DSP BlackRock A.C.E. Fund ( Analysts Conviction Equalized ) Series - - PowerPoint PPT Presentation

DSP BlackRock A.C.E. Fund

Multi Cap Fund - A close ended equity scheme investing across large cap, mid cap, small cap stocks

( Analyst’s Conviction Equalized ) Series 1

November 2017

ACE = People + Process + Protection

2.

`

= + +

Process People Protection*

*Put Option limits downside, from the underlying security, up to the cost of Put ^DSP BlackRock A.C.E. (Analyst’s Conviction Equalized) Fund Series 1 (The Scheme)

DSP BlackRock A.C.E. Fund^

A n a l y s t ’ s

• C
• n

v i c t i

• n
• E

q u a l i z e d

People: Together. Everyone. Achieves. More.^

Analysts out of a 16 member Investment T.E.A.M. pick top ideas from the stock pool

Protection: Risk Management

Important to protect downside when markets are at above average valuations.

*DSP BlackRock A.C.E. (Analyst’s Conviction Equalized) Fund Series 1 (The Scheme) ^ Refer Slide 18 for details on the Equity Investments Team

Why DSP BlackRock A.C.E. Fund*?

3. Process

We believe a consistent Investment Process precedes Strong Performance

Reasons to Invest in the DSP BlackRock A.C.E. Fund*

4. The Scheme invests in Analysts’ High Conviction ideas across each sector

High Conviction Stock Ideas Across Sectors

The Scheme will have sector allocation in-line with NIFTY 500

No Sector Allocation Bias

Equal weights for all stocks within a sector

No Stock Allocation Bias

Portfolio protected against falling markets through put options available at a reasonable price

Downside

Protection `

*DSP BlackRock A.C.E. (Analyst’s Conviction Equalized) Fund Series 1 (The Scheme)

A Consistent Investment Process Precedes Strong Performance

PROCESS GOOD BAD SUCCESS HIGH LOW

Temporary

(Persistence leads to high success)

Well deserved

(Sustained success)

Dumb luck Obvious By J. Edward Russo and Paul J. H. Schoemaker from the book Winning Decisions 5. DSP BlackRock A.C.E Fund* aims to be in this quadrant

*DSP BlackRock A.C.E. (Analyst’s Conviction Equalized) Fund Series 1 (The Scheme)

UNIVERSE

COVERAGE

OWNERSHIP

ANALYST CONVICTION IDEAS

BSE 500+ ~US$ 1.96 trn Covered ~340 ~US$ 1.72 trn Owned~240 ~US$ 1.33 trn 45-55 Stocks Active coverage We own 50 stocks across our portfolios which are

• utside the top 500 stocks by market cap.

Source: DSP BlackRock, as of October 2017 Above information on stock pool is across all schemes of DSP BlackRock.

Our eyes, ears and minds are always open to new ideas

Stock Coverage

Stocks Market Cap

6.

(Portfolio Managers + Analysts)

INTERNAL EXTERNAL

• Together. Everyone. Achieves. More

Our Network creates our Networth Daily morning calls Weekly all-day team meeting every Wednesday Weekly calls with global BlackRock teams Internal screens Interactions with 400+ companies a year 15+ conferences a year Industry experts, supply chain checks Sell-side interactions

Source: DSP BlackRock, as of October 2017

Idea Generation

7.

We focus on incremental ROE and Price/Book, in addition to other fundamental parameters Across each of the 340 stocks under coverage

Overall at a fund house level

• ur endeavour is to maintain ~70%
• f our scheme portfolios in

Strong Buys and Buys

Focus on Companies and Earnings

STEP 01

Price Target

STEP 02

Stock Recommendation

STEP 03

Investment Comfort Conviction Expressed Strong buy Buy Hold Sell Strong sell

Investment Philosophy: Growth at a Reasonable Price

In-depth Company Analysis

DSP BlackRock A.C.E. Fund* Large portion of the portfolio aims to be in Strong Buys and Buys

8.

*DSP BlackRock A.C.E. (Analyst’s Conviction Equalized) Fund Series 1 (The Scheme)

EQ

Emotional Quotient (Subjective)

IQ

Intelligence Quotient (Objective) Stocks under coverage are assigned a binary rating across 7 parameters

Source: DSP BlackRock, as of October 2017. | *Or as many years as available if <10years; Broader market refers to NIFTY 500. Refer Slide 10 for details on Simulated Portfolio mapping to EQ & IQ framework. The above information is only for illustration purpose and should not be construed as recommendation of the stocks. There is no guarantee of returns/income generation in the Scheme. SHORT TERM GROWTH (STG)

Our proprietary EQ & IQ framework

Analyst view on earnings growth trajectory over the next 2-3 quarters

EQ

LONG TERM GROWTH (LTG)

10 year market-cap CAGR greater than broader market*

IQ

VALUE (VAL)

EQ

Analyst view of stock valuation (combination of relative and absolute) versus the sector

RETURN ON EQUITY (ROE)

IQ

PREDICTABILITY (PRE)

EQ

VOLATILITY (VOL)

IQ

QUALITY (MQ)

EQ

Either absolute ROE > 15% or an improving ROE trajectory Analyst view of business / quarterly shocks Threshold of stock volatility being lower than market volatility Analyst view of management quality

Some of our indicative recommendations / ratings Name RECO STG LTG VAL ROE PRE VOL MQ

Bharat Petroleum Strong Buy 1 1 1 1 1 1 Strong Buy Buy Hold Maruti Suzuki Federal Bank Bharti Airtel 1 1 1 1 1 1 1 1 1 1 1 1 1

9.

Analyst Portfolio^ on the proprietary EQ & IQ framework

1 2 3 4 5 6 7 3 5 14 17 12 Source: DSP BlackRock, as on September 29, 2017 | ^ Portfolio simulated with the investment process and strategy proposed for the Scheme. The above information is only for illustration purpose. There is no guarantee of returns/income generation in the Scheme.

% of Analyst Portfolio with Binary Rating of 1 across EQ & IQ parameters Binary ratings across EQ & IQ parameters

Binary Rating (No. of 1s across EQ & IQ parameters) Count of Companies Analyst Portfolio BSE 100

Total Companies 51

10.

LT Growth ST Growth ROE Value Predictability Volatility Quality (Management) 73% 55% 47% 68% 38% 53% 82% 76% 67% 84% 37% 57% 92% 49%

Portfolio Construction for DSP BlackRock A.C.E. Fund*

45 - 55 High Conviction stocks picked across sectors from the coverage pool Analysts’ Conviction Quarterly re-balancing Real time re-balancing stock inclusion/exclusion Portfolio Rebalancing/ Reconstitution Stock allocation= ~94% Put allocation = ~6% Downside

Protection

= weights for stocks

within a sector No Stock Allocation Bias Adherence to NIFTY 500 sector weights No Sector Allocation Bias

*DSP BlackRock A.C.E. (Analyst’s Conviction Equalized) Fund Series 1 | ^Refer Slide 16-17 for illustration on how NIFTY 50 Put Option can be used to hedged portfolio against down markets.

11.

Performance: Analyst Portfolio^ vs. Active Diversified Equity Funds, NIFTY 500 TRI & NIFTY 50 TRI

12.

Source – DSP BlackRock, MFIE, Factset. Data from December 30, 2011 to September 29, 2017. | ^ Portfolio simulated with the investment process and strategy proposed for the Scheme; Returns are post expense of 2.5% | *Average Returns. # Diversified Equity Funds with minimum INR 1,000 crores in AUM, and Average last 6 months portfolio allocation: <75% in Large Cap and <55% in Mid+Small+Micro Cap. Figures for indices are on Total Return basis. These figures pertain to performance of the simulated portfolio out of Analysts’ Top Picks and do not in any manner indicate the returns/performance of the Scheme. Past performance may or may not be sustained in future.

Performance in %

2012

Analyst Portfolio^ 29 Diversified Equity Funds*# NIFTY 500 TRI (Total Return Index) NIFTY 50 TRI 36.5 34.1 33.5 29.4

2013

6.4 5.9 4.8 8.1

2014

51.2 52.4 39.3 32.9

2015

• 1.7

3.4 0.2

• 3.0

2016

9.6 5.6 5.1 4.4

YTD 2017

31.1 23.6 24.6 20.9

Absolute

210.1 193.2 155.9 127.6

CAGR

21.8 20.4 17.8 15.4

α

• 1.4

4.0 6.4 Alpha of portfolio

• ver peers/indices

Analyst Portfolio vs. Diversified Equity Funds Universe NIFTY 500 NIFTY 50 Beta 0.97 1.01 1.03 0.92 0.95 0.95 Correlation Portfolio has better Return/Risk High conviction Ideas held for the long term – evident in low portfolio turnover of ~40% vs. avg. of ~68% for 29 Diversified Equity Funds

Standard Deviation Return / Risk

14.5 17.3 14.8 15.1 1.50 1.18 1.20 1.02

Annexures

13.

DSP BlackRock A.C.E. (Analyst’s Conviction Equalized) Fund Series 1

Investment Objective: The primary investment objective of the Scheme is to generate capital appreciation by investing

predominantly in portfolio of equity and equity-related securities

Benchmark:

NIFTY 500 Index

Fund Manager:

• M. Suryanarayanan

Tenure:

37 months from the date of allotment

NFO Details:

NFO opens: 17 Nov, 2017 NFO closes: 01 Dec, 2017

Minimum Application Amount (Applicable

• nly during New

Fund Offer Period): Asset Allocation:

Under normal circumstances, it is anticipated that the asset allocation of the Scheme shall be as follows:

• A. Equity and equity related securities: 80% to 100%
• B. Debt and money market instruments: 0% to 20%.
• C. Units issued by REITs & InvITs: 0% to 10%

Applicable to both Regular & Direct Plan: Rs. 1,000

14.

α in all 10/10 Sectors

Stock selection and equal weighting has generated α over NIFTY 500 in each sector over the period^

Source: DSP BlackRock, Factset| *The above information is as of September 29, 2017 and is for the simulated portfolio with the investment process and strategy proposed for the Scheme. ^These figures pertain to performance from December 30, 2011 to Septem- ber 29, 2017 of the simulated portfolio out of Analysts’ Top Picks and do not in any manner indicate the returns/performance of the

• Scheme. #Some of the alpha generated may be attributable to underweight positions. Past performance may or may not be sustained in
• future. | The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any recommendation of the same and the Scheme

may or may not have any future position in these sector(s)/stock(s)/issuer(s).

Sector Financials Industrials Consumer Staples

Analyst Portfolio Return % (Gross, Absolute) for each sector* NIFTY 500 Return % (Gross, Absolute) for each sector

Top Contributors to α# 77.9 27.1 31.5 52.6 14.6 17.9

α

25.4 12.5 13.6 Energy 20.7 12.1 8.6 Consumer Discretionary 30.3 20.6 9.7 Materials 20.9 14.1 6.8 Health Care 15.1 9.6 5.6 Telecommunication Services 2.6 0.7 1.9 Information Technology Utilities 19.5 15.3 4.2 4.2 3.0 1.2 Bajaj Finance, IndusInd Bank, Mahindra & Mahindra Financial Finolex Cables, Havells India, Bharat Heavy Electricals Britannia Industries, GSK Consumer Healthcare, Tata Coffee BPCL, HPCL Motherson Sumi, Arvind Limited, Maruti Suzuki Shree Cement, Supreme Industries, Bayer Cropscience Glenmark Pharma, Strides Shashun, Indoco Remedies Bharti Airtel Infosys, HCL Tech, Wipro GAIL (India), NTPC Ltd, CESC Ltd

15.

What is a Put Option? : Benefits owner if underlying security : price falls below Strike Price

The above calculation is only for illustration purpose and should not be construed as performance of scheme. Past performance may or may not be sustained in future. There is no guarantee of returns/income generation in the Scheme. Further, there is no assurance of any capital protection/capital guarantee to the investors in the Scheme.

A put option is a contract (at a cost/ premium) giving the owner the right to sell the underlying security at the strike price before/ at maturity The owner can sell the underlying security for the Strike price even if the current market price is lower

Owner does not gain if price remains flat :

• r rises above the Strike Price

The owner does not have the obligation to sell the security for a flat or risen price

Assumptions (at the time of : deployment of assets)

• NIFTY 50 Level 10,000
• Purchase of NIFTY 50 Put: Strike Price of 10,000 & Premium (Cost) of 565

NIFTY Returns at the end of 3 years (r%) NIFTY Value (A) 10,000*(1+r%) Pay Off from NIFTY 50 Put (C) Strike Price – A Final Value (D) A + C – Put Cost Total Returns D/10,000-1

• 30%

0% 30% 7,000 10,000 13,000 3,000 9,435

• 5.65%

9,435

• 5.65%

12,435 24.35%

`

Scenario 1: Falling Markets Scenario 2: Flat Markets Scenario 3: Rising Markets

Illustration on working of a Put Option

16.

A PUT OPTION LIMITS DOWNSIDE, FROM THE UNDERLYING SECURITY, UP TO THE COST OF PUT

DSP BlackRock A.C.E. Fund* Structured to Protect Portfolio using Put Options

NIFTY 50 Returns

7,000 8,000 9,000 10,000 12,000 13,000 14,000 (30%) (20%) (10%) 0% 20% 30% 40% 78 88 98 109 129 140 150 32 21 9 110 109 108 109 129 140 150 1.7% 1.6% 1.4% 1.1% 21.8% 32.1% 42.4% 0.6% 0.5% 0.5% 0.4% 6.8% 9.7% 12.5% (11.2%) (7.2%) (3.5%) 0.0% 6.3% 9.1% 11.9% * DSP BlackRock A.C.E. (Analyst’s Conviction Equalized) Fund Series 1 | ^Market Values mentioned are indicative at the maturity of the Fund | #Strategy Performance is net of expenses assumed at 2.5% per annum | The above calculation is only for illustration purpose and should not construe as performance of scheme. Past performance may or may not be sustained in future. | There is no guarantee of returns/income generation in the Scheme. Further, there is no assurance of any capital protection/capital guarantee to the investors in the Scheme.

NIFTY 50 CAGR NIFTY 50 Market Value (MV)^ Equity Portfolio MV^ Put Option MV^ Strategy MV^ Strategy Performance#

• - CAGR#

Portfolio Structure Assumptions

Stock Allocation: 94%, Cost of Put Option: 6%

• Current NIFTY 50 Level 10,000
• NIFTY 50 Put: Strike price – 10,000, Expiry: Dec 2020, Premium: INR 565/ lot, Participation: 106%
• Stock portfolio to provide α of 5% over NIFTY 50 TRI

Based on the above illustration, portfolio may provide protection against negative NIFTY 50 performance over the next 3 years.

17.

• Together. Everyone. Achieves. More

Source: DSP BlackRock, as of October 2017; Note: Team includes dealers and trade assistants not depicted in the above image.

Portfolio Managers / Analysts / Sector Responsibilities / Strategist

Anup Maheshwari (23)

Executive Vice President Chief Investment Officer - Equities

Apoorva Shah (28)

Executive Vice President, Investment Senior Portfolio Manager Harrish Zaveri (22)

Senior Vice President Portfolio Management Real Estate

Vinit Sambre (18)

Senior Vice President Portfolio Management

Rohit Singhania (16)

Senior Vice president Portfolio Management MetaIs, Infra

Gaurav Pant (12)

Vice President Portfolio Management

Atul Bhole (12)

Vice President, Portfolio Management Mayur Patel CA, CFA (12) Vice President Oil & Gas, Engineering, Utilities

Mehul Jani, CFA (12)

Vice President Banking, Financials, FMCG, Retail Suryanarayanan Manian CFA (8) Vice President Technology, Telecom, Media

Jay Kothari (12)

Vice President, Product Strategist

Aditya Khemka (10)

Assistant Vice President Pharmaceuticals, Chemicals

Resham Jain, CFA (11)

Assistant Vice President Small & Mid Caps, Agri, Textiles Chemicals

Kaushal Maroo (11)

Assistant Vice President Autos, Anicillaries, Cement

Chinmay Sapre (9)

Assistant Vice President, Aviation, Realty Mahesh Ramasubramanian CFA (5) Manager Product Strategist

Interaction with BlackRock PMs/Analysts Support from Risk & Quantitative Analysis professionals

18.

The close ended equity scheme is suitable for investors who are seeking*

• Capital appreciation with a long term

investment horizon

• Investing predominantly in equity & equity

related securities *Investors should consult their financial advisors if in doubt about whether the product is suitable for them

Investors understand that their principal will be at moderately high risk

L O W M O D E R A T E L Y M O D E R A T E M O D E R A T E L Y H I G H L O W H I G H

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

19.

Disclaimers

Statutory Details: DSP BlackRock Mutual Fund was set up as a trust and the settlers/sponsors are DSP ADIKO Holdings Pvt. Ltd & DSP HMK Holdings Pvt. Ltd. (collectively) and BlackRock Inc. (Combined liability restricted to Rs. 1 lakh). Trustee: DSP BlackRock Trustee Company Pvt. Ltd. Investment Manager: DSP BlackRock Investment Managers Private Limited. Risk Factors: Mutual funds, like securities investments, are subject to market and other risks and there can be no assurance that the Scheme’s objectives will be achieved. As with any investment in securities, the NAV of Units issued under the Scheme can go up or down depending on the factors and forces affecting capital markets. Past performance of the sponsor/AMC/mutual fund does not indicate the future performance of the Scheme. Investors in the Scheme are not being offered a guaranteed or assured rate of return. Each Scheme is required to have (i) minimum 20 investors and (ii) no single investor holding>25% of corpus. If the aforesaid point (i) is not fulfilled within the prescribed time, the Scheme concerned will be wound up and in case of breach of the aforesaid point (ii) the application to the extent of exposure in excess of the stipulated 25% limit would be liable to be rejected and the allotment would be effective only to the extent of 25% of the corpus collected. Consequently, such exposure

• ver 25% limits will lead to refund within 5 Business days from the closure of the NFO period. The name of the Scheme do not in any manner indicate the quality of the

Scheme, its future prospects or returns. In this material DSP BlackRock Investment Managers Pvt. Ltd. (the AMC) has used information that is publicly available, including information developed in-house. Information gathered and used in this material is believed to be from reliable sources.. The AMC however does not warrant the accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as “will”, “expect”, “should”, “believe” and similar expressions or variations of such expressions that are “forward looking statements”. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc. The strategy mentioned in the presentation is proposed to be followed by the Scheme and the same may change in future depending on market conditions and other factors. All figures and other data given in this document are as on 29th September 2017 (unless otherwise specified) and the same may or may not be relevant in future and the same should not be considered as solicitation/ recommendation/guarantee of future investments by DSP BlackRock Investment Managers Pvt. Ltd. or its affiliates. The data

• r figures mentioned in this presentation shall not be construed as indicative yields/returns of any of the Schemes of DSP BlackRock Mutual Fund (‘Fund’).

Past performance may or may not be sustained in the future. There is no assurance of any capital protection/capital guarantee to the investors in the Scheme. The sector(s)/stock(s)/issuer(s) mentioned in this document do not constitute any recommendation of the same and the Scheme may or may not have any future position in these sector(s)/stock(s)/issuer(s). Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication

• r consequence of subscribing to the units of the Fund. For scheme specific risk factors and more details, please read the Scheme Information Document, Statement of

Additional Information and Key Information Memorandum of Scheme available on ISC of AMC and also available on www.dspblackrock.com. DSP BlackRock A.C.E. (Analyst’s Conviction Equalized) Fund Series 1 (DSPBRACEF) which is benchmarked to the Nifty 500 Index, is not sponsored, endorsed, sold or promoted by India Index Services & products Limited (IISL). IISL is not responsible for any errors or omissions or the results

• btained from the use of such index and in no event shall IISL have any liability to any party for any damages of whatsoever nature

(including lost profits) resulted to such party due to purchase or sale or otherwise, DSPBRACEF marked to such index. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.