HDFC Money Market Fund (An open ended debt scheme investing in money market instruments) A po portf tfoli lio with ith ru run do down mat aturity^ July 2020 Riskometer This product is suitable for investors who are seeking*: Income over short term. • to generate income/ capital appreciation by investing in money market instruments • *Investors should consult their financial advisers if in doubt about whether the product is suitable for them. ^Refer slide 3-5 for run down strategy 1
HDFC Money Market Fund : Portfolio Positioning • Portfolio aims to maintain a higher credit quality with focus on run down strategy^. • Maintained high proportion of investments in AAA / A1+ or equivalent rated securities (100 00% of of Net th June Assets in in AAA/A1+ or or equiv uivale alent nt rat ated ed securit rities ies sinc nce 30 30 th ne, 2018 18) • Fund invests in money market instruments* with maturity of not more than one year ^Please refer Slide 3-5 for details on run down strategy The current investment strategy is subject to change depending on the market conditions. For complete portfolio details refer www.hdfcfund.com. The product positioning and intended duration is based on current view and is subject to change. *Commercial papers, Commercial bills, Treasury bills, Government securities (having an unexpired maturity upto one year), Call or notice money, Certificate of deposit, Usance bills and any other like instruments as specified by the RBI / SEBI from time to time. 2
Current Investment Strategy • Currently, the fund intends to follow the investment strategy of – buying money market instruments with maturity upto 1 year and – adopting a buy and hold (run down) strategy; thus allowing the maturity to reduce over time. • Strategy is initiated in January-March quarter (rebalancing period); thus the portfolio maturity shall generally be rebalanced in this period every year. • Fund may, during the financial year, invest up to 35% of the portfolio in papers maturing beyond the next rebalancing period (i.e., up to June-July) to take advantage of steepness in the yield curve, if any. • Hence, fund returns are expected to be closely aligned to the prevailing YTM, irrespective of the movement in interest rates over the run down tenor of the strategy.* The current investment strategy is subject to change as per fund manager’s outlook. Run down strategy is subject to the risks arising on account of portfolio adjustments made due to inflows/outflows. Further, all debt portfolios are subject to markets risks, interest rate risks, reinvestment risks and credit risks. For full details, read Scheme related documents. *Assuming the option of investing up to 35% of the portfolio in papers maturing beyond the next rebalancing period is not exercised The rate of return/yields mentioned should not be construed as actual returns and/or indicative returns. Expenses / charges have not been considered. HDFC Mutual Fund/AMC is not guaranteeing /offering/communicating any returns/indicative yields on investments made in the said Scheme. 3
Run down Portfolio Strategy – Graphical representation Maturity is rebalanced when Portfolio Maturity is minimal; reset of maturity will be done with the objective of optimizing returns over the target duration Up to 35% of the portfolio may be invested in papers maturing in June/July of year 2, i.e., beyond next rebalancing period. However, these papers may get rebalanced along with the rest of the portfolio Maturity at the next rebalancing period. Jan-March, Year 1 Jan-March, Year 2 June-July, Year 2 Jan-March, Year 3 (Rebalancing period) (Rebalancing period) (Rebalancing period) The current investment strategy is subject to change as per the fund manager’s outlook. Run down strategy is subject to the risks arising on account of portfolio adjustments made due to inflows/outflows. HDFC Mutual Fund/AMC is not guaranteeing /offering/communicating any returns/indicative yields on investments made in the said Scheme. 4
How does Run down Portfolio work? Scenario Analysis of Run Down Portfolio Strategy assuming the rebalancing is done on 1 st March every year $ Portfolio Yield Portfolio Yield Investment Redemption at the time of Portfolio Return Scenario at the time of Remarks Date Date redemption ^ (Annualised) Investment When investor redeemed during rebalancing period 1 1-Mar-15 7% 1-Mar-16 * ~7% It can be seen that the portfolio return approximately matched the 2 1-Aug-15 6% 1-Mar-16 * ~6% portfolio yield available at the time of investment 3 1-Nov-15 8% 1-Mar-16 * ~8% When investor redeemed before rebalancing period As the portfolio yield is lower than 4 1-Mar-15 7% 1-Aug-15 6% >~7% that of Mar-15, there would be valuation Gains As the portfolio yield is higher than 5 1-Mar-15 7% 1-Nov-15 8% <~7% that of Mar-15, there would be valuation Losses * Yield at the time of redemption would not be relevant for HTM portfolio. HTM: Held To Maturity $ The illustration assumes the option of investing up to 35% of the portfolio in papers maturing beyond the next rebalancing period is not exercised. If the option is exercised, the returns may not be closely aligned with the YTM at the time of investment, depending on market factors at the time of exercising the option. Interest rate/reinvestment risk would be lesser when redemption occurs during rebalancing period Disclaimer: Above illustration is purely to explain the concept of run down portfolio strategy. Run down strategy is subject to the risks arising on account of portfolio adjustments made due to inflows/outflows. The rate of return/yields shown are assumed figures and should not be construed as actual returns and/or indicative returns. Expenses / charges have not been considered in the calculations. HDFC Mutual Fund/AMC is not guaranteeing/offering/communicating any returns/indicative yields on investments made in this Fund. The recipient should understand that the information provided above may not contain all the material aspects relevant for making an investment decision. 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. The current investment strategy is subject to change as per the fund manager’s outlook. 5
Why Money Market Fund ? 7,000 Interbank Liquidity (INR bn) 6,000 Interbanking liquidity remains in surplus since past 5,000 4,000 12 months (see graph 1) 3,000 2,000 1,000 Upward sloping yield curve – suitable for run down 0 -1,000 benefits (see graph 2) -2,000 Jun/18 Jul/18 Aug/18 Sep/18 Oct/18 Nov/18 Dec/18 Jan/19 Feb/19 Mar/19 Apr/19 May/19 Jun/19 Jul/19 Aug/19 Sep/19 Oct/19 Nov/19 Dec/19 Jan/20 Feb/20 Mar/20 Apr/20 May/20 Jun/20 Jul/20 Updated till 6 th July 2020 Term spreads are reasonable Reaso sonably ly Steep Yield ield Curve rve High quality credit 1.4 12m CD - 6m CD 12m CD - 3m CD 1.2 Other her bene nefit its 1.0 Spreads (%) 0.8 Lower interest rate risk vis-à-vis other debt funds 0.6 except Liquid funds 0.4 0.2 0.0 No lock-in, no entry / exit load CD: Certificate of Deposit, Source: Bloomberg, RBI * HDFC AMC/Mutual Fund is not assuring or guaranteeing any returns in the Scheme 6
HDFC Money Market Fund : Suitability Allocation to AAA and equivalent securities Suit itab able le for investor ors - 100 90 80 Desiring a higher degree of liquidity and lower 70 % Of Net Asset 60 interest rate risk compared to certain debt 50 40 schemes 30 20 10 Maintained 100% of AUM in AAA/A1+ or 0 equivalent rated securities since 30-Jun-18 Jun-17 Aug-17 Oct-17 Dec-17 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Apr-20 Jun-20 Feb-18 Feb-19 Feb-20 Having an investment horizon of 3 to 12 months Who wants to minimize interest rate risk and seek returns closer to prevailing YTMs With a need to park surplus cash flows *Investors should consult their financial advisers, if in doubt about whether the product is suitable for them. For complete portfolio details refer www.hdfcfund.com * Spread between month-end YTMs and cut off yield of 91 days T-bill in last auction of the month 7
Portfolio Characteristics Portfolio Classification by Rating Class (%) * Portfolio Classification by Asset Class (%) * AAA/AAA(SO)/A1+/A1+(SO) & Commercial Papers 49.00 100.12 Equivalent Certificate of Deposits 51.12 Cash, Cash Equivalents and Net -0.12 Current Assets Cash, Cash Equivalents and Net -0.12 AUM (In Rs. Cr.) 8,422 Current Assets Avera erage ge Mat atur urit ity Modif dified ied Durat ration ion Macaulay ulay dura ratio ion n Yield ld To Matur urit ity 232 Days 215 Days 232 Days 4.53% For complete portfolio details refer www.hdfcfund.com. Portfolio details provided as on June 30, 2020 * Computed on invested amount. 8
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