hdfc equity savings fund.pdf

8/17/2019 HDFC Equity Savings Fund.pdf

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HDFC Equity Savings Fund(An open ended equity scheme)

1December 16, 2015

RiskometerThis product is suitable for investors who are seeking*:

• Capital appreciation while generating income over medium to

long term

• Provide capital appreciation and income distribution to the

investors by using equity and equity related instruments,

arbitrage opportunities, and investments in debt and money

market instruments

*Investors should consult their financial advisers if in doubt aboutwhether the product is suitable for them.


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Table of Contents

• An Overview

• Scheme Dynamics – The Best of Three

• Equity Taxation

• Fund Positioning – Risk Quotient

• Equity Market Outlook

• Debt Market Outlook

• Why HDFC Equity Savings Scheme?

• Investment Strategy

• Product Features and Asset Allocation

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Equity Savings Fund – An Overview

• Asset allocation is key to financial success.

• Investors need exposure to both Equity & Debt markets.

EquitySavings

Fund

Equity

DebtArbitrage

A Stable Trio

3

Characteristics of an Equity

Savings Fund

Volatility < Equity Funds

Potential Returns >Debt Funds

Taxation = Equity Funds

Lower unhedged Equity exposure ensures lower volatility while the combined exposure of

Equity + Arbitrage offers the tax efficiency of equity oriented funds while offering higher

potential returns as compared to debt funds.

HDFC Mutual Fund/AMC is not guaranteeing return on investments made in the Scheme


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Scheme Dynamics – The Best Of Three

• Flexible Asset allocation fund with equity fund like taxation (Refer Next Slide 5 & 6)

• Aim for optimum tax free returns through Dividends and long term capital appreciation

4

• Focus on long termgrowth.

• Invest in companieswhich trade belowtheir intrinsic valueswhile maintaining abalanced marketoutlook.

• Accrual Income.

• Capture benefits ofCapital appreciationin a falling interestrate environment.

• Maximizing incomewhile maintaining anoptimum balance ofyield, safety &liquidity.

• Generate income througharbitrage opportunitiesarising out of implied costof carry and mis-pricingacross the spot, futuresand options markets.


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Equity Taxation

@ Short Term Capital gains will be considered for equity assets held for a period of up to 12 months and up to 36 months in case of debt assets@@ Assets not falling under short term assets will be treated as long term assets.

$- Surcharge at the rate of 12% is levied in case of individual/HUF unit holders where their income exceeds Rs. 1 Crore

^ - Assuming the investor falls into highest tax bracket.

The information set out is neither a complete disclosure of every material fact of Income-tax Act 1961 nor does it constitute tax or legal advice. In view of the

individual nature of the tax consequences, each investor is advised to consult his/her own professional tax advisor.

For Resident Individuals/HUF$

Taxes Applicable Equity FundsLiquid Funds/

Debt Funds

Dividend Distribution Tax Nil 28.840%

Short Term Capital Gains@ 17.304% 34.608%^

Long Term Capital Gains@@ Nil 23.072%

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Equity Taxation

@ Short Term Capital gains will be considered for equity assets held for a period of upto 12 months and upto 36 months in case of debt assets

@@ Assets not falling under short term assets will be treated as long term assets.

$- Surcharge at the rate of 7% is levied for domestic corporate unit holders where the income exceeds Rs 1 crore but less than Rs 10 crores and at the rate of 12%

where income exceeds Rs 10 crores.

The information set out is neither a complete disclosure of every material fact of Income-tax Act 1961 nor does it constitute tax or legal advice. In view of the

individual nature of the tax consequences, each investor is advised to consult his/her own professional tax advisor.

For Domestic Companies$

Taxes Applicable Equity FundsLiquid Funds/

Debt Funds

Dividend Distribution Tax Nil 34.608%

Short Term Capital Gains@ 17.304%/16.5315% 33.063%/34.608%

Long Term Capital Gains@@ Nil 22.042%/23.072%

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Liquid Funds

ArbitrageFunds

Debt Funds

HDFC EquitySavings Fund

BalancedFunds

DiversifiedEquity Funds

SectoralFunds/ThematicFunds

Fund Positioning – Risk Quotient

• Aims to provide returns while managing risks

efficiently.

• Equity Taxation# – No capital gains taxes after

1 year. No DDT on any dividends paid.

7

• HDFC Equity Savings fund is much less volatile

than diversified equity/balanced funds (equity

≥ 65%) since it has only a limited exposure to

unhedged equity (max up to 40%)

• Suitable for conservative investors.

P r o d u c t R e t u r n

Product Risk

# Provided the scheme meets the criteria as an equity oriented scheme as per prevalent Income tax laws. HDFC Mutual Fund/AMC is not guaranteeingreturn on investments made in the scheme


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3 in 1 – The Golden Goose

• Reduce the risk of timing the markets.

• Benefit from investments in the derivative markets.

• Advantage You – Optimally take part in the Equity & Debtstories with a single product.

• Flexible asset allocation enhances the potential for investing in

the best-performing asset class and reduces the impact of the

worst-performing asset class across market cycles.

• Investment horizon of 18-24 months or more.

• Portfolio Rebalancing between equities and debt based on

market conditions.

8 8HDFC Mutual Fund/AMC is not guaranteeing return on investments made in the scheme


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A Back test Analysis

• A mixture of equity, debt & arbitrage to effectively manages risk without hindering growth

prospects.

• A 10 year analysis of this model throws up interesting facts.

9

Rolling Returns of the enchmark Investment Model

Source: Internal Data calculation.

To test the efficacy of the above benchmark model strategy in the past, a hypothetical fund is created with NAV of Rs. 10. The above findings are based

on calculations made on a daily analysis of the actual index values of the respective benchmarks by extrapolating in the ratio viz. 30% Nifty 50 + 40%

CRISIL Liquid Fund Index + 30% CRISIL Short Term Bond Fund Index for the period from November 1st 2005 to October 31st 2015. The above returns

are annualized without considering fund expenses. The above simulation is for illustrative purposes only. Past performance of the Index is not anindication of future results. Prospective application of the methodology may not result in performance commensurate with the back-test returns

shown. HDFC Mutual Fund/AMC is not guaranteeing return on investments made in the scheme

Particulars 1 Yr Rolling 2 Yr Rolling 3 Yr Rolling 5 Yr Rolling

Number Of Observations (A) 2,233 1,996 1,739 1,240

Number of Negative Returns (B) 205 2 NIL NIL

Negative Returns as % Of Total (B/A) 9.18% 0.10% 0.00% 0.00%

Lowest Return Observed -15.94% -0.48% 4.47% 5.54%

Highest Return Observed 30.94% 20.16% 13.33% 11.65%

Average Return Across test period 9.75% 8.95% 8.57% 8.47%

Standard Deviation 7.92% 4.11% 2.18% 1.37%


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Equity Market Outlook

• India is one of the biggest beneficiaries of lower

commodity prices especially crude oil.

• Further, low inflation, improving CAD and fiscal

outlook and rising order backlogs in some key

infrastructure related industries point to a

steadily improving growth prospects of theeconomy, especially of the capex cycle.

• The policy direction is right and economy is

making good progress on most fronts.

• Improving margin outlook of corporates, likely

lower interest rates, soft commodity prices andreasonable valuations lead to a positive outlook

for equity markets over the medium to long

term.

• Merit in increasing allocation to equities (for

those with a medium to long term view) in a

phased manner and stay invested. 10

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

0

5

10

15

20

25

30

35

40

45

O c t 9 1

O c t 9 3

O c t 9 5

O c t 9 7

O c t 9 9

O c t 0 1

O c t 0 3

O c t 0 5

O c t 0 7

O c t 0 9

O c t 1 1

O c t 1 3

O c t 1 5

Roll PE (LHS) average (LHS)

BSE (RHS)

Source: CLSA


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Why HDFC Equity Savings Scheme?

• Optimal Growth – Tactical equity allocation to take advantage of the long term potential in Indian

Equities.

• Regular Income – Debt and arbitrage securities held in the portfolio will provide fixed income

opportunities.

• Efficient Taxation –Tax Efficient Returns with appropriate mix of Equity, Debt and Derivatives.

• Low Fund Volatility – Using Equity Arbitrage Instruments without hindering growth prospects.

• Diversified Asset Allocation – Regular balancing between asset classes based on market conditions

and asset valuations.

12HDFC Mutual Fund/AMC is not guaranteeing return on investments made in the scheme


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Investment Strategy

• Equities

– Track disparities in valuation between across sectors to generate alpha from sector & stock

deviations.

– Multi cap strategy to provide flexibility in equity allocation based on market conditions

• Arbitrage

– The scheme will generate income through arbitrage opportunities arising out of implied cost of

carry and mis-pricing across the spot, futures and options markets which can lead to profitable

arbitrage opportunities

• Debt

– The investment strategy involves investing in a range of debt and money market instruments of various credit ratings with a view to maximizing income while maintaining an optimum balance

of yield, safety and liquidity.

– The Scheme shall endeavor to develop a well- diversified, portfolio of debt (including securitized

debt) and other securities that minimizes liquidity and credit risk.

13The current investment strategy is subject to change depending on the market conditions. For complete details on investment strategy referSID/KIM


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Asset Allocation Pattern

14

Under normal circumstances, the asset allocation of the scheme’s portfolio will be as follows:

Types of InstrumentsMinimum

(% of Net Assets)Maximum Risk Profile

Equities & Equity related instruments 65 90 Medium to High

Of which net long equity* 15 40 Medium to High

Of which Derivatives including index

futures, stock futures, index options etc.** 25 75 Low to Medium

Debt instruments & Money Market

instruments #$ 10 35 Low to Medium

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* This net long equity exposure is aimed to gain from potential capital appreciation and thus is a directional equity exposure which will not be hedged. Thisequity exposure means exposure to equity shares alone without a corresponding equity derivative exposure. ** The exposure to derivative shown in the above

asset allocation table would normally be the exposure taken against the underlying equity investments and in such case, exposure to derivative will not be

considered for calculating the gross exposure. # Investments in securitised debt, if undertaken, shall not exceed 35% of net assets of the Scheme.

$ Investments in derivatives shall not exceed 50% of the asset allocation stipulated above. Exposure to Derivatives may be taken to hedge the portfolio,

rebalance the same or to undertake any other strategy as permitted under SEBI (MF) Regulations from time to time. The margin money deployed on these

positions (both equity and / or debt derivatives) would be included in Money Market category. ^The Scheme may seek investment opportunity in ADR / GDR

and Foreign Securities, in accordance with guidelines stipulated in this regard by SEBI and RBI from time to time. Under normal circumstances, the Scheme shall

not have an exposure of more than 50% of its assets in foreign ADR / GDR and Foreign Securities. The cumulative gross exposure through debt, equity and

derivative positions shall not exceed 100% of the net assets of the scheme in accordance with SEBI Cir/IMD/DF/11/2010 dated August 18, 2010.

For further details refer SID/KIM


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Asset Allocation Pattern

15

Under defensive circumstances, the asset allocation of the scheme’s portfolio will be as follows:

Types of InstrumentsMinimum

(% of Net Assets)Maximum Risk Profile

Equities & Equity related instruments 15 65 Medium to High

Of which net long equity* 15 40 Medium to High

Of which Derivatives including index

futures, stock futures, index options etc.** 0 50 Low to Medium

Debt instruments & Money Market

instruments #$ 35 85 Low to Medium

15

* This net long equity exposure is aimed to gain from potential capital appreciation and thus is a directional equity exposure which will not be hedged. Thisequity exposure means exposure to equity shares alone without a corresponding equity derivative exposure. ** The exposure to derivative shown in the above

asset allocation table would normally be the exposure taken against the underlying equity investments and in such case, exposure to derivative will not be

considered for calculating the gross exposure. # Investments in securitised debt, if undertaken, shall not exceed 35% of net assets of the Scheme.

$ Investments in derivatives shall not exceed 50% of the asset allocation stipulated above. Exposure to Derivatives may be taken to hedge the portfolio,

rebalance the same or to undertake any other strategy as permitted under SEBI (MF) Regulations from time to time. The margin money deployed on these

positions (both equity and / or debt derivatives) would be included in Money Market category. ^The Scheme may seek investment opportunity in ADR / GDR

and Foreign Securities, in accordance with guidelines stipulated in this regard by SEBI and RBI from time to time. Under normal circumstances, the Scheme shall

not have an exposure of more than 50% of its assets in foreign ADR / GDR and Foreign Securities. The cumulative gross exposure through debt, equity and

derivative positions shall not exceed 100% of the net assets of the scheme in accordance with SEBI Cir/IMD/DF/11/2010 dated August 18, 2010.

For further details refer SID/KIM


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Product Features

16

Name HDFC Equity Savings Fund ( Erstwhile HDFC Multiple Yield F und)#

Type of Scheme Open-ended equity scheme.

Inception Date

(Date of allotment) September 17, 2004

Investment Objective

The investment objective of the scheme is to provide capital appreciation and income distribution to the

investors using arbitrage opportunities, investment in equity / equity related instruments and debt / money

market instruments. There is no assurance that the investment objective of the Scheme will be realized

Fund Manager Vinay Kulkarni (Equities), Anil Bamboli (Debt)

Investment Plans Direct Plan

Regular Plan

Investment Option Under Each Plan: Growth & Dividend. The Dividend Option offers Dividend Payout and Reinvestment facility

Minimum Application Amount

(Under Each Plan /Option)

Purchase: Rs. 5,000 and any amount thereafter

Additional Purchase: Rs. 1,000 and any amount thereafter

Load Structure

Entry Load: Not Applicable

Upfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered

Distributor) based on the investors’ assessment of various factors including the service rendered by the

ARN Holder.

Exit Load:

In respect of each purchase / switch-in of units, an exit load of 1% is payable if units are redeemed /

switched-out within 1 year from the date of allotment.

No exit load is payable if units are redeemed / switched-out after 1 year from the date of allotment.

Benchmark 30% Nifty 50 + 40% CRISIL Liquid Fund Index + 30% CRISIL Short Term Bond Fund Index

For Complete details refer KIM/SID.

# Due to change in fundamental attributes of the scheme and scheme name, w.e.f. Dec 16th 2015 the scheme shall be managed as an open ended equity scheme


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DISCLAIMER

This presentation dated 16th December 2015, has been prepared by HDFC Asset Management Company

Limited (HDFC AMC) based on internal data, publicly available information and other sources believed to

be reliable. Any calculations made are approximations, meant as guidelines only, which you must

confirm before relying on them. The information contained in this document is for general purposes

only. The document is given in summary form and does not purport to be complete. The document does

not have regard to specific investment objectives, financial situation and the particular needs of any

specific person who may receive this document. The information/ data herein alone are not sufficient

and should not be used for the development or implementation of an investment strategy. Thestatements contained herein are based on our current views and involve known and unknown risks and

uncertainties that could cause actual results, performance or events to differ materially from those

expressed or implied in such statements. Past performance may or may not be sustained in future.

Neither HDFC AMC and HDFC Mutual Fund nor any person connected with them, accepts any liability

arising from the use of this document. The recipient(s) before acting on any information herein should

make his/her/their own investigation and seek appropriate professional advice and shall alone be fully

responsible / liable for any decision taken on the basis of information contained herein.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED

DOCUMENTS CAREFULLY.

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Thank You

hdfc equity savings fund.pdf

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