Emerging opportunities that could help to generate long term wealth - - PowerPoint PPT Presentation

Mar 2020

Emerging opportunities that could help to generate long term wealth

Invest in

Matured phase

Large Cap Mid Cap Small Cap

Top 100 Stocks 101st - 250th Stocks 251st Stocks and below “Investment Universe” 6500+ Stocks listed on Indian Stock Exchanges, BSE & NSE

Large and Midcap MF Schemes – Where does it invest?

Market Capitalization

Traits of Large Businesses

Trusted Names Strong underlying business fundamentals Established track record High corporate governance Wealth creators over long term Dividend paying Generally steady returns for investors

Traits of Mid sized Businesses

Mid sized companies Adaptable to market changing conditions Potential to

• utperform

Large cap stocks Usually considered to be the front runners during bull phases in the markets Have higher risks attached Emerging leaders

Traits of Large and Midcap MF Schemes

Prudent stock selection and sector diversification leads to alpha generation over the benchmark 250 well researched names to invest in

Large and Midcap Fund is blend of:

• Stability of large cap stocks
• Growth potential of mid cap stocks

Better risk adjusted proposition than midcap and small cap funds

DISCLAIMER: The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme Information Document of the scheme.

Why Principal Emerging Bluechip Fund?

Monitored closely for any divergence in the fundamentals

• f the underlying businesses

Follows bottom-up stock selection process Actively managed fund Always almost fully invested with no prejudice to market movements We prefer to invest in businesses that are:

• Showing potential in earnings growth
• Run by competent and transparent Management
• Diligent about their capital allocation
• Trading at attractive valuations on stock exchanges

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DISCLAIMER: The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme Information Document of the scheme.

Why Principal Emerging Bluechip Fund?

Invests in stocks and sectors that are likely to benefit from the Government of India’s focused developments. Over a decade long performance track record. Adequate diversification across 25-30 industries. High beta portfolio for risk bearing investors. With its inception closer to the Global Economic Meltdown of 2008, this Fund has experienced full market cycles in last 11 years of its existence.

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Past performance may or may not be sustained in future. Data as on 28th Feb, 2020. Different plans shall have a different expense structure. The performance details provided herein are of Regular Plan - Growth option. For other schemes managed by the Fund Manager, please refer to slide no. 21.

Why Principal Emerging Bluechip Fund?

10 20 30 40 50 60 70 80 90 100 110 120 130 Principal Emerging Bluechip Fund NIFTY Large Midcap 250 TRI

Part

• f

Sub Prime crisis Recovery post the Sub Prime Eurozone Debt Crisis Global rally Taper tantrum Oil price correction Chinese slowdown Domestic reforms and implementation LTCG introduction

10.8X 5.7X

NAV movement of Principal Emerging Bluechip Fund vis-à-vis NIFTY Large Midcap 250 TRI rebased to 10 as on 12th Nov 2008

NDA 2 Wins Corporate Tax Rate Cuts

From Date To Date Major Market Event* NIFTY Large Midcap 250 TRI Principal Emerging Bluechip Fund Out / Underperformance 12/11/2008 09/03/2009 E1

• 13.69%
• 6.00%

7.69% 09/03/2009 28/09/2010 E2 185.54% 264.57% 79.04% 28/09/2010 20/12/2011 E3

• 30.51%
• 37.32%
• 6.82%

20/12/2011 31/01/2013 E4 41.00% 58.75% 17.76% 31/01/2013 28/08/2013 E5

• 16.69%
• 19.56%
• 2.87%

28/08/2013 06/08/2015 E6 101.71% 169.30% 67.59% 06/08/2015 25/02/2016 E7

• 18.44%
• 23.16%
• 4.73%

25/02/2016 23/01/2018 E8 83.56% 103.58% 20.02% 23/01/2018 22/08/2019 E9

• 14.24%
• 19.44%
• 5.20%

22/08/2019 28/02/2020 E10 8.97% 16.10% 7.13%

*Major Market Event; E1: Sub-prime Crisis; E2: Post sub-prime recovery; E3: Eurozone Debt Crisis; E4: Bounce back in the US and global rally; E5: Taper Tantrum; E6: Oil price correction; E7: Chinese economic slowdown; E8: Domestic reforms and implementation; E9: LTCG on equities, E10: NDA 2 Wins & Corporate Tax Rate Cuts

Performance Drawdown during various market events

Different plans shall have a different expense structure. The performance details provided herein are of PEBF Regular Plan - Growth option. Past performance may or may not be sustained in future. The returns given above are absolute returns. For detailed scheme performance data and performance data of other schemes managed by the Fund Manager, pls refer to the performance table Annexure in slide no. 21.

From To NIFTY Large Midcap 250 TRI Principal Emerging Bluechip Fund Out / Underperformance 03/02/2012 03/09/2013

• 0.47%

9.51% 9.98% 17/10/2014 16/05/2016 0.20% 5.53% 5.33%

During Flat Market Movements

Portfolio Positioning

Fund Manager’s View

• The economic situation is broadly stable with interest rates heading

downwards, economy bottoming out and rural consumption is expected to recover in next 6-12 months.

• We also continue to remain overweight on Consumer Good sector

by adding more stocks under this segment to our portfolio.

• Good monsoon may pave the way to increase in farm production
• ver next 2 seasons which may give a boost to the rural economy.
• The overweight stance on Speciality Chemicals is owing to the

growing tailwinds emerging out of the stricter environmental norms in China which may open global markets for Indian players.

• Autos are expected to recover on the back of expected pick up in

consumption demand which may come off the low base. Also this sector is currently at attractive valuations.

• We have also exited select IT stocks where in the business model

seemed to be undergoing stress.

Fund Positioning

Predominantly large and midcap portfolio Adequate diversification across 25-30 industries Bottom up stock selection Monitored closely for divergence in fundamentals

• f the underlying businesses

Invests in stocks and sectors that are likely to benefit from Government of India’s focused developments

1 2 3 4 5

Disclaimer:

• The sectors referred above should not be construed as recommendation from Principal AMC/ Principal Mutual Fund.

The scheme may or may not have any future positions in these sectors. The views given above may change from time to time without any notice. The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme Information Document of the scheme.

• The data/statistics/comments are given to explain general market trends in the securities market, it should not be

construed as any research report/research recommendation. Disclaimer:

• The investment strategy stated above may change from time to time without any notice and shall be in

accordance with the strategy as mentioned in the Scheme Information Document of the scheme.

Rolling Returns based Performance

Past performance may or may not be sustained in future. Returns (in %) are calculated on Compounded Annualised Basis (CAGR). Data as on 28th February, 2020. Different plans shall have a different expense structure. The performance details provided herein are of Regular Plan - Growth option. Daily rolling returns since inception of the Fund i.e. 12th Nov 2008. For complete performance details, refer to data in slide no. 20.

Percentage of observations

Returns Range 1 Year 3 Years 5 Years 7 Years PEBF Benchmark PEBF Benchmark PEBF Benchmark PEBF Benchmark

Greater than 20% 44.49% 35.03% 48.87% 26.43% 56.41% 15.41% 51.85% 7.37% Greater than 15% but less than 20% 6.04% 8.08% 12.71% 24.23% 30.25% 38.56% 47.87% 27.98% Greater than 12% but less than 15% 3.71% 5.14% 8.73% 18.72% 8.23% 22.11% 0.19% 54.91% Greater than 8% but less than 12% 5.33% 7.22% 8.73% 5.90% 5.12% 23.53% 0.09% 9.64% Greater than 0% but less than 8% 13.82% 23.97% 16.73% 20.72% 0.00% 0.39% 0.00% 0.09% Lesser than 0% 26.57% 20.56% 4.22% 4.00% 0.00% 0.00% 0.00% 0.00%

Total Number of Observations 2,533 2,038 1,544 1,055

25.0 17.8

PEBF Benchmark

19.9 3

14.49

PEBF Benchmark

21.8 9 15.5 3

PEBF Benchmark

20.5 1 14.7

PEBF Benchmark

PEBF – Principal Emerging Bluechip Fund; Benchmark – NIFTY Large Midcap 250 TRI Average Rolling Returns (%)

• 40.00%
• 20.00%

0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00% 140.00% 160.00% CY 2008 (Since Inception) CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CYTD (28th Feb 2020) 10.34% 47.16% 2.53%

• 6.72%

15.90% 2.46% 31.79% 1.89% 5.14% 5.06%

• 5.80%

0.73% 4.32% Principal Emerging Bluechip Fund NIFTY Large Midcap 250 TRI Out/Under Performance

Past performance may or may not be sustained in future. Returns (in %) are calculated on Compounded Annualised Basis (CAGR). Data as on 28th February, 2020. CYTD Returns are absolute. Different plans shall have a different expense structure. The performance details provided herein are of Regular Plan - Growth option. For complete performance details, refer to data in the slide 20 .

Only 2 out of 11 instances of underperformance on Calendar Year basis.

Year on Year Performance

Investment Philosophy

Bottom-up stock selection is the

most reliable and repeatable source

• f consistent investment

performance

Integration of traditional and quantitative fundamental research

• Breadth through a

sophisticated comparative stock selection framework

• Depth through focused

due diligence and expertise

3 key attributes

superior stock selection :

• Sustainable

Fundamental Change

• Rising Investor

Expectations

• Attractive Relative

Valuations Fundamental Changes Expectation Valuation

At Principal we firmly believe

Inhouse Research Third Party Research Industry Experts Management Meetings 6 Pillar Investment Framework

Idea Generation

Due Diligence

Stock Selection

Investment Universe

(200-225 Stocks)

Portfolio Monitoring and Evaluation Portfolio Construction

(Compounders + Alpha Generators)

• Investment Objective and Strategy
• Risk Reward Framework
• Portfolio Diversification
• Regulatory and Internal risk limits
• Performance attribution analysis
• Benchmark and peer group analysis
• Risk / Reward analysis

Equity Investment Process

Business Dynamics

Size, scalability and longevity

Operating Matrix

Operational efficiencies

Profitability

Quality and sustainability

• f profits

Quality of Growth

Management quality and business model

Capital Allocation

Efficiency and distribution of capital

Valuation

Price the Value and not Value the Price

6 Pillars of our Investment Process

An integral part of our portfolio construction and portfolio management strategy

Investment objective & strategy Portfolio risk-return framework Diversification Exclusions if any Other considerations Alignment of the investment idea to the mandate Regulatory & Internal risk limits Sector or stock limits Tracking error Liquidity of the stock Concentration risk Beta of the stock

If you don’t invest in risk management, it doesn’t matter what business you’re in, it’s a risky business…

The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme Information Document

• f the scheme.

Our Risk Management Process

7 Member strong equity fund management team Over 1500 company annual interactions with companies Over 100 man years

• f investment team

experience Use of GRP (Principal's proprietary investment software)

Inhouse Research Capabilities

Top 10 Stocks Top 10 Industry (% of NAV)

Market Cap Ranges will be determined as per prevailing SEBI/ AMFI guidelines where · Large Cap: 1st -100th company in terms of full market capitalization. · Mid Cap: 101st -250th company in terms of full market capitalization. · Small Cap: 251st company onwards in terms of full market capitalization.

Market Capitalization (% of NAV)

Large Cap, 45.01 Mid Cap, 45.16 Other than Large and Midcap, 8.93 2.21 2.26 2.31 2.40 2.48 2.61 2.80 3.59 4.32 5.75 Max Financial Services… Infosys Ltd. AIA Engineering Ltd. Divi's Laboratories Ltd. Bajaj Finserv Ltd. Bajaj Finance Ltd. Kotak Mahindra Bank Ltd. Reliance Industries Ltd. ICICI Bank Ltd. HDFC Bank Ltd.

% of NAV

18.12 9.33 7.70 6.37 5.52 5.41 5.36 5.33 4.25 3.96

Banks Finance Consumer Durables Consumer Non Durables Pharmaceuticals Chemicals Industrial Products Auto Ancillaries Petroleum Products Software

Allocation Details (as on 29th February, 2020)

Nature of Scheme

An open ended equity scheme investing in both large cap and midcap stocks.

Investment Objective

The primary objective of the Scheme is to achieve long-term capital appreciation by investing in equity & equity related instruments of large cap & midcap companies.

Investment Plan

Direct & Regular

Investment Options

Growth & Dividend

Benchmark

Nifty Large Midcap 250 TRI

Minimum Application Amount

• New Investor – Rs. 5,000/-for both Dividend and Growth Option and any

amount thereafter under each Plan/Option.

• Existing Investor – Rs. 1,000/- and any amount thereafter under each

Plan/Option.

• Systematic Investment Plan: Minimum twelve installments of Rs. 500/- each.
• Systematic Transfer Plan: Minimum Six installments of Rs. 1,000/- each.
• Regular Withdrawal Plan: Minimum Six installments of Rs.500/- each.

Load Structure

• If redeemed on or before 1 Year from the date of allotment

– 1%

• Nil thereafter

Fund Manager

• Mr. Ravi Gopalakrishnan has over 25 years of experience in research and

asset management business. During the course of his career, he has worked across many Asset Management Companies, including Canara Robeco AMC, Pramerica AMC, and Sun F&C AMC. He has managed several funds across Large Cap, Multi-cap and Mid cap strategies. He has a very strong research background and has sound knowledge of the fund management business.

• Mr. Ravi Gopalakrishnan is a M.S. Finance(Investments) & holds a M.B.A

Inception date (Regular Plan)

12th November 2008.

Fund Details

Periods

Total Amount Invested (in Rs.)

Principal Emerging Bluechip Fund NIFTY Large Midcap 250 TRI NIFTY 50 TRI Returns Market Value (in Rs.) Returns Market Value (in Rs.) Returns Market Value (in Rs.) 1 Year SIP 120,000 9.78% 126,178

• 0.59%

119,621

• 5.15%

116,673 3 Years SIP 360,000 3.57% 380,102 1.96% 370,911 4.29% 384,197 5 Years SIP 600,000 8.61% 744,945 7.06% 716,690 7.72% 728,637 7 Years SIP 840,000 14.46% 1,405,041 10.66% 1,226,979 9.18% 1,164,193 10 Years SIP 1,200,000 15.89% 2,757,117 11.49% 2,179,218 9.78% 1,990,802 Since Inception* SIP 1,350,000 17.08% 3,747,622 12.34% 2,798,888 10.42% 2,490,883

*12th Nov 2008. Data as on 28th February, 2020. Different plans shall have a different expense structure. Returns shown above are for Regular Plan - Growth option. Past performance may or may not be sustained in the future. The returns shown above are calculated using XIRR approach (CAGR Returns) assuming investment of Rs. 10,000/- on the 1st business day of every month. XIRR helps in calculating return on investments given an initial and final value and a series of cash inflows and outflows with the correct allowance for the time impact of the transactions. Load is not taken into consideration for computation of performance. Disclaimer: The above investment simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. The AMC / Mutual Fund is not guaranteeing or promising or forecasting any returns. SIP does not assure a profit or guarantee protection against a loss in a declining market.

Periods Principal Emerging Bluechip Fund NIFTY Large Midcap 250 TRI NIFTY 50 TRI Returns (%) Market Value (in Rs.) Returns (%) Market Value (in Rs.) Returns (%) Market Value (in Rs.) 1 Year 11.50 11149.96 5.13 10513.14 4.99 10499.04 3 Year 8.19 12665.18 7.43 12398.27 9.46 13116.22 5 Year 9.79 15957.20 7.56 14400.61 6.18 13501.94 Since Inception* 23.45 108110.00 16.61 56781.28 14.24 45010.58

Data as on 28th February, 2020. Different plans shall have a different expense structure. The performance details provided herein are of Regular Plan - Growth option. Past performance may or may not be sustained in future. Returns (in %) are calculated on Compounded Annualised Basis (CAGR). PTP (Point to Point) Returns are based on standard investment of Rs. 10,000/- made at the beginning of relevant period. Performance of the dividend option for the investors would be net of dividend distribution tax, as applicable. Please refer slide no. 19 for annexure of returns for all scheme managed by the fund manager.

Point to Point Performance

SIP Performance

Past performance may or may not be sustained in future. Different plans shall have a different expense structure. The performance details provided herein are of Regular Plan - Growth option. Returns (in %) are calculated on Compounded Annualised Basis (CAGR). Ravi Gopalakrishnan also manages Principal Balanced Advantage Fund - Equity Portion , Principal Hybrid Equity Fund - Equity Portion, Principal Retirement Savings Fund (Conservative Plan-Progressive Plan-Moderate Plan) and Principal Small Cap Fund w.e.f. July 2019 , Principal Focused Multicap Fund, Principal Emerging Bluechip Fund & Principal Dividend Yield Fund w.e.f. October 2019. ** The equity component of CRISIL Hybrid 35+65 - Aggressive Index is represented by total returns variant of S&P BSE 200. Principal Retirement Savings Fund (Conservative Plan, Progressive Plan & Moderate Plan) was launched on 14th Dec 2015 and is yet to complete 5 years of performance.

• Mr. Siddharth Mohta also manages Principal Multi Cap Growth Fund since Aug 2018 and Principal Small Cap Fund since May 2019.
• Mr. Ashish Aggrawal also manages Principal Hybrid Equity Fund since Oct 2019.

Note: Performance of Principal Small Cap Fund & Principal Mid Cap Fund is not given as the scheme has not completed 1 year.

Scheme Name 1 Year CAGR (%) 3 Years CAGR (%) 5 Years CAGR (%) Since Inception CAGR (%) Date of Inception

Principal Multi Cap Growth Fund 5.63% 7.28% 7.46% 14.61% 25-10-2000 Nifty 500 Index - TRI 4.30% 7.52% 6.33% 14.89% Principal Dividend Yield Fund 3.97% 8.72% 7.70% 11.36% 15-10-2004 Nifty Dividend Opportunities 50 - TRI

• 6.98%

3.36% 4.44% NA Principal Hybrid Equity Fund (Equity Portion) 1.68% 7.60% 7.88% 10.53% 14-01-2000 CRISIL Hybrid 35+65 - Aggressive Index** 7.95% 8.49% 7.56% NA Principal Focused Multicap Fund 14.86% 9.87% 7.28% 14.39% 11-11-2005 S&P BSE 250 Large Midcap - TRI 4.63% 8.32% 6.74% 12.38% Principal Balanced Advantage Fund (Equity Portion) 0.88% 4.13% 4.17% 8.14% 16-12-2010 50% Nifty 100 TRI Index + 35% CRISIL Short Term Bond Index + 15% Nifty Arbitrage Index 7.20% 8.16% 7.28% 8.75% Principal Equity Savings Fund (Equity Portion) 4.07% 4.97% 5.15% 7.54% 23-05-2002 30% Nifty 50 - TRI + 70% CRISIL Liquid Fund Index 6.32% 7.89% 7.15% 10.05% Principal Retirement Savings Fund (Conservative Plan) 2.77% 3.73% NA 5.36% 14-12-2015 30% Nifty 50 - TRI + 70% CRISIL Liquid Fund Index 6.32% 7.89% NA 8.41% Principal Retirement Savings Fund (Moderate Plan) 3.50% 4.40% NA 5.86% 14-12-2015 CRISIL Hybrid 35+65 - Aggressive Index** 7.95% 8.49% NA 10.27% Principal Retirement Savings Fund (Progressive Plan) 3.08% 4.99% NA 7.18% 14-12-2015 Nifty 200 Full Marketcap Index 4.14% 7.98% NA 10.41%

Disclosures

Other schemes managed by Mr. Ravi Gopalakrishnan

DISCLAIMER: The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme Information Document of the scheme. The views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. This material should not be relied upon by you in evaluating the merits of investing in any securities or products. Diversification does not guarantee investment returns and does not eliminate the risk of loss. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Past performance may or may not be sustained in future. The views and strategies described may not be suitable for all investors. Furthermore, whilst it is the intention to achieve the investment objective of the investment product(s), there can be no assurance that those objectives will be met. Investors are advised to consult their Investment advisors for determining their risk appetite and Tax Advisor before taking any investment decision.

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

For Distributors only and not for further circulation

Principal Emerging Bluechip Fund (An open ended equity scheme

investing in both large cap and midcap stocks)

~ ThisProduct IsSuitable For InvestorsWho Are Seeking -

• Invest ment

in equit y & equit y relat ed securit ies including equit y derivat ives of large & mid capit alizat ion companies Long t erm Capit al Growt h

~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.