NFO from 13 th July, 2018 to 27 th July, An Open Ended Dynamic Asset Allocation Fund

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1 NFO from 13 th July, 2018 to 27 th July, 2018 An Open Ended Dynamic Asset Allocation Fund

2 The Expectation & Reality WHAT INVESTORS WANT WHAT MARKET REALLY IS THE DISCONNECT

3 Hurdles in Wealth Creation Buy Low-Sell High is easier said but it is the reverse that is usually practised by investors Right Asset Allocation mitigates the risk. But it usually takes a Zen master to tide over emotional biases

4 More Hurdles in Wealth Creation In Absence of disciplined structure; emotional biases take over Short term volatility can spook the investor making them avoid/ under allocate to equities

5 The Resultant Investor

6 The Cost Forgot Asset Allocation

7 The Solution Asset Allocation, Rule Based Investing, Planning Returns & Risk Allocation You only have to do a very few things right in your life so long as you don t do too many wrong things - Warren Buffet

8 Even A Small Money Decision Has A Major Life Impact In Long Term Stay Alert What if Rs 1.5 were invested in each of these to buy a Vadapav 39 yrs later Rs 1.5 in % Inflation yoy Investment Class Post tax Return Money after 39 yrs Impact of Decision on Life FD 8.46% Can Buy Vadapav for two Gold 9.85% Can Buy Vadapav for the family Equity 15.94% Can Buy Vadapav for the family, neighbours family and friends Rs 15 in 2018 Daavar Seth!! main aaj bhi paise market main daaltaa hoon Debt tax incidence is assumed without indexation. Equity tax incidence at 10% on capital gains. The above is just an illustration. Please refer to the tax consultant for advice

9 What Is Our Idea? Stay at the docks in Euphoric Sea Our model measures the future of market weather and automatically directs accordingly Our Portfolio Sails Full Steam when Weather is fair and sea abandoned

10 Why Kotak Balanced Advantage Fund? Provides systematic mobility between equity, fixed income and arbitrage investments; without compromising tax efficiency Model led allocation structure not only informs: it helps avoid risky investment behavior

11 More Of Why Kotak Balanced Advantage Fund? Seeks to Mitigate the Downside while striving for Upside Is an Alternative to Traditional Investments

12 Valuation as measured by PE What The Model Driven KBAF Wants To Achieve? Preserve Capital Preserve Capital Market main reh karr trend se dushmani nahi karrtee Time

13 The Model Features 2 Factor Model to determine equity allocation Primary factor is trailing Nifty 50 P/E Higher the P/E lower the Equity & vice versa But, many a time high or low valuations can sustain for a long time Therefore the 2 nd factor which is Trend/sentiment data which includes rolling returns (long range and short range) etc In other words, valuation levels and trend sentiments determine our equity allocation Measuring Value Catching sentiments The fund manager reserves the prerogative to alter/modify the investment approach according to the evolving environment while keeping the sanctity of the investment objective Warren Buffet s Famous Metaphor

14 Why the Force is Strong with trailing PE Dominant sectors have changed dramatically ( IT, Infra, Commodities, Infra) in Nifty from time to time. The PB of Infra thus is not comparable to PB of IT sector. Price to Book (PB) needs to be read in conjunction with ROE to obtain the view of valuation In Nifty, a dominant sector PB varies significantly and can skew the Index valuation PE normalizes the trend across market cycle and sectors; reflecting the larger picture

15 How The PE Model Indicates Equity Allocation PE of 12 or Less PE Between 12 to 20 PE Between PE More than 24 PE Level Na Milega Doobara Kadam Kadam Badaahye ja Level Sam-bhaal Ke Nazar main aata hain, Samajh main nahi

16 Source: internal research. Disclaimer: The data of the model is as per our back tested internal calculation. This is an illustration to highlight the functioning of the model. The performance is gross of expenses. Past performance is no guarantee for future return. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Nifty Price Levels And How the Equity Allocation of Model has Behaved The Average Allocation in Equity over the entire model period is around 59%.

17 How Model Has Performed Historically NAV Growth since Inception Outperformance with Consistently Lower and reducing Risk. Performance as on 30 th Apr 18 Inception date: 30 th Sept Source: internal research. Disclaimer: The data of the model is as per our backtested internal calculation. This is an illustration to highlight the functioning of the model. The performance is gross of expenses. Past performance is no guarantee for future return. Mutual Fund investments are subject to market risks,

18 Performance as on 30 th Apr 18 Start date: 30 th Sept Source: internal research. Disclaimer: The data of the model is as per our backtested internal calculation. This is an illustration to highlight the functioning of the model. The performance is gross of expenses. Past performance is no guarantee for future return. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. How the Model Performs Against Traditional Investment Traditional Investment Potential Rolling Return Summary of 5 year performance Rate of Return Time needed to Double corpus At 6% At 7% At 8% 12 yrs 10.3 yrs 9.1 yrs The model back-testing showed that the corpus doubled in 5 8 year time span

19 Source: internal research. Disclaimer: The data of the model is as per our backtested internal calculation. This is an illustration to highlight the functioning of the model. The performance is gross of expenses. Past performance is no guarantee for future return. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Scenario Analysis Calendar Year Alpha over Nifty KBAF Return Nifty Return Sentiment % 43.14% 36.34% Bull % 25.46% 39.83% Bull % 32.84% 54.77% Bull % % % Bear % 55.30% 75.76% Bull % 16.75% 17.95% Bull % % % Bear % 28.58% 27.70% Bull % 8.37% 6.76% Flat % 36.32% 31.39% Bull % 9.41% -4.06% Flat % 11.27% 3.01% Flat % 22.74% 28.65% Bull % 1.19% 1.98% Flat 13 year Story 3.62% 16.72% 13.10% You Decide Outperforms significantly over Nifty in 8 out of 14 years Strong Outperformance over Nifty in the Bear and Flat Market Irons out the Volatility through Asset Allocation The pain of capital loss is more than pleasure of similar gain

20 Gilt AAA AA Credit Rating Our Debt Asset Strategy Duration The Portfolio will run the debt component dynamically. Portfolio while opportunistic in seeking growth; will be mindful of the risk-reward trade off Philosophy of the portfolio would be to preserve the capital while generating performance The fund manager reserves the prerogative to alter/modify the investment approach according to the evolving environment while keeping the sanctity of the investment objective Performance tau performance hovve hain.. Equity laave yaa debt!!

21 WHO CAN INVEST?? Frankly, Everybody!! First Timer Market Timer Long Term Investors First Time investor keen for an equity experience A wary Investor who is concerned of market level but is keen to generate wealth A goal oriented investor with a long horizon can look at investing in this product

22 Fund Features & Risk Factors

23 Fund Facts Benchmark Nifty 50 Hybrid composite debt 50:50 Index Investment Objective The investment objective of the scheme is to generate capital appreciation by investing in a dynamically balanced portfolio of equity & equity related securities and debt & money market securities. Type of scheme Open ended Dynamic Asset Allocation Fund Plans available Exit load Investment Style There will be two plans under the Scheme namely, Regular Plan and Direct Plan Redemption/switch up to 10% of Investment amount within 1 year: Nil. > Above limit of with redemption/switch within 1 year: 1%. After 1 year : Nil. Multicap approach for Equity Allocation; Dynamic Bond Approach for Debt allocation Taxation Status That of an Equity Fund Fund Managers Mr. Harish Krishnan and Mr. Deepak Gupta (For investments in equity and equity related instruments) Mr. Abhishek Bisen (For investments in debt and money market instruments)

24 Asset Allocation The asset allocation under the Scheme, under normal circumstances, will be as follows: Particulars Allocation Risk Profile Equity & Equity related securities 65%-100% High Equity Derivatives 0%-45% High Debt Securities & Money Market instruments 0%-35% Low to medium Units of REITs & INVITs 0%-10% Medium to High Although the gross equity exposure would be maintained between 65%-100%, the net equity exposure can be brought down significantly below 65% by hedging through equity derivatives. For eg. if the gross exposure to equity is 70%, the fund manager may hedge 40% of this equity using derivatives to bring down the net exposure to 30%. The net equity exposure is thus dynamically managed and is increased when the fund manager has favourable view on equity as an asset class or is brought down when the view is not favourable or under defensive circumstances

25 About The Fund Disclaimers This product is suitable for investors who are seeking*: Wealth creation over a long period of time Investment in equity, equity related securities & debt, money market instruments while managing risk through active allocation. Investors should consult their financial advisors if in doubt about whether the product is suitable for them Mutual Fund investments are subject to market risks, read all scheme related documents carefully.