IIFL CAPITAL ENHANCER FUND - SERIES 1 An Annual Interval Scheme investing in Equity and Equity Related Securities
CURRENT ASSET ALLOCATION: INDIAN SCENARIO The current asset allocation* of Indian investors is skewed in favour of fixed income as against equity Equity Fixed Income Why do Investors prefer Fixed Deposits? Provides downside protection and assurance of capital Regular and stable returns 1 * Asset allocation based on MF Industry AUM and Bank Deposits **Source: RBI report (March 2004 Dec 2017) ^Source: Association of Mutual Funds of India (AMFI) Website, AUM as on 31-Dec-2017
A STUDY OF VALUE CREATION: EQUITIES VS DEBT 12000 10000 Nifty Returns (2004-2017) CAGR 15% Greece Default and China Metldown 10530.7 Demonetisation 8000 6000 Sub-prime Crisis Euro Crisis -9% -5% 4000 1771.9-24% 2000-51% 0 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Although volatile in the short term, equities have created value in the long term 18 16 14 12 10 8 6 4 2 0 Mar 04 Aug 04 Jan 05 Jun 05 Nov 05 Apr 06 Sep 06 Feb 07 Jul 07 Dec 07 May 08 Oct 08 Mar 09 Aug 09 Jan 10 Jun 10 Inflation Index Long term debt yields show downward trend Adjusted for inflation, fixed income returns have eroded capital across past periods Nov 10 Apr 11 Sep 11 Feb 12 Jul 12 Dec 12 May 13 Oct 13 Mar 14 10Year G-Sec Yields Periods of Capital Erosion Aug 14 Jan 15 Jun 15 Nov 15 Apr 16 Sep 16 Feb 17 Jul 17 Dec 17 Source: Bloomberg 2
THE QUESTION REMAINS, DESPITE EQUITIES REWARDING INVESTORS IN THE LONG RUN, WHY DON T INVESTORS INVEST IN EQUITY? Improved Investor sentiment and prospects of better returns have led to higher inflows in Balanced funds over the past year NET INFLOWS (IN `000 CRORES) 300 250 268.54 31-Dec-16 31-Dec-17 200 150 100 102.43 50 0 Debt Mutual Funds 37.75 22.76 Balanced Funds 3 Source: Association of Mutual Funds of India (AMFI)
02-Jan-08 23-Jan-08 13-Feb-08 05-Mar-08 26-Mar-08 16-Apr-08 07-May-08 28-May-08 18-Jun-08 09-Jul-08 30-Jul-08 20-Aug-08 10-Sep-08 01-Oct-08 22-Oct-08 12-Nov-08 03-Dec-08 24-Dec-08 30-Jan-18 06-Feb-18 13-Feb-18 20-Feb-18 27-Feb-18 06-Mar-18 13-Mar-18 20-Mar-18 DO BALANCED MUTUAL FUNDS REALLY PROTECT CAPITAL? Even balanced funds, considered as safe investment avenues during a downfall, fell during volatile markets! January - December 2008 February-March 2018 12 10.2 10 8 10 9.8 9.6 6 9.4 4 9.2 2 Fall in Nifty: 50% Fall in CRISIL BLFD: 40% 9 8.8 Fall in Nifty: 10% Fall in CRISIL BLFD: 5% 0 8.6 CRISIL Balanced Fund Nifty Balanced Funds Nifty 4 Source: Bloomberg
GLOBAL ICONS - VIEWS ON TIMING EQUITY INVESTMENTS Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves The stock market is a device for transferring money from the impatient to the patient Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble The single greatest edge an investor can have is a long-term orientation If there is one investing adage that comes close to a rock solid principle its this Time in the market is more important that timing the market Peter Lynch Warren Buffet Seth Klarman Charles Schwab 5
IDEAL PORTFOLIO CONSTRUCT FOR INVESTORS Participate in the India Story Bullish long term view Strong inflows (domestic and foreign) into Indian equities No evident visible structural risk Downside Protection Fearful of Market Valuations Upcoming Event- General Elections 2019 Rising crude and slipping fiscal deficit Rising Fed Interest Rates ENSURE PORTFOLIO LIQUIDITY GET OPPORTUNITIES TO REBALANCE IF MARKET CONDITIONS CHANGE 6
IIFL CAPITAL ENHANCER FUND SERIES 1 Investment Approach Put Options Explained Back-tested Returns Equity Investment Philosophy 7 Mutual Fund investments are subject to market risks, read all scheme related documents carefully
IIFL CAPITAL ENHANCER FUND SERIES 1 INVESTMENT APPROACH MAXIMISE THE UPSIDE Invest in a theme that is expected to capitalize on the exponential acceleration in the Indian economy Equity exposure to large companies that will lead the economic growth LIMIT THE DOWNSIDE Aims to protect the downside by investing in a put option A hedge against any fall in the market Equity Scrips forming part of Nifty 50 Universe Other Equity Scrips with a Market Cap of > USD 2BN Nifty 50 Put Option Premium for Hedge 75-100% 0-25% 0-8% Dual advantage of limiting the downside and potentially unlimited upside benefits 8 For complete details on investment strategy (Including illustrations on derivative strategies refer SID/KIM available on the website www.iiflmf.com) *Indicative Allocation at the time of initial portfolio construction, post closure of NFO. IIFL Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. The portfolio allocation is subject to change depending on the market conditions. Please refer the risks factors associated with the investment in SID/KIM.
LIMITING DOWNSIDE USING A ONE-YEAR PUT A put option is a right, but not an obligation to sell a prescribed number of shares at a specified price on or before the specific expiry date. It comes with a specific cost called the premium. The specified price at which the underlying is contracted to be sold is called the strike price. Nifty 50 Put Option will increase in value when Nifty goes down from the strike price & vice versa. Risk of loss for an option buyer is limited only to the premium paid. LIMITS THE DOWNSIDE ENABLES UNCAPPED UPSIDE 9 The investment strategy of hedging by investing in NIFTY 50 PUT Option may or may not enable the downside protection. The strategy of protecting the downside is based only on the movement of value of NIFTY 50 and not the scheme s stock portfolio. Using Index Option of NIFTY 50 PUT for the purpose of hedging may not be efficient due to mis pricing, improper valuations, portfolio composition and coloration and liquidity. For complete Risk Factors, please read the offer document.
HOW DOES A PORTFOLIO WITH A PUT OPTION WORK? The maximum loss that a buyer of a put option can incur is the option premium paid and this premium cost is as low as only 4% p.a.* Portfolio Illustration based on the following assumptions +30% +20% Nifty 50 Levels Today +10% 0% Loss capped at 4% (option premium cost) -4% -10% -30% -25% -20% -15% -10% -5% Nifty 50 Today +5% +10% +15% +20% +25% 10 * Premium of 4% based on counterparty quotes received by IIFL AMC. Actual premium may or may not be at the same levels and shall depend on market conditions at the time of deployment every year
PUT OPTION ILLUSTRATION Illustration based on the following assumptions: Invested Amount = Rs.100, Cost of Put = 4% of hedged amount, Allocation to Stocks Portfolio = 96.15% NIFTY 50* Level = 10000 NIFTY 50* Level at Maturity NIFTY 50* Returns Fund Return (with 0% Outperformance) Fund Return (with 3% Outperformance)# 5000-50.00% -3.85% -0.96% 6000-40.00% -3.85% -0.96% 7000-30.00% -3.85% -0.96% 8000-20.00% -3.85% -0.96% 9000-10.00% -3.85% -0.96% Downside protection as put payoff offsets loss in the portfolio 11000 10.00% 5.77% 8.65% 12000 20.00% 15.38% 18.27% 13000 30.00% 25.00% 27.88% 14000 40.00% 34.62% 37.50% 15000 50.00% 44.23% 47.12% Enables Uncapped Upside due to investment in equities The above illustrates the payoff in multiple scenarios of index levels at maturity. For e.g., if the index falls to 8000 (i.e. a 20% fall), the scheme falls only by 3.85% assuming 0% outperformance. However, given an outperformance of 3% annually, the scheme returns -0.96% (see row corresponding to NIFTY 50 level at 8000). The scheme thereby aims to provide downside protection. However, in scenarios with higher index levels, the scheme delivers commensurate returns with no upside cap. 11 The above illustration does not in any manner offer any assured returns and is subject to market risks. The above illustration does not take expenses into account and that the returns shown are assumed figures and not to be constructed as actual returns and/or guaranteed returns. IIFL AMC is not guaranteeing returns on investments made in the Scheme. The information provided herein is used to explain the concept and is given for illustrative purposes only. The same is not sufficient and shouldn t be used for the development or implementation of an investment strategy. It should not be construed as an investment advice to any party. Past performance may or may not be sustained in future. 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. *NIFTY 50 has been used for illustration purpose. Benchmark of the fund is Crisil Balanced (Aggressive) Index. # Outperformance in this illustration refers to excess returns over the NIFTY 50 index post fees.
IIFL CAPITAL ENHANCER FUND SERIES 1: BACKTESTED RESULTS Period NIFTY Returns CRISIL Balanced Fund Returns Strategy* CY 2003 72% 43% 115% CY 2004 11% 7% 24% CY 2005 36% 23% 51% CY 2006 40% 25% 42% CY 2007 55% 37% 57% CY 2008-52% -35% -1% CY 2009 76% 46% 139% CY 2010 18% 14% 27% CY 2011-25% -14% 4% CY 2012 28% 21% 40% CY 2013 7% 5% 9% CY 2014 31% 25% 40% CY 2015-4% 0% 8% CY 2016 3% 6% 7% CY 2017 29% 20% 35% Overall CAGR 17.57% 13.73% 38.30% Notes: *Back Tested Results for Pre-dominantly Large Cap Hedged Portfolio. Back tested results are no assurance of future performance 12
BACKTESTED RESULTS (RS. 100 INVESTED ACROSS STRATEGIES) 600 NIFTY 50 CRISIL Balance Fund 561 500 400 424 300 200 100 100 0 5000 4000 Strategy 4354 3000 2000 1000 0 100 13 Notes: *Back Tested Results for Pre-dominantly Large Cap Hedged Portfolio. Considering management fees of 1.5% and the hedging cost of total 4% is reduced from Portfolio Back tested results are no assurance of future performance The portfolio has been re-balanced to the proposed weighted allocation as on 31 st December of every calendar year. The said analysis explains the behaviour of the strategy and does not in any manner reflect, assure, assume the returns of the actual portfolio nor is it a recommendation made by IIFL AMC. IIFL Mutual Fund/ IIFL AMC is not guaranteeing returns on investments made in the scheme.
WHY INVEST IN A ONE-YEAR PUT WITH ANNUAL INTERVAL? SCENARIO 1 Performance Illustration 250 200 170 198 150 100 50 100 99 48 84 100 0 01-Jan-07 01-Jan-08 01-Jan-09 01-Jan-10 NIFTY Strategy* NIFTY Strategy* CY 2008-52% -1% CY 2009 76% 72% CY 2010 18% 16% Negative returns at the beginning of a 2/3 year tenor doesn t impact overall returns significantly Annual Interval option also provides liquidity facility The above illustration explains the behavior of the strategy in various scenarios and does neither in any manner, reflect, assure, assume the returns of the actual portfolio, nor is it a recommendation made by IIFL AMC. IIFL MF/AMC is not guaranteeing any returns on investments made in the schemes. Overall CAGR 0% 25% 14 * Strategy refers to hedged portfolio computed on back tested basis Considered out performance of 3% over Nifty, post all expenses Back tested results are no assurance of future performance. Above illustration is only for reference
WHY INVEST IN A ONE-YEAR PUT WITH ANNUAL INTERVAL? SCENARIO 2 Performance Illustration 250 217 200 208 140 150 100 100 137 206 104 50 0 01-Jan-05 01-Jan-06 01-Jan-07 01-Jan-08 NIFTY Strategy* CY 2006 CY 2007 NIFTY Strategy* 40% 37% 55% 52% Negative returns at the end of a 2/3 year tenor doesn t impact overall returns significantly Annual Interval option also provides liquidity facility CY 2008-52% -1% Overall CAGR 1% 27% The above illustration explains the behavior of the strategy in various scenarios and does neither in any manner, reflect, assure, assume the returns of the actual portfolio, nor is it a recommendation made by IIFL AMC. IIFL MF/AMC is not guaranteeing any returns on investments made in the schemes. 15 * Strategy refers to hedged portfolio computed on back tested basis Considered out performance of 3% over Nifty, post all expenses Back tested results are no assurance of future performance. Above illustration is only for reference
SCHEME DETAILS SCHEME NAME IIFL CAPITAL ENHANCER FUND SERIES 1 To achieve long term capital appreciation by investing in equity and equity related securities, with strategy OBJECTIVE of hedging the portfolio with Nifty 50 Put Option and other Equity derivatives. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved. TYPE Annual Interval Scheme investing in Equity and Equity Related Securities* NFO OPEN DATE April 23 rd 2018 NFO CLOSE DATE May 4 th 2018 BENCHMARK CRISIL Balance Fund Aggressive Index FUND MANAGER PLANS OFFERED OPTIONS OFFERED ASSET ALLOCATION MINIMUM APPLICATION AMOUNT LISTING Mr. Prashasta Seth has over 16 years of experience in the financial services industry. He has been with IIFL Wealth Group since inception and has been instrumental in setting up the equity desk at IIFL Wealth Group. As a Chief Executive Officer of IIFL Asset Management Limited (IIFL AMC), he has been instrumental in launch of various products under Mutual Fund, Alternative Investment Fund and PMS platform of IIFL AMC. He is a MBA from IIM Ahmedabad and B Tech from IIT Kanpur. His previous assignment includes a stint in JP Morgan, London and heading Irevna (a Standard & Poor s company). Regular Plan and Direct Plan Growth & Dividend Option Equity or Equity Related Instruments including Derivatives: 65 100% Debt and money market instruments: 0-35% Purchase Rs. 5000 and in multiples of Re. 1 thereafter. (During NFO & STP) Additional Purchase - Rs. 1000 and in multiples of Re. 1 thereafter (Only during Specified transaction period) Investments above the minimum amount mentioned, shall be made in multiples of Re. 1. The units of the Scheme will be listed on the National Stock Exchange (NSE). Exit Load not applicable 16 Mutual Fund investments are subject to market risks, read all scheme related documents carefully *The first STP (Specified Transaction Period) of the Scheme may occur beyond a period of 12 months from the close of the New Fund Offer (NFO) but not later than June 30, 2019. The subsequent STPs shall occur at an interval of 12 months.
IIFL CAPITAL ENHANCER FUND SERIES 1 Annual Interval Scheme investing in Equity and Equity Related Securities This product is suitable for investors who are seeking* Long Term Capital Growth; Investments in equity and equity related securities with a Strategy of hedging by buying NIFTY 50 Put Option and other Equity derivatives; * Investors should consult their financial advisers if in doubt about whether the product is suitable for them. 17
DISCLAIMERS MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY This presentation has been prepared and issued on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact and terms and conditions `and features of IIFL Capital Enhancer Fund. This document is for information purposes and private circulation only and is not an offer to sell or a solicitation to buy any mutual fund units / securities. The information/ data here in alone is not sufficient and shouldn't be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All opinions, figures, charts/graphs, estimates and data included in this presentation are as on date and are subject to change without notice. This presentation is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to local law, regulation or which would subject IIFL and affiliates to any registration or licensing requirement within such jurisdiction. The units / securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. While utmost care has been exercised while preparing this document, the Sponsors/the AMC/ the Trustee Company/ their associates/ any person connected with it, does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein are based on our current views and assumptions 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. Readers shall be fully responsible / liable for any decision taken on the basis of this presentation. No part of this document may be duplicated in whole or in part in any form and/or redistributed without prior written consent of the IIFL Mutual Fund / IIFL Asset Management Limited. Readers should before investing in the Scheme make their own investigation and seek appropriate professional advice. Neither the Sponsors /the AMC/ the Trustee Company/ their associates/ nor any person connected with it, accept any liability arising from the use of this information. Contact Us Location Address Contact no Email IDs Mumbai IIFL Asset Management Ltd, 6th Floor, IIFL Centre, Kamla Mills Compound, Senapati Bapat Road, Lower Parel (W), Mumbai 400013 022 39585600 Extn 5896 / 5172 amcsaleswest@iiflw.com Delhi IIFL Asset Management Ltd, 2nd Floor, GYS Platinum, D-3, P-3B, Saket District Centre New Delhi 110 017. 011 4369 3000 Extn 3090 amcsalesnorth@iiflw.com Bangalore IIFL Asset Management Ltd, Level 3,Prestige Nebula-1,8-12,Cubbon road, FMC Cariappa Colony, Shivanchetti Gardens,Bangalore-560001 080 22536400 Extn 6465/67 amcsalessouth@iiflw.com Kolkata IIFL Asset Management Ltd, Kolkatta, Unit 3, Level 3, Camac Square,24, Camac Street, Kolkata - 700 016 033 44035800 Extn 5820 amcsaleseast@iiflw.com 18 Contact us at Customer Service: (91-22) 39585896 / 5172 / 5600 6th Floor, IIFL Centre, Kamala Mills Compound, Lower Parel, Mumbai 400 013 www.iiflmf.com CIN No. :U74900MH2010PLC201113
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