Large Cap Companies: Own what you consume 02 The Stocks mentioned above are only for the purpose of information and should not be construed as recommendation from Principal Mutual Fund. The stocks may or may not be a part of the portfolio.
Highlights of the Fund Portfolio of Indian and US Blue Chip Companies • First Large Cap fund in India combining Indian and Foreign Large Cap companies • 80% to 85% in Indian Equities with minimum 80% in Large Cap Companies • Upto 15% in US Large Cap Companies • Diversified portfolio of 50 to 60 companies • Universe consists of US companies with a market cap higher than USD 50 Billion Benefits of an investment in US Large Cap* Performance Accretive and Reduced Volatility • Enhanced, returns 7 of the last 11 years (including CY2020) the addition of S&P500 to the portfolio has helped a composite index of (85% NIFTY 100 TRI and upto 15% S&P 500 INR) • Lower volatility Adding the S&P 500 INR has also reduced the portfolio across investment horizons. • Benefit from potential Rupee depreciation 03 The Stocks mentioned above are only for the purpose of information and should not be construed as recommendation from Principal Mutual Fund. The stocks may or may not be a part of the portfolio. P ast performance is no guarantee of future returns . 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 Fund shall invest in Foreign Securities as mentioned in the SID of Principal Large Cap Fund ^ Please refer to Slide 10 -14
Highlights of the Fund experience in enabling US Equity • • Access to advice and research from the US based PGI Equity team Indian Large Cap Companies • Top 100 Companies by market capitalization • Large Companies with strong balance sheets and brands expected to benefit from the ongoing economic disruptions and the changing economic landscape • Top 100 Companies* contribute more than 69% of sales and 77% of PAT of the NIFTY500 TRI Companies • Top 100 companies* in India contribute more than 77% of the total market cap for listed companies 04 The Stocks mentioned above are only for the purpose of information and should not be construed as recommendation from Principal Mutual Fund. The stocks may or may not be a part of the portfolio. P ast performance is no guarantee of future returns . 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. * Data as on 31 st July, 2020 Source: Capitalline, Company Classification as per AMFI June 2020
Principal Large Cap Fund (An Open-ended Equity scheme predominantly investing in Large Cap Stocks) 05
Principal Large Cap Fund: Key Characteristics Emphasis on Fundamental Research Growth quotient of the portfolio to ` and Portfolio Construction be higher than the value quotient Robust investment process with Focus on compounding and unique 6 pillar investment framework quality businesses Sector agnostic approach with Earnings Growth and Return ratios to be bottom up stock selection the preferred metrics of stock selection Diversified portfolio of Management Quality and their performance 50-60 companies track record will be the guiding principles Upto 15% of the portfolio invested Emphasis on risk management to $ in US large cap companies reduce portfolio volatility 06 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.
` Principal Large Cap Fund: Investment Approach Quality of the Business: • Focus on professionally managed and process driven businesses • Stock selection to be based on operating free cash flow generation • Preference towards compounding franchises • Prefer industries / sectors where the opportunity size is large and increasing Business Moats • To invest in market leaders with sound balance-sheet and healthy return ratios • Business franchises with brand equity and pricing power • Value Traps to be avoided when business model has ruptured Investment Returns ` • Focus on Price Value Gap • Compounding of Intrinsic Value • Seek Opportunities for potential value unlocking 07 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.
Principal Large Cap Fund: Allocation to US Large Caps Portfolio Diversification Investments in leading US companies • • Adding Performance Global Leaders ` • • High and Stable Growth Lowering Volatility • Dominant Businesses • Globally recognized brand names The allocation to US large Cap Universe consists of US Large Cap would comprise about 15 stocks Companies with a minimum market and 4 to 6 sectors and upto 15% cap of USD 50 Billion of the total portfolio 08
Foreign Companies: The Cherry on Top 09
` US Equity Markets and Indian Equity Markets: Adding to the Performance Trailing Returns (in %) Calendar year returns (in %) 50% 18 40% 30% 13 20% 8 10% 0% 3 -10% -20% -2 -30% CY CY CY CY CY CY CY CY CY CY CYTD -7 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 6 Months 1 Year 3 Years 5 Years 7 years 10 Years 15 Years Nifty 100 Nifty 50 TRI S&P 500 INR Nifty 100 TRI Nifty 50 TRI S&P 500 INR The S&P 500 INR Index outperforms the NIFTY50 TRI and NIFTY 100 TRI Indexes over multiple time horizons 10 Source: Bloomberg, MFI Explorer, Internal Analysis. Data as on Jul 31,2020. Past performance may or may not be sustained in future.
Foreign Companies: Accretive to Performance Trailing Returns (in %) 18 13 8 3 -2 -7 6 Months 1 Year 3 Years 5 Years 7 years 10 Years 15 Years Composite Index Nifty 100 TRI Nifty 50 TRI A Composite Index of 15% of the S&P 500 INR Index and 85% of the NIFTY 100 TRI Index outperforms the Indian indexes in multiple trailing periods 11 Source: Bloomberg, MFI Explorer, Internal Analysis. Data as on Jul 31,2020. Past performance may or may not be sustained in future.
Foreign Companies: Adding to the Performance Calendar year returns (in %) 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CYTD 2020 Composite Index Nifty 100 TRI Nifty 50 TRI A Composite Index of 15% of the S&P 500 INR Index TRI and 85% of the NIFTY 100 TRI Index outperforms the Indian indexes in multiple years 12 Source: Bloomberg, MFI Explorer, Internal Analysis. Data as on Jul 31,2020. Past performance may or may not be sustained in future.
Foreign Companies: Reducing the Volatility Annualized Standard Deviation (in %) 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CYTD 2020 Composite Index Nifty 100 TRI Nifty 50 TRI A Composite Index of 15% of the S&P 500 INR Index and 85% of the NIFTY 100 TRI Index reduces the volatility vis-à-vis the Indian indexes 13 Source: Bloomberg, MFI Explorer, Internal Analysis. Data as on Jul 31,2020. Past performance may or may not be sustained in future.
Foreign Companies: Consistently accretive to performance 3 Years 5 Years 10 Years Rolling Nifty Nifty Nifty Returns Nifty 50 S&P Nifty 50 S&P Nifty 50 S&P Composite Composite Composite 100 100 100 TRI 500 INR TRI 500 INR TRI 500 INR Index Index Index TRI TRI TRI Max Returns 55.5 64.5 62.1 32.9 40.3 46.9 44.8 26.7 21.3 23.1 22.3 18.7 Min Returns -6.9 -6.5 -5.2 -14.7 0.4 -0.7 -1.0 -7.6 6.8 5.5 5.1 6.0 Med Returns 12.6 12.7 11.9 11.3 13.8 13.4 12.7 11.7 13.2 12.7 12.0 9.6 +ve Returns 97.3% 96.6% 97.7% 82.9% 100% 99.9% 99.9% 81.2% 100% 100% 100% 100% In the longer term, the Composite Index (15% of the S&P 500 (INR) Index and 85% of the NIFTY 100 TRI Index) displayed consistent performance vis-à-vis the Indian indexes The Composite Index had positive returns for all observations for the 5 years rolling returns. Source: Bloomberg, MFI Explorer, Internal Analysis. Data as on Jul 31,2020. The data used in above illustration is for the period from 1 Jan 2000 to 31 st Jul 2020. The data is based on daily rolling returns for the mentioned periods. No. of observations for 3, 5 and 10 years are 3494, 3012 and 1814 respectively. Past performance may or may not be sustained in future. 14
The Investment Process & Philosophy 15
Equity Investment Process Stock Universe In-house Research Management Meetings Third Party Research Idea Stock Due 6 Pillar Investment Framework Industry Experts Generation Selection Diligence Investment Universe (225-250 Stocks) Investment Objective and Strategy Risk Reward Framework Portfolio Construction (Compounders + Alpha Generators) Portfolio Diversification Regulatory and Internal risk limits Portfolio Monitoring Performance attribution analysis and Benchmark and peer group analysis Evaluation Risk / Reward analysis 16 Applicable only to the selection of Domestic Companies
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