Large Cap Companies: Own what you consume 02 The Stocks mentioned - - PowerPoint PPT Presentation
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.
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.
Large Cap Companies: Own what you consume
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companies
Billion
Portfolio of Indian and US Blue Chip Companies
Highlights of the Fund
to the portfolio has helped a composite index of (85% NIFTY 100 TRI and upto 15% S&P 500 INR)
investment horizons.
Benefits of an investment in US Large Cap* Performance Accretive and Reduced Volatility
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. Past 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
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Highlights of the Fund
experience in enabling US Equity
the ongoing economic disruptions and the changing economic landscape
NIFTY500 TRI Companies
listed companies
Indian Large Cap Companies
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. Past 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
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(An Open-ended Equity scheme predominantly investing in Large Cap Stocks)
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Principal Large Cap Fund: Key Characteristics
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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.
Emphasis on Fundamental Research and Portfolio Construction Robust investment process with unique 6 pillar investment framework Sector agnostic approach with bottom up stock selection Diversified portfolio of 50-60 companies Upto 15% of the portfolio invested in US large cap companies Growth quotient of the portfolio to be higher than the value quotient Focus on compounding and quality businesses Earnings Growth and Return ratios to be the preferred metrics of stock selection Management Quality and their performance track record will be the guiding principles Emphasis on risk management to reduce portfolio volatility
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Principal Large Cap Fund: Investment Approach
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Quality of the Business:
Business Moats
Investment Returns
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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
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Investments in leading US companies
Portfolio Diversification Universe consists of US Large Cap Companies with a minimum market cap of USD 50 Billion The allocation to US large Cap would comprise about 15 stocks and 4 to 6 sectors and upto 15%
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US Equity Markets and Indian Equity Markets: Adding to the Performance
3 8 13 18
6 Months 1 Year 3 Years 5 Years 7 years 10 Years 15 Years
Trailing Returns (in %)
Nifty 100 TRI Nifty 50 TRI S&P 500 INR
0% 10% 20% 30% 40% 50%
CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CYTD 2020
Calendar year returns (in %)
Nifty 100 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
Source: Bloomberg, MFI Explorer, Internal Analysis. Data as on Jul 31,2020. Past performance may or may not be sustained in future.
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Foreign Companies: Accretive to Performance
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
Source: Bloomberg, MFI Explorer, Internal Analysis. Data as on Jul 31,2020. Past performance may or may not be sustained in future.
3 8 13 18
6 Months 1 Year 3 Years 5 Years 7 years 10 Years 15 Years
Composite Index Nifty 100 TRI Nifty 50 TRI
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Trailing Returns (in %)
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
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
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0.00% 10.00% 20.00% 30.00% 40.00% CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CYTD 2020
Calendar year returns (in %)
Composite Index Nifty 100 TRI Nifty 50 TRI
Foreign Companies: Reducing the Volatility
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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
Source: Bloomberg, MFI Explorer, Internal Analysis. Data as on Jul 31,2020. Past performance may or may not be sustained in future.
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CYTD 2020
Annualized Standard Deviation (in %)
Composite Index Nifty 100 TRI Nifty 50 TRI
Rolling Returns 3 Years 5 Years 10 Years
Composite Index Nifty 100 TRI Nifty 50 TRI S&P 500 INR Composite Index Nifty 100 TRI Nifty 50 TRI S&P 500 INR Composite Index Nifty 100 TRI Nifty 50 TRI S&P 500 INR Max Returns Min Returns Med Returns +ve Returns 55.5
12.6 64.5
12.7 62.1
11.9 32.9
11.3 40.3 0.4 13.8 100% 46.9
13.4 99.9% 44.8
12.7 99.9% 26.7
11.7 81.2% 21.3 6.8 13.2 100% 23.1 5.5 12.7 100% 22.3 5.1 12.0 100% 18.7 6.0 9.6 100%
Foreign Companies: Consistently accretive to performance
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
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 31st Jul 2020. The data is based on daily rolling returns for the mentioned
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97.3% 96.6% 97.7% 82.9%
The Composite Index had positive returns for all observations for the 5 years rolling returns.
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Equity Investment Process
16 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 Investment Universe (225-250 Stocks) Portfolio Monitoring and Evaluation Portfolio Construction
(Compounders + Alpha Generators)
Stock Universe
In-house Research Third Party Research Industry Experts Management Meetings 6 Pillar Investment Framework
Idea Generation Due Diligence Stock Selection
Applicable only to the selection of Domestic Companies
The 6 Pillars of our Investment Process
17 Business Dynamics Operating Matrix
Size, Scalability & Longevity Operational efficiencies Quality & Sustainability
Management quality & Business model Efficiency & Distribution
Price the Value and not Value the Price
Profitability Quality of Growth Valuation Capital Allocation
Applicable only to the selection of Domestic Companies
Portfolio Construction
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Portfolio Construction Sell Discipline
investment process
before investing
portfolio companies
and estimates
Performance and Quality of Earnings
business fundamentals
compromised
Portfolio Review
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Almost 70% of countrieshave scaled up their fiscal support since April 2020 Fiscal measures announced stand at more than USD 11 Tn, globally US Fed increased its balance sheet from USD 4.2 Tn to USD 6.95 Tn since March 2020 Interest rates are expected to remain benign 4,159 6,945
2,000 3,000 4,000 5,000 6,000 7,000 8,000 Jan/20 Jan/20 Feb/20 Mar/20 Apr/20 May/20 Jun/20 Jul/20 Aug/20
US Fed: Total Assets USD Billion
Total Assets USD Billion
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Source: IMF World Economic Outlook June 2020, US Federal Reserve
Policy Support by Central Banks: Across the World
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`Government debt and deficits are set to rise globally, more so than during 2008 - 10 following the global financial crisis.
5 10 15 20 25 2008 09 10 2008 09 10 21 20 19 21 20 19
10.5 18.7
Global financial crisis Global financial crisis COVID 19 pandemic COVID 19 pandemic Government debt Overall fiscal balance
Various support measures towards MSMEs, weaker sections
the society, Moratorium, MNREGA schemes . Reduction in the Corporate Tax Rate from 30% to 22% Recapitalization and Consolidation of the Banking Sector Agricultural Sector Reforms: Dismantling of the APMC structure
1Credit Suisse, Bloomberg Quinthttps://www.bloombergquint.com/technology/production-linked-incentive-scheme-could-add-55-billion-to-gdp-in-5-years-says-credit-suisse
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Production Linked Incentives (PLI) to Manufacturing in India: Could Add $55 Billion To GDP In 5 Years (about 0.5% in additional GDP growth)1 Additional GDP Impact From PLI Scheme:
5 10 15 20 25 2021 2022 2023 2024 2025 Cumulatively, benefits from the PLI scheme could add ~$55 billion to GDP ($ billion) 2 4 9 14 21
Government Reforms and Support
43.3
20 40 60 80 100 120 140 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20
Brent Crude The Debt to GDP ratio will increase but India would remain in comfortable position vis-à-vis other major economies The impact
mitigate the impact of COVID19 is expected to put a strain on government finances in FY20 -21. Current demand supply equation is in balance and hence prices may not rise meaningfully Aggressive push towards electric vehicles likely to keep a lid on oil prices from a long term perspective
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Source: Bloomberg, WorldBank
Key Macros are Stable
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Debt to GDP Ratio
97 50 86 97 55 116 75 75 32.2 157 250 57 63 17.224 120 81.8 40 115 4840.5 100 120
Argentina Australia Brazil Canada China France Germany India Indonesia Italy Japan Mexico Netherlands Russia Saudi Arabia Singapore South Africa South Korea Spain Switzerland Turkey United States
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6.0
2 4 6 8 10 Jan-14 Jun-20
CPI (in %)
5.0 6.0 7.0 8.0 9.0 Jan-14 Jul-20
10 YR GSEC (in %) Stable commodity prices and good monsoon to keep inflation under check 10 year G Sec yields have come down in India and across the world This would provide support to investments in the economy
Source: Bloomberg, www.rbi.gov.in
Key Macros are Stable
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3.5%
0.4%
0.0% 5.0% 10.0%
Argentina Brazil China India Indonesia Japan Mexico Russia Singapore South Africa South Korea Turkey UK
Currency Rate vs USD (in %) The Indian Rupee has remained comparatively stable in recent months versus other Emerging Markets is at 535 billion as on August 14, 2020. this is expected to provide stability to the Indian Rupee
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Source: RBI
Key Macros are Stable
100000 200000 300000 400000 500000
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Forex Reserves (USD Mn)
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Large Cap Funds: Lower risk equity funds than
Large Cap Funds Large & Mid Cap Funds Multicap Funds Mid Cap Funds Focused Funds Small Cap Funds Sectoral Funds
Risk Positioning
Perceived to be at less risk amongst the equity funds.
Low Risk High Risk
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What are Large Cap Companies?
Top 100 companies by market capitalization GDP Drivers and bellwethersof economic growth Businesses with established long term track records
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Companies with established systems and processes Economies of scale owing to larger size of business Diversified in terms of nature of businesses and geographies Usually segment leaders with major market share
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16% 9% 7% 15% 8% 6%
69% 83% 87%
0% 20% 40% 60% 80% 100% Top 100 101-250 Beyond 250
Share holding pattern
FII DII Others *as per AMFI Market cap data dated 30th Jun 2020. Source for charts: Capitaline; Data as on 31st Jul 2020.
Past performance may or may not be sustained in future
Top 100 companies account for 77%* of the total market cap of the listed companies Comparatively lower volatility and stable returns
Liquidity risk is relatively lower especially in volatile markets Relatively broader research coverage by analysts High institutional (FIIs and DIIs) ownership: Own more than a third of market cap in large cap companies Have created wealth for investors in the long term
Why invest in large cap companies?
Top 100 101 to 250 251 and beyond
77 16 7
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` Market cap share
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Did you know?
Source: Capitaline/Internal Analysis. Data as on 31st Jul 2020. Past performance may or may not be sustained in future. The above simulation is for illustration purpose only and should not be construed as an investment advise. Investors should consult their financial advisors before investing
Top 100 companies contribute to over 69% of the total Net Sales of the top 500 companies by market cap. Over 77% of the Profit After Tax of top 500 companies by market cap is contributed by Top 100 companies
Large Cap Companies: Higher Contribution to Sales and Income
Top 100 Rest 400
31 69 23 77 Net Sales (%) PAT Share (%)
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Source: Capitaline/Internal Analysis. Data as on 31st Jul 2020. Past performance may or may not be sustained in future. The above simulation is for illustration purpose only and should not be construed as an investment advise. Investors should consult their financial advisors before investing
Large Cap Companies: Higher returns with less volatility
The Large Cap Index has a lower volatility compared to other indexes The NIFTY100 Index outperforms the Mid Cap and Small Cap Indexes over multiple time horizons
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Annualized Volatility (in %)
3 Years 5 Years 10 Years
Nifty 100 TRI Nifty Midcap 100 TRI Nifty Smallcap 100 TRI
15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 0% 5% 10%
3 Years 5 Years 10 Years
Nifty 100 TRI Nifty Midcap 100 TRI Nifty Smallcap 100 TRI
Long Term CAGR (in %)
Large Cap Companies: More resilient in declining markets
Source: Morningstar Direct. Data as on 31st Jul 2020. Past performance may or may not be sustained in future. The above simulation is for illustration purpose only and should not be construed as an investment advise. Investors should consult their financial advisors before investing
Historically it has been observed that large caps have better resilience during market downturns as compared to mid and small caps. Last 3 max drawdowns when Nifty 100 TRI corrected by more than 25% Risk data for last 15 years Nifty 100 TRI Nifty Midcap 100 TRI Nifty Small Cap 100 TRI Max Drawdown (%) Max Drawdown (no. of Days) Average Drawdown Worst Month Worst Quarter Gain/Loss Ratio
294 427 427
1.14 1.12 1.09
Global Financial Crisis (7th Jan 2008 to 27th Oct 2008) European Sovereign Debt Crisis (7th Nov 2010 to 20th Dec 2011) COVID19 Outbreak (19th Jan 2020 to 23rd Mar 2020)
Returns in %
Nifty 100 TRI Nifty Midcap 100 TRI Nifty Small Cap 100 TRI
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Periods of Correction
Large Cap Companies: Stock selection is the Key
Illustration: Assuming you invested Rs. 10 lacs in Top 100 Companies by market capitalization as on 30th Jul 2010 by deploying Rs. 10,000 equally into each of the 100 companies.
Source: Capitaline/Internal Analysis. Data as on 31st Jul 2020. Past performance may or may not be sustained in future. The above simulation is for illustration purpose only and should not be construed as an investment advise. Investors should consult their financial advisors before investing
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1 company has ceased to exist in the last 10 years. As on 31st Jul 2020, your corpus has grown by mere 5.3% CAGR to Rs.16.8 lacs. Investment in the NIFTY100 Index would have grown to by 9% to 23.86 lacs. However, within these 100 companies there is a wide dispersion of performance. Hence, stock picking based
robust investment process is the key even while investing in large caps. Segmented by Performance
0.0% 10.0% 20.0% 30.0% 25 50 75 100 Returns Stock segmentation
Individual stock CAGR
Segment Invested Amount (Rs. In Lacs) Current Value (Rs. In Lacs) 10 Year CAGR
Top 25 26 to 50 51 to 75 76 to 100 All 100 stocks- equal weight All 100 stocks- NIFTY100 2.5 2.5 2.5 2.5 10 10 10.68 4.22 1.56 0.31 16.78 23.86 15.6% 5.4%
5.3% 9%
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GDP Growth: Long Term is intact
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5.5 5.6 3
5.4 4.3 3.5 3.5 3.6 3.5 3.4 3.9 3.6 2.9
5.4
2 4 6 8 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020P 2021P
World GDP Growth
9.3 9.8 3.9 8.5 10.3 6.6 5.5 6.4 7.4 8 8.3 7 6.1 4.2
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5 10 15 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020P 2021P
India GDP Growth
Source: IMF World Economic Outlook Update Jun 2020; 2020 and 2021 data is projected GDP growth
Market cap to GDP: Markets need to play catch-up
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42 52 82 83 103 55 95 88 71 64 65 81 69 79 83 79 56 75
20 40 60 80 100 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E
Market cap to GDP ratio (%)
Average: 73
Market cap-to-GDP ratio has seen a steep decline from 79% as on FY19 to 54% (FY20E GDP) This much below its long-term average of 75% Also it is close to the levels last seen during Global Financial Crisis.
Lowest since the GFC Growth potential
Source: Motilal Oswal India Strategy Report, Aug 3, 2020
%
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Facilities in
Principal Large Cap Fund
Aims to protect against
sharp fall in market
Shifts appreciated amount to another fund In a nutshell, it helps you reduce the risk of timing the market
Introducing SMART and MY GAIN Facilities
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Introduction to SMART Facility
How SMART Facility works?
This facility is available exclusively during NFO period SMART Facility lets you stagger your investments 25% is invested in the Principal Large Cap Fund and 75% into Principal Cash Management Fund If the market falls below 3% from the date of allotment, the SMART Facility gets activated and 25% of the invested amount is deployed in Principal Large Cap Fund Incase if the market does not fall, the switch takes place at month end from Principal Cash Management Fund to Principal Large Cap Fund If the SMART Facility deployment takes place during the month based on market fall, the month end switch gets deactivated for that month
How SMART Facility works?
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How SMART Facility works
Smart Trigger
2nd
Initial Investment
*Includes any rise or fall in the value of investment
Facility divides and deploys your investment in 4 parts:
On Allotment 19th Oct 2020 Units of Principal Large Cap allotted and balance 75% is invested in the Principal Cash Management Fund Subsequent Month Nov 2020 3% fall in Nifty 100 Index from the date of initial allotment or last business day of the Month (if SMART Facility did not activate during the month) Subsequent Month Dec 2020 Further 3% (total 6%) fall in Nifty 100 Index from the date of initial allotment or last business day of the Month (if SMART Facility did not activate during the month) Subsequent Month Jan 2021 Further 3% (total 9%) fall in Nifty 100 Index from the date of initial allotment or last business day of the Month (if SMART Facility did not activate during the month) Smart Trigger
1st
Smart Trigger
3rd
25% 25% 25% 25%
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Illustration (assuming 15% appreciation trigger is specified by investor)
Principal Large Cap Fund Principal Fund
Amount Invested ` 50,000.00 Allotment NAV ` 10.00 Units Allotted 5,000.00 Trigger 1 15% Appreciated NAV ` 11.50 Units redeemed 652.17 Amount Switched to Target Scheme ` 7,500.00 Balance Units 4,347.83 Balance in Principal Large Cap Fund* ` 50,000.00 Opening Balance in Target Scheme* ` 7,500.00 Trigger 2 15% Appreciated NAV ` 13.23 Units redeemed 567.11 Amount Switched to Target Scheme ` 7,500.00 Balance Units 3,780.72 Balance in Principal Large Cap Fund* ` 50,000.00 Balance in Target Scheme* ` ` 15,000.00
*The illustration excludes MTM gain/loss. In the actual scenario, the amount may vary depending on the market movement.
Invest in Principal Large Cap Fund Investment appreciates to reach the target rate of return Units redeemed from
Principal Large Cap Fund and amount
switched to any Principal Fund of your choice Your investments in Principal
Large Cap Fund
Your investment in a Principal Fund
The flow of investments
You specify the target rate of return to facilitate auto trigger
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Fund Details
Nature of Scheme
An open ended equity scheme predominantly investing in Large Cap stocks.
Investment Objective
To achieve long term capital appreciation by investing in a diversified portfolio predominantly consisting of equity and equity related securities
However, there can be no assurance that the investment objective of the Scheme will be achieved.
Investment Plan
Direct & Regular
Investment Options
Growth & Dividend
Benchmark
Nifty 100 TRI
Min Application Amount
amount thereafter under each Plan/Option.
` 500/- each.
` 1,000/-each.
` 500/- each.
Load Structure
upto 24% of the units allotted (the limit)
Fund Manager Fund Manager (for foreign investments)
management business. During the course of his career, he has worked with Mirae India AMC and ASK Investment
managed Hybrid strategies and other Multi cap portfolios is his earlier organisations. He has a very strong research background and has sound understanding of the fund management business. He is an MBA and also holds CA and CFA.
side research. He has covered the banking and financial sector for 6 years as well as multiple other sectors prior to that. He has a very strong research background and has sound knowledge
He is BE (Electrical) and also holds PGD from IIM Calcutta.
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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. 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
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Product Label
Principal Large Cap Fund
(An Open-ended Equity scheme predominantly investing in Large Cap stocks)
Principal Cash Management Fund
(An Open Ended Liquid Scheme)
This product is suitable for investors who are seeking*: Long term Capital Growth Investment predominantly in equity and equity-related securities of large cap companies. This product is suitable for investors who are seeking*: Income
a short term investment horizon Investment in Debt & Money Market Instruments, with maturity not exceeding 91 days *Investors should consult their financial advisers if in doubt about whether the product is suitable for them
Inves tors unders tandthat their principa l will be at moder ately high risk