Kotak Classic Equity Fund IQ EQ 1
IQ + EQ = Success IQ Sell side and In-house research Detailed Company Models Regular Company Meetings Plant Visits On ground research like Dealer check EQ Higher OW/UW Calls Non Consensus Calls Letting profits run Cutting losses if hypothesis changes 2
Importance of EQ When emotional intelligence (EQ) first appeared to the masses, it served as the missing link in a peculiar finding: People with average IQs outperform those with the highest IQs 70 percent of the time. This anomaly threw a massive wrench into the broadly-held assumption that IQ was the sole source of success. Decades of research now point to emotional intelligence as being the critical factor that sets star performers apart from the rest of the pack. The connection is so strong that we know 90 percent of top performers have high emotional intelligence. Few quotes by eminent investment gurus: "Only when you combine sound intellect with emotional discipline do you get rational behavior." Warren Buffet The most important quality for an investor is temperament, not intellect. Warren Buffet Individuals who cannot master their emotions are ill-suited to profit from the investment process. Benjamin Graham 3 The most important organ in the body as far as the stock market is concerned is the guts, not the head.anyone can acquire the know how for analysing stocks. Peter Lynch
Issues with Emotions While Investing Overconfidence Ignoring Cost Past Record Clinging to Losers Gain Grabbing Emotional Risk Illusion of Control Herd Mentality Anchoring Bias Short Sighted Narrow Framing 4
Uniqueness of the Kotak Classic Fund Strategy Sustainable Performance Largecap Oriented Growth At Reasonable Price (GARP) BALANCING IQ & EQ Flexibility to Take High Conviction Calls Mix of Top Down- Bottom Up & EQ Verified
Investment Management Process Stock universe Investment Universe Fundamental Analysis Fund Mandate EQ Screening Risk Controls Portfolio 6
Portfolio Selection Approach Various approaches to sector selection Factor Concentration Cyclical / non cyclical Global / Local Private / State Owned Reforms Dependent/Independent Value Growth Quality ROE Risk Management Portfolio Consumption / Investment Driven Cash Flow Generation Commodity producer / Users Volatility 7 Checking the fundamentally selected sectors for factor concentration and then overlaying the risk management framework
Case Study Snapshot Risk Management IQ = Sell, EQ = Buy IT Metals (Quadrant 4) Big overweight IQ = Buy, EQ = Buy OMCs Paints (Quadrant 1) 8 Big Underweight IQ = Sell, EQ = Sell Telecom PSU Banks Pvt Corp Lenders IQ = Buy, EQ = Sell Cement and Media Gas Utilities Two Wheelers (Quadrant 3) (Quadrant 2) Fundamentals override Disclaimer: The above segregation of sectors is based on the broad thematic assessment of the business. As such this is subjective to change from time to time and is based on fund manager s prerogative with respect to that allocation.
Quadrant 1 IQ = Buy, EQ = Buy When we are positive on a sector/ stock both from the IQ and EQ perspective, we take a big overweight position in that sector/ stock 9 Disclaimer: The above segregation of sectors is based on the broad thematic assessment of the business. As such this is subjective to change from time to time and is based on fund manager s prerogative with respect to that allocation, Data from ICRA
Quadrant 3 IQ = Sell, EQ = Sell When we are Negative on a sector/ stock both from the IQ and EQ perspective, we take a big underweight position in that sector/ stock 10 Disclaimer: The above segregation of sectors is based on the broad thematic assessment of the business. As such this is subjective to change from time to time and is based on fund manager s prerogative with respect to that allocation. Data from ICRA
Quadrant 2 IQ = Buy, EQ = Sell The fundamental view overrides here Sectors like cement, media, gas utilities, 2 wheelers like Hero Motorcorp and NBFCs like Bajaj Finance where the fundamental house view was positive, found overweight position in Kotak Classic Equity too 11 Disclaimer: The above segregation of sectors is based on the broad thematic assessment of the business. As such this is subjective to change from time to time and is based on fund manager s prerogative with respect to that allocation. Data from ICRA
Quadrant 4 IQ = Sell, EQ = Buy The market had seen the sector getting butchered continuously since April 2010 during which the metal stocks in India corrected by more than 60% on an average and hence the investors were skeptical about the recovery. But the sector showed up on the EQ screener as a deep value buy and we increased the weight gradually. We were massively underweight on the IT sector till Sep, 2016 and then went overweight as the value proposition of the sector increased as highlighted by the EQ screener. INR too was showing signs of depreciation then which strengthened our case. 12 Disclaimer: The above segregation of sectors is based on the broad thematic assessment of the business. As such this is subjective to change from time to time and is based on fund manager s prerogative with respect to that allocation. Data from ICRA
Key Portfolio Characteristics 1. High Conviction calls in sectors Shows Higher Alpha Opportunities 2. Lower Volatility ( Last 1 Year) Better Risk Management 3. Benefitting due to prudent balancing between IQ and EQ 13 Disclaimer: The above segregation of sectors is based on the broad thematic assessment of the business. As such this is subjective to change from time to time and is based on fund manager s prerogative with respect to that allocation. Data from ICRA
Key Portfolio Characteristics 4. Valuation * (%) 5. Largecap Orientation 6. Non consensus calls - Example: Metals Shows Willing to Take Conviction Based Stance Source : Bloomberg estimates As on 28 th February 2017 * Earning Growth is the measure of percentage growth of companies' (which are there in the portfolio or index ) net income over the specific period 14 Source : ICRA
Sector Allocation Top sectors allocation as on 28th February 2017 0 5 10 15 20 25 Banking & Finance 23.75 Information technology 15.00 Oil & Gas 12.61 Metal & Metal Products Auto & Auto Ancillary Utilities FMCG Cement & Cement Products Pharmaceutical 8.34 7.49 6.74 5.94 5.19 5.09 Paints 2.19 Source : KPAX 15
Portfolio Action Top 10 Companies as on 28th February, 2017 Market Cap Mix (%) HDFC Bank Ltd. 0% 1% 2% 3% 4% 5% 6% 7% 6.96% Midcap, 6.56 Cash, 1.1 Infosys Ltd. 6.52% ITC Ltd. Tata Consultancy Services Ltd. Power Grid Corporation Of India Ltd National Thermal Power Corporation Limited Hindalco Industries Ltd Hero MotoCorp Ltd. Tata Steel Limited. Asian Paints Ltd. 4.12% 3.96% 3.75% 2.98% 2.91% 2.89% 2.76% 2.19% Large Cap, 92.34 Source: KPAX. Market definition used is market capitalization of the 100th largest scrip (on the bases of market capitalisation) is the cutoff to determine the large cap and midcap segment. 16 as on 28 th February 2017
Performance As On 31st December 2016 *Scheme Inception date is 27/07/2005. Fund Managed by Mr. Harish Krishnan. *With effect from 1st January, 2017, the fund management responsibilities of Kotak Classic Equity Fund was changed from Mr. Harish Krishnan to Mr. Deepak Gupta. ^Past performance may or may not be sustained in future.*all payouts during the period have been reinvested in the units of the scheme at the then prevailing NAV. Returns <= 1 year: Absolute; Returns > 1 year: CAGR (Compounded Annualised Growth Rate). N.A stands for data not available. Note: Point to Point (PTP) Returns in INR shows the value of 10,000/- investment made at inception. Source: ICRA MFI Explorer. # Name of Scheme Benchmark. ## Name of Additional Benchmark. Please refer page no. 18 to 20 for other schemes managed by Mr Deepak Gupta and Mr. Harish Krishnan. 17
Top 3 Funds Managed by Mr. Deepak Gupta Scheme Inception date is 09/08/2004. Fund Managed by Mr. Deepak Gupta. Scheme Inception date is 20/12/2013. Fund Managed by Mr. Deepak Gupta 18 Scheme Inception date is 21/01/2011. Fund Managed by Mr. Abhishek Bisen & Mr. Deepak Gupta ^Past performance may or may not be sustained in future.*all payouts during the period have been reinvested in the units of the scheme at the then prevailing NAV. Returns <= 1 year: Absolute; Returns > 1 year: CAGR (Compounded Annualised Growth Rate). N.A stands for data not available. Note: Point to Point (PTP) Returns in INR shows the value of 10,000/- investment made at inception. Source: ICRA MFI Explorer. # Name of Scheme Benchmark. ## Name of Additional Benchmark
Bottom 3 Funds Managed by Mr. Deepak Gupta Scheme Inception date is 08/02/2010. Fund Managed by Mr. Deepak Gupta. Scheme Inception date is 06/06/2008 Fund Managed by Mr. Deepak Gupta Scheme Inception date is 26/09/2007. Fund Managed by Mr. Deepak Gupta (Dedicated fund manager for overseas investment) & Mr. Abhishek Bisen ^Past performance may or may not be sustained in future.*all payouts during the period have been reinvested in the units of the scheme at the then prevailing NAV. Returns <= 1 year: Absolute; Returns > 1 year: CAGR (Compounded Annualised Growth Rate). N.A stands for data not available. Note: Point to Point (PTP) Returns in INR shows the value of 10,000/- investment made at inception. Source: ICRA MFI Explorer. # Name of Scheme Benchmark. ## Name of Additional Benchmark 19
Other Funds Managed by Mr. Harish Krishnan Scheme Inception date is 25/02/2008. Fund Managed by Mr. Harish Krishnan. Scheme Inception date is 29/12/1998. Fund Managed by Mr. Harish Krishnan. 20 Scheme Inception date is 06/05/2015. Fund Managed by Mr. Harish Krishnan ^Past performance may or may not be sustained in future.*all payouts during the period have been reinvested in the units of the scheme at the then prevailing NAV. Returns <= 1 year: Absolute; Returns > 1 year: CAGR (Compounded Annualised Growth Rate). N.A stands for data not available. Note: Point to Point (PTP) Returns in INR shows the value of 10,000/- investment made at inception. Source: ICRA MFI Explorer. # Name of Scheme Benchmark. ## Name of Additional Benchmark
Disclaimers Mutual Fund investments are subject to market risks, read all scheme related documents carefully. 21