Give your investments growth of Equity & protection of Debt # Baroda Pioneer Hybrid Fund - Series I (A 3.05 years / 1112 days close ended Hybrid Scheme) NFO dates: nd th 2 Mar - 17 Mar 2015 Offer Price : Rs 10/- This product is suitable for investors who are seeking## To generate income and capital appreciation over the short term to medium term Investment in debt, equity and equity related instruments Medium Risk YELLOW ##Investors should consult their financial advisers if in doubt about whether the product is suitable for them. **Note: Risk may be represented as: (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. # As the Scheme is a close ended Scheme; it will not provide redemption facility until the Maturity Date i.e. 3.05 years / 1112 days from the date of allotment. The Units of the Scheme are proposed to be listed on the National Stock Exchange of India Ltd. (NSE). Investors can purchase/ sell Units on a continuous basis on the Stock Exchange(s) on which the Units are listed.
Contents Equity and Debt Return analysis Economy and Markets Classic Dilemma faced by investors Advantages of Hybrid Fund How Hybrid Funds work Benefits of investing in Options Return Matrix & Pay off Profile Product Features - Baroda Pioneer Hybrid Fund - Series 1 About Baroda Pioneer Asset Management Company Ltd.
Comparative Performance of Equity and Debt over the last six years 100% 80% 60% Performance in % 40% 20% 0% -20% Equity Y-o-Y Performance 37.0% 81.0% 28.0% 17.4% 13.3% 17.3% 25.7% 12.1% 9.0% 14.4% Sensex Return Sensex Volatility 29.9% 10.3% CY'08 CY'09 CY'10 CY'11 CY'12 CY'13 CY'14 Performance in % 16% 14% 12% 10% 8% 6% 4% 2% 9.1% 2.3% Bond Y-o-Y Performance Comp Bond Return Comp Bond Volatility 3.5% 3.3% 5.0% 0.8% 6.9% 0.9% 9.4% 0.8% 3.8% 6.4% 14.3% 2.0% -40% -60% -52.4% -24.6% 0% CY'08 CY'09 CY'10 CY'11 CY'12 CY'13 CY'14 Last 6 years performance Data source: Bloomberg Sensex Absolute 185% CAGR 19% Average Volatility 21% CRISIL Last 6 years performance Composite Bond Fund Absolute 51% CAGR 7% Average Volatility 3% As on 31st Dec 2014
The underlying macros of the economy reflect in the performance of different asset classes 100% 80% 60% 40% Positive relations: GDP & equity growth Sensex Return Average GDP Growth (RHS) 12% 10% 8% Equity market exhibits the strength of an economy. During a favorable economic environment (i.e. higher GDP growth, higher IIP etc.) it performs well 20% 0% -20% -40% -60% CY'06 CY'07 CY'08 CY'09 CY'10 CY'11 CY'12 CY'13 CY'14 6% 4% 2% 0% Debt market focuses specifically to the inflation and interest rate environment Typically yield of long dated bonds fall followed by consistent low inflation and rate cut. 13% 12% 11% Positive reactions: Gsec yield & lower inflation 9% 8% The relationship is, however not exactly linear in fashion i.e. Gsec yield may react positively well before a rate cut 10% 9% 7% 8% 7% 6% 6% 5% 4% Gsec Yield Average Inflation - CPI IW Repo Rate (RHS) CY 06 CY 07 CY 08 CY 09 CY 10 CY 11 CY 12 CY 13 CY 14 5% 4% Data source: Bloomberg As on 31st Dec 2014
We are at the cusp of interesting times. GDP Growth has now started showing signs of improvement with better outlook Inflation is cooling off and well within RBI s comfort zone Since October 2014, CPI print is coming below 6% This coupled with better GDP growth prospects, may compel RBI to reduce rates Fiscal Deficit and Current Account Deficit are likely to be in control on account of: lower crude price which came off sharply by 30 40% in CY 14 Implementation of direct subsidies Disinvestment Higher forex reserves ( ~ USD 328 billion as on 31st Jan 2015) has led to lower currency volatility. Data source: Bloomberg As on 31st Jan 2015
Classic dilemma faced by an investor Two popular Investment options Equity Investment Beats the inflation High Risk Fixed Income Investment Stable income Low Risk The dilemma is Equity or Fixed income
Combining the best of the two World Stability of Debt with lower Volatility Performance of Equity Baroda Pioneer Hybrid Fund Series I Reduced Volatility Potentially lower risk vis-à-vis an equity portfolio Capable of generating higher income as compared to typical Debt equity 80:20 portfolio Lock in at yields currently prevailing in the debt market Combine income generation with potential capital preservation
Combining bond and Equity: How Baroda Pioneer Hybrid Fund Series - I will work Predominantly a Fixed income product as more than 65% of the corpus would be invested in debt and money market instruments This would endeavor to preserve capital on maturity A max of 30% would be invested in equity or equity linked instruments This would endeavor to generate return or income 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Decomposing Hybrid Structure Equity Bond Investment in NCD 788,345 Initial Value Investment in Equity/ Equity Related Instruments 1,000,000 Final Value Contribution from equity portion, depending upon the upside of equity market The value of bond becomes the initial investment due to compounding effect Assumptions: Initial Investment say : INR 1 million Tenor: 3 years Bond Yield 8%
Benefits of investing in Index options Buying call options entail benefit of leverage of say 4 to 5 times depending upon the underlying market dynamics Say by paying 20% one can get exposure to Nifty movement by 100% An holder of a call option gets participation in the upside of the markets Participation level depends on Nifty volatility and strike price A strike price above the spot level (called as Out of the Money option) can lead to higher participation Similarly, a strike price closer to spot level (called as At the Money option) can lead to lower participation Long dated Nifty call option (say 3 years) are purchased in line with the maturity of the product The risk in buying a call option is limited to the premium paid In case market falls below the initial level, the loss is limited to the extent of premium paid for buying the options
Baroda Pioneer Hybrid Fund Series I: Return Dynamics Nifty Strike Level say Option type Options Premium (in % terms) 8600 ATM 26% 80% 9000 OTM 23% 90% 9400 Deep Nifty Returns say OTM Scheme absolute return @100% Participation - Option 20% 100% Scheme absolute return @90% Participation - Option Participation (Equity Component in %)/ Premium %) Scheme absolute return- Debt Equity 80:20 - Direct Equity -25% 0% 0% 15% -10% 0% 0% 19% 0% 0% 0% 21% 10% 1% 5% 23% 25% 17% 18% 26% 50% 44% 39% 31% 100% 98% 82% 41% 125% 125% 104% 46% The actual payoff of the strategy depends on (a) the allocation between debt and equity at the time of investment (b) the prevailing interest rates in the debt market; (c) the prevailing prices of options. Return is available only on Maturity; MTM valuation may not give the true performance of the fund. In the absence of exact 36 months maturity Nifty Option, the overall return of the scheme may get impacted Initial Investment say : INR 1,000,000 79% in Bond & 21% Equity Bond Yield assumed at 8.00% Maturity: 3 years Nifty Initial Level: 8616 Nifty 3 year Volatility: 20% (impacts the options premium) Participation based on current strike price Nifty Strike 9400 - > 100% participation Nifty Strike 9000 - > 90% participation Participation is available only when the prevailing spot Nifty crosses the strike price during the time period of option. Return data is absolute. TER is excluded in the calculations The above is just an illustration and should not be assumed as a promise, guarantee or forecast on minimum returns and safeguard of capital. Absolute Returns are shown for the purpose of this illustration. The period of investment is assumed to be 36 months.
Pay Off Illustration of Baroda Pioneer Hybrid Fund - Series I Scheme performance (in %) 140% 120% 100% 80% 60% 40% 20% 0% Performance - hybrid structure under different combination Product Performance @100% Participation Option Product Performance @90% Participation Option Product Performance - Debt Equity 80:20 Direct Equity 44% 41% 46% 31% 19% 21% 23% 26% 17% 18% 39% 0% 0% 1% 5% 0% 0% -10% 0% 10% 25% 50% 100% 125% Nifty Performance (in %) The above is just an illustration and should not be assumed as a promise, guarantee or forecast on minimum returns and safeguard of capital. Absolute Returns are shown for the purpose of this illustration. The period of investment is assumed to be 36 months. The actual payoff of the strategy depends on (a) the allocation between debt and equity at the time of investment (b) the prevailing interest rates in the debt market; (c) the prevailing prices of options. Return is available only on Maturity; MTM valuation may not give the true performance of the fund. In the absence of exact 36 months maturity Nifty Option, the overall return of the scheme may get impacted 98% 82% 125% 104%
Product Feature - Baroda Pioneer Hybrid Fund - Series l Type of Scheme Investment Objective Asset Allocation Plans/Options Minimum Application Amount Load Structure Benchmark A 3.05 years / 1112 days close ended Hybrid Scheme The objective of the Scheme is to generate income by investing in fixed income securities maturing on or before the date of the maturity of the Scheme and to generate capital appreciation by investing in equity and equity related instruments Instruments Indicative Allocations Maximum Minimum Debt and debt related instruments # 100% 65% Risk Profile Medium to High Money market instruments 5% 0% Low Equity and equity related instruments including derivatives @ 30% 0% High Plan A and Plan B (Direct) Growth Option and Dividend Option (Payout ) Rs.5,000/- & in multiples of Re. 1/- thereafter Entry Load Nil Exit Load - NA CRISIL MIP Blended Index # The Scheme will not invest in securitized debt. The Scheme may invest in unrated papers having residual maturity equal to or less than the maturity of the Scheme upto 5% of the net assets of the Scheme. @ Equity related instruments include all derivative instruments that have equity/equity indices as the underlying as well as securities such as convertible bonds and debentures and warrants carrying the right to obtain equity shares. Investment in equity derivatives can be upto 30% of the net assets of the Scheme.
Baroda Pioneer Asset Management Company Limited Joint Venture between two heritage companies Bank of Baroda Pioneer Investments Pioneer Investments took a stake in the erstwhile BOB Asset Management Co and company in 2008 and was renamed as Baroda Pioneer Asset Management Company Assets under Management at the time of change of control in July 2008 was at INR 60 crores Baroda Pioneer Mutual Fund operates out of 34 locations in India and managed average assets of about Rs. 7,841.27 cr. for the quarter ending December 2014 Baroda Pioneer Mutual Fund is positioned to serve the varied asset management needs of investors in India through a range of equity, debt and money market offerings
Pioneer Investments A global asset management player PRODUCTS & SERVICES EXPERIENCE Investment experience since 1928 Pioneer Fund, the third oldest mutual fund in the U.S. MARKET KNOWLEDGE & INVESTOR NEEDS Strong team of over 2,070 employees globally, including nearly 350 investment professionals Presence in 27 countries with three Global Investment Hubs Assets Under Management 209.5 BN as on 31st January 2015 Source: Pioneer Investments
Bank of Baroda: Key strengths Bank of Baroda is a 106 years old State-owned Bank with modern & contemporary personality, offering banking products and services to Large Industrial, SME, Retail & Agricultural customers across India and 25 other countries. Key Financial Information* Capital adequacy ratio (Basel III) 12.28% Operating Profit INR 9291 crores Global Advances INR 397,006 crores Deposits INR 568,894 crores Global Business INR 965,900 crores Uninterrupted Record in Profit-making and Dividend Payment Pioneer in many Customer-Centric Initiatives First PSB to receive Corporate Governance Rating (CGR-2) A well-accepted & recognised Brand in Indian banking industry- Top 20 Best Indian Brand Overseas Business Operations extend across 25 countries through 100 Offices Relatively Strong Presence in Progressive States like Gujarat & Maharashtra Strong Domestic Presence through 4956Branches Modern & Contemporary Personality Provides Financial Services to over 47 mln Customers Globally Robust Technology Platform with 100% CBS in Indian Branches *Data as on 31 March 2014 source www.bankofbaroda.com
Mutual Fund Investments are subject to market risks, read all scheme related documents carefully Baroda Pioneer Asset Management Company Ltd CIN: U65991MH1992PLC069414 501, Titanium, 5th Floor, Western Express Highway, Goregoan East, Mumbai - 400063 Tel: +91 22 3074 1000 Fax: +91 22 3074 1001 Toll Free No: 1800419 0911 Website: www.barodapioneer.in;