![[Title to come]
[Sub-Title to come]
Strictly for Intended Recipients OnlyDate
* DSP India Fund is the Company incorporated in Mauritius, under which ILSF is the corresponding share class
March 2020
| People | Processes | Performance |
DSP Dynamic Asset Allocation Fund](https://image.slidesharecdn.com/dspdynamicassetallocationfund-march2020-200623184123/85/DSP-Dynamic-Asset-Allocation-Fund-1-320.jpg)
DSP Dynamic Asset Allocation Fund
- 1. [Title to come] [Sub-Title to come] Strictly for Intended Recipients OnlyDate * DSP India Fund is the Company incorporated in Mauritius, under which ILSF is the corresponding share class March 2020 | People | Processes | Performance | DSP Dynamic Asset Allocation Fund
- 2. 2 What is the DSP Dynamic Asset Allocation Fund? DYNAMICALLY MANAGES ALLOCATION between equity and debt by assessing equity market attractiveness. Equity allocation ranges between 20%-90% depending on the output of the AVERAGE COMPOSITE PERCENTILE score model and the balance is allocated to arbitrage and debt. FUNDAMENTAL FACTORS determine core equity allocation based on equity market valuations TECHNICAL SIGNALS are used to capitalize on equity market upswings by adding to core equity allocation. Allocates between Equity and Debt based on attractiveness of equity markets Core Equity allocation is arrived on the basis of TWO FACTOR MODEL which incorporates fundamental and technical signals. Source: Internal.
- 3. 3 Why consider investing in the DSP Dynamic Asset Allocation Fund? Potential for CAPITAL PRESERVATION DURING MARKET DOWNTURNS.. CONTROLS PORTFOLIO LEVEL VOLATITY by managing equity exposures across market cycles. Enables a SMOOTHER INVESTOR EXPERIENCE giving investors confidence to stay invested to capture upsides Combines potential capital appreciation, capital preservation and volatility control DYNAMICALLY ADAPTS TO CHANGING EQUITY MARKET CONDITIONS by adjusting allocations to equity. Removes the need for the investor to time entries and exits from equity markets POTENTIALLY SUITABLE FOR VARIOUS INVESTOR TYPES NEW INVESTORS – offers a way to gain exposure to equity markets with potentially lower volatility INTERMEDIATE INVESTORS – offers an automated* solution for investments especially when markets are confusing EXPERIENCED INVESTORS – Suitable for combining with other exposures in an asset allocation model Source: Internal. * The construct of DSP Dynamic Asset Allocation Fund (‘scheme’) is to dynamically manage the asset allocation of the Scheme based on a model’. For scheme specific risk factors, asset allocation and more details, please read the SID of the scheme available on www.dspim.com. There is no assurance of any capital protection/returns/guarantee to the investors in the scheme.
- 4. 4 Investment team EQUITY & EQUITY RELATED SECURITIES INCL. DERIVATIVES (65% – 100%) Seek Capital appreciation plus Income DEBT & MONEY MARKET (MM) INSTRUMENTS (0-35%) Seek Income Atul Bhole - Portfolio Manager for equity allocation • 14 year experience in fund management and equity research • Masters in Management Studies from JBIMS and has cleared his CA exams. Saurabh Bhatia - Portfolio Manager for debt & money market allocation • 17 year experience in fund management and treasury management. • Post Graduate Diploma in Business Management, Wigan & Leigh College Dynamic allocation between equity and debt via a model driven approach
- 5. 5 Investment process DETERMINING EQUITY MARKET ATTRACTIVENESS ASSIGNING ALLOCATION TO EQUITIES BALANCE ALLOCATION IN ARBITRAGE & DEBT Manage market risks via asset allocation -> enhance investment longevity TWO FACTOR ASSET ALLOCATION MODEL DIRECTIONAL EQUITY INVESTMENT FRAMEWORK Seek capital appreciation Seek income generation SHORT TERM FIXED INCOME INSTRUMENTS Manage risk Evaluate returns potential Source: Internal.
- 6. 6 Two factor asset allocation model Determine core equity allocation based on equity market valuationsFUNDAMENTAL FACTORS Capitalize on equity market upswings by adding to core equity allocationTECHNICAL SIGNALS Assign final allocation to equities for active equity portfolio constructionFINAL ALLOCATION Manage equity market risks via asset allocation -> enhance investment longevity NEW DAAF MODEL SOLELY FOCUSED ON DETERMINING ALLOCATION TO EQUITIES MAXIMUM CORE EQUITY ALLOCATION MINIMUM CORE EQUITY ALLOCATION 20% 90% Source: Internal.
- 7. 7 Equity Investment Philosophy Business Management Growth STOCK SELECTION Framework for identifying quality businesses PORTFOLIO CONSTRUCTION Core portfolio Tactical portfolio Core portfolio of quality businesses based on long term themes REVIEW & REBALANCING Stock prices Competitive positioning of quality businesses Use market corrections to add to quality business at lower prices Buy quality businesses, stay invested and use market corrections to average down costs Source: Internal.
- 8. 8 Equity Investment Framework - Portfolio construction DETERMINE LONG TERM STRUCTURAL THEMES Aspirational country like India dependent on per capita income growth DIVERSIFY STOCK WEIGHTS IN PORTFOLIO No stock has outsized weight Control portfolio volatility MAINTAIN MARKET CAP BALANCE IN PORTFOLIO Diversified portfolio with large cap bias CORE ALLOCATION TO STRUCTURAL THEMES 75 – 80% in structural themes 20-25% in tactical ideas with turnaround triggers Seeking to capture long term growth prospects via equity allocations PORTFOLIO CONSTRUCTION PROCESS FOR ACTIVE DIRECTIONAL EQUITY ALLOCATION EQUITY PORTFOLIO COMPOSITION EQUITY PORTFOLIO DIVERSIFICATION Source: Internal.
- 9. 9 Two factor DAAF model – Back-tested performance history Model shows higher Returns per unit Risk v/s Equity markets across time periods 1 YEAR DAILY ROLLING 3 YEAR DAILY ROLLING 5 YEAR DAILY ROLLING 10 YEAR DAILY ROLLING DAAF Model* Nifty 50 TRI DAAF Model* Nifty 50 TRI DAAF Model* Nifty 50 TRI DAAF Model* Nifty 50 TRI Average Annual Returns 11.59% 17.55% 10.18% 13.96% 9.93% 12.42% 9.97% 12.42% Median Annual Returns 9.47% 14.57% 9.27% 11.47% 9.56% 12.53% 9.27% 11.41% Minimum Annual Returns -33.81% -56.38% -4.48% -5.21% 1.62% -0.11% 5.38% 5.13% Maximum Annual Returns 75.85% 105.39% 25.99% 51.32% 18.38% 27.29% 14.02% 19.46% Returns / Risk 0.87 0.77 0.76 0.61 0.75 0.54 0.75 0.54 Performance differential v/s unhedged Nifty TRI reduces with longer time periods Lower standard deviation of returns allows for a smoother NAV series Source: Internal, MFIE. *Expenses ratio of 2.3% assumed for the DAAF Model. Data as of 31st Mar 2020. Standard Deviation considered for Returns / Risk calculation in the above table is: DSP DAAF : 13.1%, Nifty 50 TRI: 22.3%. Indices are unmanaged and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index. These figures pertain to performance of the model and do not in any manner indicate the returns/performance of the Scheme. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. 0 100 200 300 400 500 600 700 800 900 Jan-04 Jun-06 Nov-08 Apr-11 Aug-13 Jan-16 Jun-18 NAV Series - DAAF Model* (Net) v/s Nifty 50 TRI DAAF Model* Nifty 50 TRI
- 10. 10 Efficacy of the allocation model in Bull markets PRIMARY REQUIREMENT – HIGH EQUITY ALLOCATION INITIALLY & REDUCE ALLOCATION AS BULL PHASE MATURES 0% 20% 40% 60% 80% 100% 1000 2000 3000 4000 5000 6000 7000 8000 30-Jan-04 30-Jan-05 30-Jan-06 30-Jan-07 30-Jan-08 Bull phase (Jan 2004 - Jan 2008) Equity Allocation NIFTY 50 TRI 0% 20% 40% 60% 80% 100% 3000 4000 5000 6000 7000 8000 9000 10000 Bull phase (Apr 2009 - Oct 2010) Equity Allocation NIFTY 50 TRI 0% 20% 40% 60% 80% 100% 5000 6000 7000 8000 9000 10000 11000 12000 Bull phase (Jan 2012 - Feb 2015) Equity Allocation NIFTY 50 TRI 0% 10% 20% 30% 40% 50% 60% 70% 80% 9000 10000 11000 12000 13000 14000 15000 16000 Bull phase (Mar 2016 - Jan 2018) Equity Allocation NIFTY 50 TRI Meeting primary requirement in the observed bull phases Source: Bloomberg, DSP Investment Managers. * Expenses ratio of 2.3% assumed for the DAAF Model. Data as of 31st Mar 2020. Indices are unmanaged and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index. These figures pertain to performance of the model and do not in any manner indicate the returns/performance of the Scheme. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Returns Matrix Nifty 50 TRI 31.9% DAAF Model* 17.0% Returns Matrix Nifty 50 TRI 55.3% DAAF Model* 36.2% Returns Matrix Nifty 50 TRI 24.4% DAAF Model* 17.4% Returns Matrix Nifty 50 TRI 26.3% DAAF Model* 13.1%
- 11. 11 Efficacy of the allocation model in Bear markets PRIMARY REQUIREMENT – LOW EQUITY ALLOCATION INITIALLY & INCREASE ALLOCATION PROGRESSIVELY Meeting primary requirement in the observed bear phases 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 3000 3500 4000 4500 5000 5500 6000 6500 7000 7500 8000 01-Feb-08 01-May-08 01-Aug-08 01-Nov-08 01-Feb-09 Bear phase - (Feb 2008 - Mar 2009) Equity Allocation NIFTY 50 TRI 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 5500 6000 6500 7000 7500 8000 8500 01-Nov-10 01-Feb-11 01-May-11 01-Aug-11 01-Nov-11 Bear phase (Nov 2010 - Dec 2011) Equity Allocation NIFTY 50 TRI 0% 20% 40% 60% 80% 9000 9500 10000 10500 11000 11500 12000 02-Mar-15 02-Jun-15 02-Sep-15 02-Dec-15 Bear phase (Mar 2015 - Feb 2016) Equity Allocation NIFTY 50 TRI Source: Bloomberg, DSP Investment Managers. * Expenses ratio of 2.3% assumed for the DAAF Model. Data as of 31st Mar 2020. Indices are unmanaged and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index. These figures pertain to performance of the model and do not in any manner indicate the returns/performance of the Scheme. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Returns Matrix Nifty 50 TRI -37.9% DAAF Model* -19.0% Returns Matrix Nifty 50 TRI -20.6% DAAF Model* -10.5% Returns Matrix Nifty 50 TRI -21.2% DAAF Model* -7.5%
- 12. 12 Efficacy of the allocation model in Volatile markets PRIMARY REQUIREMENTS - 1. TACTICAL ADJUSTMENTS TO ALLOCATIONS TO CAPTURE MEAN REVERTING TRENDS 2. MAINTAIN LOWER DIRECTIONAL EQUITY EXPOSURES AS VALUE-AT-RISK IS HIGHER Meeting primary requirements in the recent volatile phase 0% 10% 20% 30% 40% 50% 60% 70% 80% 10500 11500 12500 13500 14500 15500 16500 17500 Feb-18 Apr-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 Volatile phase (Feb 2018 - till date) NIFTY 50 TRI Equity Allocation Increasing equity allocations during equity market falls Reducing equity allocations during equity market spikes Directional equity exposure at moderate levels (30% – 40%) Source: Bloomberg, DSP Investment Managers. * Expenses ratio of 2.3% assumed for the DAAF Model. Data as of 31st Mar 2020. Indices are unmanaged and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index. These figures pertain to performance of the model and do not in any manner indicate the returns/performance of the Scheme. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Returns Standard Deviation Nifty 50 TRI -9.6% 20.7% DAAF Model* -1.8% 9.6%
- 13. 13 Efficacy of the allocation model in Volatility reduction VOLATILITY REDUCTION FOR A SMOOTHER INVESTOR EXPERIENCE Volatility reduction gives investors confidence to stay invested in order to capture upsides Source: Bloomberg, DSP Investment Managers. *Expenses ratio of 2.3% assumed for the DAAF Model. Data as of 31st Mar 2020. Indices are unmanaged and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index. These figures pertain to performance of the model and do not in any manner indicate the returns/performance of the Scheme. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Jan-05 Aug-06 Feb-08 Aug-09 Feb-11 Aug-12 Mar-14 Sep-15 Mar-17 Sep-18 Mar-20 1 Year Rolling Ann. Std Dev of Nifty 50 TRI – 1 year Rolling Ann. Std Dev of DAAF Model* POSITIVE DIFFERENCE BETWEEN VOLATILITY OF NIFTY 50 TRI & DAAF MODEL
- 14. 14 Performance during different market cycles Model participates in bull phases and limits downside during bear phases Nifty 50 TRI > 12% Nifty 50 TRI <-6% Nifty 50 TRI between -5% to 5% Source: Bloomberg, DSP Investment Managers. * Expenses ratio of 2.3% assumed for the DSP DAAF model. 1 year rolling returns calculated based on daily rolling returns since January 2004. Data as of 31st Mar 2020. Indices are unmanaged and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index. These figures pertain to performance of the model and do not in any manner indicate the returns/performance of the Scheme. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. 18.9% -9.7% 4.3% 32.4% -22.6% 0.8% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% Average Returns in Bull Period Average Returns in Bear Period Average Returns in Flat Period 1 year Rolling Returns DAAF Model 1 year Rolling Returns Nifty 50 TRI
- 15. 15 CYTD 2020 Performance DSP DAAF has preserved capital and reduced volatility as compared to benchmark during the 2020 Q1 turmoil Source: MFIE. Data as of 28th Apr 2020. Indices are unmanaged and used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. Click here for performance in SEBI prescribed format and of other schemes managed by Fund Managers. Significant capital preservation Significant volatility reduction 3.0% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 1 Year Rolling Ann. Std Dev of Nifty 50 TRI - 1 Year Rolling Ann. Std Dev of DSP AAF 1 Year Rolling Ann. Std Dev of CRISIL Hybrid 35+65 - Aggressive Index - 1 Year Rolling Ann. Std Dev of DSP DAAF 600 700 800 900 1,000 1,100 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 DSP DAAF Nifty 50 TRI CRISIL Hybrid 35+65 - Aggressive Index RebasedValues -7.0% -22.7% -12.3%
- 16. 16 Month on month Equity Allocation recommended by Model Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2020 40% 50% 70% 2019 50% 40% 30% 30% 30% 30% 30% 30% 40% 40% 30% 30% 2018 30% 40% 40% 30% 30% 30% 30% 30% 30% 40% 40% 40% 2017 50% 50% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 2016 60% 70% 60% 50% 60% 50% 40% 50% 50% 50% 50% 50% 2015 50% 40% 40% 40% 30% 40% 40% 40% 50% 40% 50% 50% 2014 80% 90% 70% 60% 60% 50% 50% 50% 50% 60% 50% 50% 2013 70% 70% 80% 80% 70% 70% 70% 80% 90% 80% 80% 70% 2012 70% 70% 80% 80% 80% 80% 80% 80% 80% 70% 80% 70% 2011 50% 50% 50% 50% 50% 60% 50% 70% 70% 70% 70% 80% 2010 40% 60% 50% 40% 50% 40% 40% 50% 40% 40% 40% 40% 2009 90% 90% 90% 80% 70% 50% 60% 50% 40% 40% 50% 50% 2008 30% 20% 20% 20% 30% 40% 50% 50% 60% 80% 90% 90% 2007 30% 30% 40% 30% 30% 30% 30% 30% 30% 30% 30% 30% 2006 40% 40% 30% 30% 30% 40% 30% 30% 30% 30% 30% 30% 2005 70% 70% 70% 70% 70% 70% 60% 60% 50% 60% 50% 40% 2004 30% 40% 50% 50% 70% 80% 80% 80% 70% 70% 60% 60% DSP DAAF New Model went live in Sep 2019 Source: Internal Model has used the downturn in Feb – Mar ’20 to increase equity allocations
- 17. 17 Portfolio Summary for DSP Dynamic Asset Allocation Fund (as on Mar 31st 2020) ASSET CLASS ALLOCATION Directional Equities 67.35% Equity Arbitrage 4.03% Debt Instruments * 34.52% INDICATOR MEASURE Portfolio Turnover ratio for Directional Equity (last 12 months) 0.17 Average Maturity 2.09 years Modified Duration 1.78 years Portfolio Macaulay Duration 1.90 years Portfolio Yield to Maturity 5.96% ASSET ALLOCATION PORTFOLIO METRICS * DEBT INSTRUMENTS ALLOCATION Fixed Deposits 3.60% Bonds & NCDs 22.51% TREPS 8.41% Source: Internal, Click here for performance in SEBI prescribed format and of other schemes managed by Fund Managers.
- 18. 18 What does DSP stand for Aligning our interest with the Investor Focus on investing v/s asset gathering Blending science with art in investing Skin in the game - employees invest only in DSP schemes First to benchmark against Total Return indices Transparent communication Strengthened Investment Teams – Analysts, Credit Head, Value, Skeptical Analyst Launched DSP Corporate Bond Fund when spreads attractive but category not getting inflows Stopped inflows into DSP Small Cap Fund when valuations were expensive with transparent communication on the same. Started taking inflows only when markets corrected significantly making valuations reasonable & providing opportunity of incremental investments Bouquet of alpha & differentiated passive strategies Framework based investing Different manager styles under the same roof Privately owned, focused business line and professional set-up allows focus on long term CORE VALUES OF THE INVESTMENT MANAGER
- 19. 19 Disclaimer & Product labelling details Fund Product Suitability Riskometer DSP Dynamic Asset Allocation Fund (An open ended dynamic asset allocation fund) The scheme is suitable for investors who are seeking* Long term capital growth Investments in equity and equity related securities including the use of equity derivatives strategies and arbitrage opportunities with balance exposure in debt and money market instruments. DSP Small Cap Fund (An open ended equity scheme predominantly investing in small cap stocks) The Open ended equity scheme is suitable for investors who are seeking* Long-term capital growth Investment in equity and equity-related securities predominantly of small cap companies (beyond top 250 companies by market capitalization) DSP Corporate Bond Fund (An open ended debt scheme predominantly investing in AA+ and above rated corporate bonds) The Open ended debt scheme is suitable for investors who are seeking* Income over a medium-term to long term investment horizon Investment in money market and debt securities *Investors should consult their financial advisors if in doubt about whether the Scheme is suitable for them. In this material DSP 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. The data/statistics are given to explain general market trends in the securities market, it should not be construed as any research report/research recommendation. 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 sector(s)/stock(s)/issuer(s) mentioned in this presentation do not constitute any research report/recommendation of the same and the Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s). The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors which is available at www.dspim.com. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. For Index disclaimer click here. DSP Mutual Fund and its schemes are not registered in any jurisdiction, except the Schemes viz. DSP Equity Opportunities Fund and DSP Dynamic Asset Allocation Fund, which are registered with the Securities and Commodities Authority (“the SCA”) in the United Arab Emirates (UAE). The distribution of the Schemes in UAE would be undertaken by Barjeel Geojit Securities LLC, which is a licensed local distributor registered with SCA. .The distribution of this material in certain jurisdictions may be restricted or subject to registration requirements and, accordingly, persons who come into possession of this material in such jurisdictions are required to in form themselves about, and to observe, any such restrictions. The strategy mentioned has been currently followed by the Scheme and the same may change in future depending on market conditions and other factors. 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. All figures and other data given in this document for the fund and the yield gap model are as on March 31st, 2020 (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 the AMC or its affiliates. Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to the units of DSP Mutual Fund. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.