statutory Details: has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC) Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. This document represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. 21

22 Thank You