HDFC Equity Fund (Open ended Growth Scheme)

Transcription

1 HDFC Equity Fund (Open ended Growth Scheme) Performing consistently^ over two decades and several market cycles ^ The Fund has outperformed benchmark in 18 out of 20 years of existence This product is suitable for investors who are seeking*: Capital appreciation over long term Investment predominantly in equity and equity related instruments of medium to large sized companies High risk (BROWN) * Investors should consult their financial advisers if in doubt about whether the product is suitable for them. # Fund Inception date: January 1, 1995 Note: Risk is represented as: The wonders of compounding... refer slides 4,8 (BLUE) investors understand that their principal will be at low risk (YELLOW) investors understand that their principal will be at medium risk (BROWN) investors understand that their principal will be at high risk May

2 Every journey begins with a small step Launched in December 1994 as Centurion Open End Fund, it was renamed as Zurich India Equity Fund and finally HDFC Equity Fund ( The Fund ) in June 2003 From a small beginning of ~Rs 52 crores AUM in Jan 1, 95 HDFC Equity Fund is today the largest * Equity Fund in India with an AUM of ~ Rs 18,000 crores and ~ 6.7 lac investors as on 31 st March, 2015 In this journey of 20 years, Rs 10,000 has become ~Rs 4.7 lacs(~47 times), CAGR of ~21.0% * * Our sincere thanks to all investors, distributors, well wishers etc. in making this possible. A special thanks to ~5,000 investors who have stayed with the Fund right through this 20 year journey A strong belief in India & its entrepreneurs, a disciplined approach to investing and focus on long term has made this possible. * Based on data available on AMFI - Average AUM : Rs 18,721 crs (Jan Mar 2015), ** Past performance may or may not be sustained in Future. Refer Slide No. 23 for detailed performance 2

3 HDFC Equity Fund Standing the test of time Elections, wars, global crises, bubbles, tapering etc. HDFC Equity Fund has seen it all 3

4 HDFC Equity Fund Adding value across cycles HDFC Equity Fund Rs 4.7 lacs CNX 500 Rs 0.7 lacs S&P BSE Sensex Levels ~4,000 ~5,000 ~10,000 ~20,000 ~9,000 ~20,000 ~29,000 HDFC Equity Fund : Rs 10,000 invested at inception has become ~Rs 470,000 in ~20 years at a CAGR of 21.0% CNX 500 : Rs 10,000 invested at inception has become ~Rs 70,000 in ~20 years at a CAGR of 10.1% Reference made to S&P BSE SENSEX in this presentation is only for easy understanding of market movement and must not be construed as future performance of S&P BSE SENSEX. The Benchmark for this FUND is CNX 500. Past performance may or may not be sustained in Future. Refer Slide No. 23 for detailed performance 4

5 HDFC Equity Fund - Investment Philosophy Steadfast adherence to few principles has worked well for HDFC Equity Fund over medium to long periods A predominantly large cap portfolio with limited exposure to mid caps Preference for strong & growing companies - Strong companies not only survive, but emerge stronger in challenging times, reducing permanent losses Effective diversification of portfolio The portfolio has always been diversified across key sectors and variables across the economy to reduce risk A long term approach to investing and a Low portfolio turnover Annual Portfolio turnover ratio (in %) "We don't have to be smarter than the rest. We have to be more disciplined than the rest." - Warren Buffet For latest scheme portfolio visit our website 5

6 Avoiding big mistakes Key to wealth creation It takes several years and a 400% return for Rs. 20 to become Rs. 100; the reverse however can happen much faster and a loss of just 80% makes Rs. 20 of Rs Thus, one large mistake can have a big impact in the wealth creation journey. The key to wealth creation over long periods is thus in not aiming for highest returns every year, but in avoiding big mistakes each year. HDFC Equity Fund has successfully navigated several bubbles / meltdowns i.e. IT, media, real estate, power, cement sector etc. in this journey of 20 years. HDFC Equity Fund Focused on not just returns, but also on managing risk by avoiding big mistakes Sectors referred above are illustrative and not recommended by HDFC Mutual Fund / HDFC Asset Management Company Ltd. HDFC Mutual Fund/AMC is not guaranteeing any returns on investments made in this Fund. Past performance may or may not be sustained in future. 6

7 Equities work better over long term Illustrative Study based on return distribution of HDFC Equity Fund Following table represents rolling returns of HDFC Equity Fund since inception distributed over different holding periods and return brackets, e.g., returns have been more than 20% p.a. in ~55% of 1 year holding periods, more than 20% p.a. in ~55% of 3 year holding periods, more than 20% p.a. in ~67% of 5 year holding periods, more than 20% p.a. in ~98% of 10, more than 20% p.a. in ~100% of 15 & 20 years holding periods (Row 1) etc. Performance data computed till Mar, Where NAV as on the end of a particular month is not available, NAV of the nearest date available is considered. Returns are monthly rolling. The holding periods in the above simulation is purely an assumption and not the actual holding period of investors in the Fund. It can be clearly seen, that as the holding period increases, return profile improves This is consistent with the belief that equities are a long term asset class and that risk reduces as holding period increases Time spent in markets is more important than timing the markets Past performance may or may not be sustained in Future. Refer Slide No. 23 for detailed performance 7 7

8 Getting more from Equity Fund s Patience is the key Illustrative Study based on return distribution of HDFC Equity Fund over 20 years Short term returns in equities are volatile; hence equity investments should be made with a long term horizon Long term returns are less volatile; risk in equities reduces as holding period increases Benefits of compounding are bigger over longer periods For detailed calculation process & disclaimer please refer next slide Past performance may or may not be sustained in the future. Returns for periods more than 1 year are shown on a compounded annualized basis. 8 8

9 Calculation process & detailed disclaimer of Slide 8 - Getting more from Equity Fund s Patience is the key Rolling Returns as on 31st December, Benchmark; CNX 500, Returns for 1 year is absolute and above 1 year is CAGR (The rate at which an investment grows annually over a specified period of time). Values of NAV and Benchmark are as on 31st of every month of the respective period excluding inception date. Returns column represents the return earned on the investment for the referred period. For e.g. If you invested in Jan-95 when NAV was Rs10, then 1 year returns (in Dec-95) would have been -27%, 3 years returns (in Dec-97) would have been -13%, 5 years returns (in Dec-99) would have been 20%, 10 year returns (in Dec-04) would have been 21%, 15 year returns (in Dec-09) would have been 23% and 20 year returns (in Dec-14) would have been 21%. The above figures are rounded off to the nearest Number of times the scheme has outperformed the Number of times the investor has made positive returns. Past performance may or may not be sustained in the future. The AMC / Mutual Fund is not guaranteeing or promising or forecasting any returns. # Inception date of HDFC Equity Fund is January 01, Returns shown are annualised rolling returns with a yearly frequency. 9

10 No investment too small, No dream too big A SIP of just Rs 2,000 per month (total investment ~Rs 4.8 lacs) in HDFC Equity Fund has grown to ~1.01 crores by Mar 15 (refer below table) Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it. Albert Einstein Past performance may or may not be sustained in the future. The above investment simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. The AMC / Mutual Fund is not guaranteeing or promising or forecasting any returns. SIP does not assure a profit or guarantee protection against a loss in a declining market. Inception date of HDFC Equity Fund is January 01, Benchmark 2. Additional Benchmark. Returns as on March 31, The above SIP investment is assumed to be invested on the 1st business day of every month over a period of time.. 10

11 HDFC Equity Fund Consistency in performance & dividends Outperformed benchmark in 18 out of 20 years across cycles Past performance may or may not be sustained in the future.where NAV as on the end of a particular month is not available, latest released NAV is considered, Year- Calendar Year Good years, bad years, dividends each year (for those who prefer cash) It's not what we do once in a while that shapes our lives. It's what we do consistently. Anthony Robbins ^Past performance may or may not be sustained in the future. All dividends are on face value of Rs 10 per unit. After payment of the dividend, the per Unit NAV falls to the extent of the payout and statutory levy (if applicable). There is no assurance or guarantee to Unit holders as to rate/quantum of dividend distribution or that the dividends will be paid regularly. NAV of the Regular Plan - Dividend Option 11

12 Bigger Funds or Smaller Figures don t lie! Bigger funds have done better than smaller!! In reality, there are no large funds in India i.e. HDFC Equity Fund, the largest equity Fund is just ~0.2% of market capitalization Choose a Fund by its track record, investment discipline, consistency of performance and not by size. For those who still value size, bigger Funds have done better! The above table shows simple average returns of all equity funds arranged in different quartiles basis the descending order of AUM at the beginning of the year. Loads have not been taken into consideration for calculation of returns.the investment objective, asset allocation and investment strategy of the schemes considered for the above simulation may differ. Where AUM as on the end of a particular month is not available, AUM of the nearest date available is considered. This simulation is only an illustration should not be construed as a recommendation or an investment advice. In view of the individual circumstances and risk profile, each investor is advised to consult his / her professional advisor before making a decision to invest. Source: Bloomberg, Capitaline, NAV India 12

13 Fund Selection - Lane Changing does not work! The above data illustrates the calendar year performance of 11 largest diversified Equity / Balanced funds as on Dec 31, 2014 for last 11 years It is evident that flavor of the season investing does not work. There is merit in sticking with funds that have a disciplined approach to investments and have performed across cycles If investing is entertaining, if you're having fun, you're probably not making any money George Soros Internal Computation of the above table ^ Past performance may or may not be sustained in the future. 13

14 Economic outlook & positioning of HDFC Equity Fund 14

15 Economy : Ready, set, go A stable, proactive, long term focussed Government : Coal & telecom auctions, gas pooling, DBT, GST (FY16), MMRDA, Bankruptcy act likely, diesel deregulation, resolving stalled projects, roads and railway spending increased, etc. Falling inflation low commodity prices, stable INR, improving supplies; Real rates of 3% indicate lower yields going forward Recent IIP readings are encouraging CAD Q4FY15/FY16 likely to be surplus after 11 years Steadily improving growth; Capex should revive in FY16 By 2020, India is likely to be 5 th largest economy in the world and fastest growing as well Source: Morgan Stanley, Kotak, BOAML 15

16 Equity Markets : A positive outlook Reasonable P/E s * despite markets * * run up EBITDA margins bottoming out * ** Despite the run up in 2014, since 2008 equity markets are up only ~40% vs. nominal GDP growth of ~100% EBITDA margins to improve from 17 year lows due to improving economy, lower inflation, lower wage growth and lower commodity prices etc. Opportunities are like sunrises, if you wait too long you can miss them. William Arthur Reference made to S&P BSE SENSEX in this presentation is only for easy understanding of market movement and must not be construed as future performance of S&P BSE SENSEX. The Benchmark for this FUND is CNX

17 Lower interest rates are good for equities There is near consensus about lower rates in India in 2015 & beyond Equities benefit in several ways from lower interest rates: Lower rates means lower interest expense & higher profits Lower rates lead to higher fair P/E multiples Lower rates improves economic growth prospects Interest rates are like gravity Warren Buffett This implies, lower rates improve valuations of assets and vice versa HDFC Mutual Fund/AMC is not guaranteeing any returns on investments made in this Fund. Past performance may or may not be sustained in future. 17

18 Time to say bye bye to Gold and buy buy to equities The table below summarises the returns of Gold and of of S&P BSE SENSEX ( Sensex ) since 1979, when the Sensex commenced with a base value of 100 in last 36 years... Sensex Gold CAGR (%) Rs. 10,000 has become lac 3.7 lac Source: World Bank, Bloomberg, Data pertains from March 31, 79 to Mar 31, 15 As can be seen from the table above, long term returns on equities are much higher than returns on gold A difference of ~6.3% in CAGR over long term (36 years) resulted in ~8 times higher wealth. Equities over time grow in line with the nominal growth of the economy (real growth plus inflation), while gold returns close to inflation Equities The Real Gold? *Disclaimer: Above referred asset classes are not strictly comparable. The views expressed may hold true in the context of prevailing economic conditions and is subject to change. HDFC Mutual Fund/AMC is not guaranteeing returns on equities. Past performance may or may not be sustained in Future. Refer Slide No. 23 for detailed performance 18

19 Who is smarter? Indians or FII s (FII s were allowed to invest from September 1992 onwards; shareholding of FII not available from ) Source: (SEBI) FII ownership increased from 0 to 23% in 22 years (~1% per annum) While, FII s have invested $154 bn in Indian equities between , locals have bought gold worth $245 bn in same period Thus, the dollars received by the locals & more have been invested in gold. Gold as was pointed out in previous slide (slide 18) has yielded near inflation (9-10%) returns vs ~17% CAGR for the Sensex. In effect, locals have been exchanging a ~17% CAGR asset for a 9-10% CAGR one. This certainly is not a smart thing to do. Why are FII s so positive on India: India offers significantly higher growth than World growth Favourable demographics, rising affordability, low penetration of consumer goods, rich natural resources, large size are key drivers of growth Barring (Lehmann crisis), FII s have been net buyers of Indian equities By 2020 India is expected to be 5 th largest economy in world Source: (IMF) Decadal GDP (average % change) Real India GDP Real World GDP Source: (BOAML) 19 19

20 HDFC Equity Fund Portfolio positioning Steady reduction in exposure to midcaps in FY15 Midcaps have outperformed largecaps by highest margin in CY14 in last 10 years Midcap s discount to largecap s is lowest in last 5 years HDFC Equity Fund has steadily reduced exposure to midcaps Given the NIL discount of midcaps vs. largecaps and a predominantly largecap portfolio, HDFC Equity Fund is well positioned in the current market environment Source: Bloomberg, CY- Calendar Year, The current investment strategy is subject to change depending on the market conditions 20

21 HDFC Equity Fund Strongly positioned for improving economic outlook Overweight Banks : Improving economic outlook, peaking interest rates, improving outlook for asset quality Overweight Capex : Early signs of capex recovery Overweight Oil & Gas : Sharp fall in subsidies Neutral IT & Pharma : Reasonable valuations, INR appreciation is a key risk Underweight FMCG : Slowing growth, expensive valuations Large Cap exposure : Exposure to large caps is ~80%, Fund has reduced exposure to midcaps in 2014 HDFC Equity Fund is well positioned for improving economic outlook and lower interest rates Sectors referred above are illustrative and not recommended by HDFC Mutual Fund / HDFC Asset Management Company Ltd. The Fund may or may not have any present or future positions in these sectors. HDFC Mutual Fund/AMC is not guaranteeing any returns on investments made in this Fund. Past Performance may or may not be sustained in the future 21

22 Why HDFC Equity Fund? Whom is it suited for? HDFC Equity Fund is a good investment vehicle for those who believe in the growth prospects of India and understand the power of compounding The Fund offers : Best in class returns across several economic & market cycles Long term oriented, disciplined and consistent approach to investments Unbroken dividend track record for last 10 years (7-13% dividend yield) (Refer Slide 11) The best time to invest was yesterday, the second best is today! * Past Performance may or may not be sustained in the future. HDFC Mutual Fund/AMC is not guaranteeing any returns on investments made in this Fund. In view of the individual circumstances and risk profile, each investor is advised to consult his / her professional advisor before making a decision to invest in the Scheme. Refer Slide No. 23 for detailed performance 22

23 SCHEME PERFORMANCE SUMMARY 23

24 Product Features Type of Scheme Inception Date (Date of allotment) Investment Objective Fund Manager $ Plans Options Minimum Application Amount (Under Each Plan/Option) Load Structure Open-ended Growth Scheme January 1, 1995 To achieve capital appreciation Prashant Jain HDFC Equity Fund, HDFC Equity Fund - Direct Plan Under Each Plan: Growth & Dividend. The Dividend Option offers Dividend Payout and Reinvestment facility. Purchase: Rs 5000 and any amount thereafter Additional Purchase: Rs1,000 and any amount thereafter Entry Load: Not Applicable. Upfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor) based on the investors assessment of various factors including the service rendered by the ARN Holder. Exit Load: In respect of each purchase / switch in of units, an exit load of 1.00% is payable if units are redeemed / switched out within 1 year from the date of allotment. No exit load is payable if units are redeemed / switched out after 1 year from the date of allotment. For further details on load structure, please refer to the Scheme Information Document / Key Information Memorandum of the Scheme. Benchmark CNX 500 Index $ Dedicated Fund Manager for Overseas Investments: Mr. Rakesh Vyas. For complete Scheme details refer SID/KIM. 24

25 Asset Allocation Pattern Under normal circumstances, the asset allocation of the scheme s portfolio will be as follows: Types of Instruments Normal Allocation (% of Net Assets) Risk Profile Equities & Equity related instruments Medium to High Debt and money market instruments* 0 20 Low to medium *Investment in Securitised debt, if undertaken, would not exceed 20% of the net assets of the Scheme. The scheme may seek investment opportunity in the ADR / GDR / Foreign Equity and Debt Securities (max. 40% of net assets) subject to SEBI (Mutual Funds) Regulations, The scheme may use derivatives mainly for the purpose of hedging and portfolio balancing (max 25% of net assets) based on the opportunities available subject to SEBI (Mutual Funds) Regulations,

26 DISCLAIMER The views expressed herein are based on the basis of internal data, publicly available information and other sources believed to be reliable. Any calculations made are approximations, meant as guidelines only, which you must confirm before relying on them. The information contained in this document is for general purposes only and is not an offer to sell or a solicitation to buy/sell any mutual fund units/securities. The document is given in summary form and does not purport to be complete. The document does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. The information/ data herein alone are not sufficient and should not be used for the development or implementation of an investment strategy. The same should not be construed as an investment advice to any party. The statements contained herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Neither HDFC Asset Management Company (HDFC AMC) and HDFC Mutual Fund (the Fund) nor any person connected with them, accepts any liability arising from the use of this document. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein. MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. 26

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