Oppenheimer Film Discussion for Philosophy and Film
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Presenting<br />HDFC Prudence Fund<br />(An Open-Ended Balanced Scheme)<br />As on December 31, 2010<br />1Table of Contents<br />Definition and Positioning<br />Product Rationale and Investment Strategy<br />Portfolio Composition<br />Product Features and Asset Allocation Pattern<br />Performance and Fund Rating<br />Fund Suitability<br />Disclaimer<br />2What is a balanced fund?<br />A balanced fund is one that has a portfolio comprising debt<br />instruments, convertible securities, preference and equity shares<br />Assets are generally held in predefined proportion of debt / money market<br />securities and equities<br />Broadly, Broadly, balanced balanced funds funds target target returns returns greater greater than than debt debt schemes schemes with with lower lower<br />volatility than equity schemes<br />Balanced funds provide investors with the best of both worlds; the returns of<br />equity with the safety of debt<br />3Positioning of balanced funds<br />RETURN<br />Monthly Income Plans<br />Balanced Funds<br />Index Funds<br />Equity Funds<br />Sectoral Funds<br />RISK<br />RETURN<br />Liquid Funds<br />Income Funds<br />Gilt Funds<br />Monthly Income Plans<br />4Product Rationale<br />Hassle free investing Investors save time, effort and costs. No need to constantly monitor the portfolio<br />to maintain the target asset allocation<br />Buy low Sell High A constant asset allocation results in buying more equities when markets fall<br />sharply (selling bonds) and selling equities when markets rally sharply (buying<br />bonds)<br />Cost effective Cheaper and tax efficient alternative to maintain constant asset allocation<br />5Investment Strategy<br />In the long term, the mix between equity and debt instruments is targeted<br />between 40:75 and 60:25 respectively<br />In such times when the interest rates are high and equities are<br />expensive, investments in debt would be generally more attractive versus<br />equities and accordingly the fund would increase the debt component in the<br />portfolio<br />Similarly in times when the interest rates are low and equity valuations are<br />cheap, the fund would increase equity exposure while lowering its debt<br />component in the portfolio<br />The exact mix of the portfolio will be a function of interest<br />rates, equity valuations and outlook for growth of earnings<br />6Investment Strategy<br />(Equities)<br />Maintains an effectively diversified portfolio<br />No cap / style bias<br />Focus is on:<br />Sound quality companies<br />Companies that enjoy Leadership / near leadership position<br />Companies / businesses with superior growth prospects available at a reasonable price<br />7Investment Strategy<br />(Fixed Income)<br />The fund would invest in debt instruments such as government<br />securities, securitised debts, corporate debentures and bonds, preference<br />shares, quasi government bonds and money market instruments<br />Preference for high quality assets<br />Actively Actively managed managed debt debt portfolio portfolio based based onon interest interest rate rate outlook outlook;; investment investment<br />opportunity is assessed with regard to credit, interest rate and liquidity risk<br />The exact proportion in money market instruments will be a function of the<br />liquidity needs and the attractiveness of the debt/equity markets<br />8Managing and Controlling Risk<br />The key to building wealth in the long run is not to earn very high returns<br />occasionally, but to earn reasonable returns with higher consistency and to<br />avoid large losses that reduce wealth significantly<br />Best illustration of this strategy was the reduction in exposure to IT stocks in<br />late 1999 ahead of the ‘IT meltdown’. Subsequently in CY 2000 and CY 2001,<br />most IT stocks lost between 50%-90% in value. In the same period HDFC<br />Prudence Prudence Fund Fund lost lost around around 1414%% **<br />* Past performance may or may not be sustained in the future. Please refer relative performance <br />table on slide 16.<br />9Portfolio Composition<br />(As on December 31, 2010)<br />10Industry Allocation - % of Net Assets<br />(Equity)<br />(As at December 31, 2010)<br />Chemicals <br />Minerals/Mining<br />Industrial Capital Goods<br />Media & Entertainment<br />Textile Products<br />Oil<br />Others<br />Pharmaceuticals<br />Consumer Non Durables<br />Software<br />Banks<br />2.28<br />2.31<br />2.53<br />2.82<br />3.13<br />3.52<br />5.56<br />6.20<br />8.63<br />9.19<br />14.70<br />Telecom - Services<br />Gas<br />Finance<br />Auto<br />Industrial Products<br />Trading<br />Auto Ancillaries<br />Petroleum Products<br />Chemicals <br />1.26<br />1.32<br />1.46<br />1.67<br />1.68<br />1.99<br />2.01<br />2.04<br />2.28<br />Others include: Power (1.03%), Construction (0.82%), Paper Products (0.78%), Consumer Durables (0.78%) Paper<br />(0.69%), Construction Project (0.61%), Ferrous Metals (0.54%), Retailing (0.22%), Textiles Synthetic 0.15%)<br />11Portfolio Composition<br />(As at December 31, 2010)<br />% to Net Assets<br />Total of Top 10 equity holdings 31.80<br />Total Equity & Equity Related Holdings 74.30<br />Total Government Securities, Money Market Instruments and Credit Exposures 24.45<br />Cash, Cash, Cash Cash Equivalents Equivalents and and Net Net Current Current Assets Assets 1.13 1.13<br />Cash Margin 0.11<br />Grand Total 100.00<br />Net Assets (``` In crore) 5,964.57<br />12Product Features<br />Type of Scheme An Open-ended Balanced Scheme<br />Inception Date (Date of allotment) February 1, 1994<br />Investment Objective To provide periodic returns and capital appreciation over a long period of time from a judicious mix of<br />equity and debt investments with an aim to prevent / minimise any capital erosion<br />Fund Manager $ Prashant Jain (Since June 19, 2003)*<br />Plans / Options Growth and Dividend – The Dividend Option offers Dividend Payout and Reinvestment facility<br />Minimum Application Amount<br />(Under Each Option)<br />Purchase: ` 5,000 and any amount thereafter<br />Additional Purchase: ` 1,000 and any amount thereafter<br />Load Load Structure Structure Entry Entry Load Load:<br />Not Applicable. Upfront commission shall be paid directly by the investor to the ARN Holder<br />(AMFI registered Distributor) based on the investors’ assessment of various factors including<br />the service rendered by the ARN Holder.<br />Exit Load:<br />In respect of each purchase / switch-in of units, an exit load of 1.00% is payable if units are<br />redeemed / switched – out within 1 year from the date of allotment.<br />No exit load is payable if units are redeemed / switched – out after 1 year from the date of<br />allotment.<br />Entry / Exit load shall not be levied on bonus units and units allotted on dividend reinvestment.<br />Benchmark CRISIL Balanced Fund Index<br />* Date of migration from Zurich India Mutual Fund.<br />$ Dedicated Fund Manager for Overseas Investments: Miten Lathia since Auugst 5, 2010.<br />13Asset Allocation Pattern<br />Type of the Instruments Minimum Allocation<br />(% of Net Assets)<br />Maximum Allocation<br />(% of Net Assets)<br />Risk Profile of the <br />Instrument<br />Equity & Equity linked<br />instruments<br />40 75 High<br />Debt Securities and<br />money market<br />instruments*<br />25 60 Low to Medium<br />*Investment in Securitised debt, if undertaken, would not exceed 10% of the net assets of the Scheme.<br />The scheme may seek investment opportunity in the ADR / GDR / Foreign Equity and Debt Securities (max. 40% of net<br />assets) subject to SEBI (Mutual Funds) Regulations, 1996. The scheme may use derivatives mainly for the purpose of<br />hedging and portfolio balancing (max 25% of net assets) based on the opportunities available subject to SEBI (Mutual<br />Funds) Regulations, 1996.<br />14Performance <br />& Fund Rating<br />(As on December 31, 2010)<br />15Relative Performance –<br />HDFC Prudence Fund (Growth Option)<br />(As on December 31, 2010)<br />Period Returns (%) $$ ^ CRISIL Balanced Fund Index <br />Returns (%) #<br />Last 1 Year (365 Days) 26.32 13.57<br />Last 3 Years (1096 Days) 10.56 3.45<br />Last 5 Years (1827 Days) 20.84 13.64<br />Last 10 Years (3654 Days) 27.19 N.A.<br />Since Inception $ (6177 Days) 21.88 N.A.<br />^ Past performance may or may not be sustained in the future<br />Performance of the Dividend Option for the investor would be net of Distribution Tax as applicable.<br />Above returns are compounded annualized (CAGR.<br /># Benchmark Index <br />$$ All dividends declared prior to the splitting of the Scheme into Dividend & Growth Options are assumed to be reinvested in the <br />units of the Scheme at then prevailing NAV ( ex-dividend NAV) .<br />N.A. – Not available<br />$ Inception Date: February 1, 1994<br />16Systematic Investment Plan Returns<br />(As on December 31, 2010)<br />SIP Investments<br />Since <br />Inception $<br />SIP<br />10 Year<br />SIP <br />5 Year<br />SIP <br />3 Year<br />SIP <br />1 Year<br />SIP <br />Total Amount <br />Invested (`)(`) (`)<br />203,000 120,000 60,000 36,000 12,000<br />Market Value (`)(`) 23,75,540 5,58,470 1,06,870 57,830 13,540<br />This is how your investments would have grown if you had invested say ``` 1,000 systematically on the first <br />business day of every month over a period of time.<br />Market Value (`)(`) (`) 23,75,540 5,58,470 1,06,870 57,830 13,540<br />Returns (annualised) <br />(%) * ^ $$<br />25.25 28.93 23.29 33.36 24.70<br />Benchmark Returns <br />(annualised) (%) #<br />N.A N.A 13.40 17.53 18.82<br />^Past Performance may or may not be sustained in the future.<br /># CRISIL Balanced Fund Index $ Inception Date: February 1, 1994 .*Load is not taken into consideration and the Returns are of Growth Option.<br />Investors are advised to refer to Relative Performance table on slide 17 for Non – SIP Returns<br />$$ All dividends declared prior to the splitting of the Scheme into Dividend & Growth Options are assumed to be reinvested in the units of the Scheme<br />at the then prevailing NAV( ex- dividend NAV).<br />Disclaimer: The above investment simulation is for illustrative purpose only and should not be construed as a promise on<br />Minimum returns and safeguard of capital. HDFC Mutual Fund / HDFC Asset Management Company Ltd. is not guaranteeing<br />or promising or forecasting any returns. SIP does not assure a profit or guarantee protection against loss in a declining market.<br />Please refer to the SIP enrolment form or contact the nearest ISC for SIP load structure.<br />17Dividend History<br />(Since 1999)<br />Record Date Cum Dividend<br />NAV per Unit (`)(`) (`)<br />Dividend ^<br />Per Unit (`)(`) (`)<br />November 29,1999 17.730 2.00<br />April 07, 2000 15.200 1.50<br />March 09, 2001 12.700 0.90<br />March 15, 2002 13.900 1.00<br />July 15, 2003 18.737 2.00<br />December 26, 2003 23.711 3.00<br />^Past performance may or may not be sustained in the future.<br />All dividends are on face value of ` 10 per unit. After payment of the dividend, the per Unit NAV falls to the extent of the <br />payout and statutory levy (if applicable)<br />March 15, 2004 20.247 1.50<br />March 18, 2005 25.265 5.00<br />March 03, 2006 30.543 5.00<br />February 21, 2007 32.483 5.00<br />February 21, 2008 33.503 5.00<br />March 19, 2009 17.393 2.50<br />March 18, 2010 31.238 3.50<br />18Recent Awards won by <br />HDFC Prudence Fund<br />ICRA Mutual Fund Awards 2010:<br />HDFC Prudence Fund has been ranked “A Seven Star Fundquot;
# and has been awarded Gold<br />Award for 'Best Performance‘ # in the category of Open Ended Balanced for one year period<br />ending December 31, 2009 (from amongst 24 schemes)<br />Lipper Fund Awards 2010:<br />HDFC Prudence Fund – Growth Option was awarded the ‘Best Fund for over Five years’# in<br />the‘Mixed Asset INR Aggressive’ category (from amongst 24 schemes) for the 5 year period<br />ending December 31, 2009 at Lipper Fund Awards 2010 (India)<br />HDFC Prudence Fund - Growth Option was awarded the ‘Best Fund over Ten Years’# in<br />the‘Mixed Asset INR Aggressive’ category (from amongst 10 schemes) for the 10 year period<br />ending December 31, 2009 at Lipper Fund Awards 2010 (India)<br /># Past performance is no guarantee of future results.<br />Please refer slide No. 26 for Award Methodology and Disclaimer.<br />27Fund Rating<br />HDFC Prudence Fund – Growth Option was assigned ‘CRISIL Mutual Fund<br />Rank 1’# in the ‘Open End Balanced Schemes’ Category (out of 18 schemes) for<br />the 2 year period ending September 30, 2010 by CRISIL.<br />HDFC Prudence Fund was assigned ‘CRISIL Mutual Fund Rank 1’# in the ‘Open<br />End Consistent Balanced’ Category (out of 14 schemes) for the 5 year period ending<br />September 30, 2010 by CRISIL.<br />CRISIL Mutual Fund Rank “1” means that the composite performance of the<br />Scheme is “Very Good performance “and ranks within the Top 10 percentile in the<br />category.<br />^Past performance is no guarantee of future results.<br />Please refer to the slide number 26 on Award rating methodology and disclaimer.<br />20Fund Rating and Awards<br />HDFC Prudence Fund has been rated Five Stars by Morningstar in the Morningstar India<br />Open Ended Moderate Allocation Category (from amongst 74 schemes) for the overall<br />(3/5/10 year- as applicable) period ending December 31<br />st<br />, 2010#<br /> Five Stars indicate that the fund is in the top 10 percent of its category in terms of historical risk –<br />21<br /> Five Stars indicate that the fund is in the top 10 percent of its category in terms of historical risk –<br />adjusted returns<br />Value Research Rating - * * * * * (Five Stars) in Hybrid Equity – Oriented Category (25<br />schemes) for period ending December 31, 2010#<br /> Five – stars indicate that fund is in the top 10 per cent of its category in terms of historical risk –<br />adjusted returns<br /># Past performance is no guarantee of future results.<br />Please refer to the slide: 25 on Rating methodology.Fund Suitability<br />22Why HDFC Prudence Fund?<br />One of the oldest and best performing* balanced funds in the industry, with an<br />established track record of over 16 years<br />Strong emphasis on managing and controlling portfolio risk<br />Targets to assume higher risk only when justified by potentially higher returns<br />Helps investors maintain their asset allocation discipline at all times and not get<br />carried away by the cycle of fear and greed as a result of market swings<br />*Past performance may or may not be sustained in the future<br />The targets / objectives of the scheme may or may not be achieved.<br />23HDFC Prudence Fund is suitable for <br />investors:<br />As a building block for their mutual fund portfolio<br />Looking for a well diversified portfolio across asset classes<br />Desiring a mixture of income and capital appreciation<br />Looking Looking toto maintain maintain their their asset asset allocation allocation inin aa convenient, convenient, tax tax efficient efficient and and<br />timely manner<br />24DISCLAIMER: This presentation has been prepared and issued on the basis of internal data, publicly available information and other sources believed to be<br />reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact and terms and conditions<br />and features of HDFC Prudence Fund. The information/ data herein alone is not sufficient and shouldn’t be used for the development or implementation of an<br />investment strategy. It should not be construed as investment advice to any party. The statements contained herein may include statements of future<br />expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties<br />that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The recipient alone shall be fully<br />responsible / liable for any decision taken on the basis of this presentation. The content of this presentation is confidential and intended solely for the use of the<br />addressee. If you are not the addressee, or the person responsible for delivering it to the addressee, any disclosure, copying, distribution or any action taken or<br />omitted to be taken in reliance on it is prohibited and may be unlawful. No part of this document may be duplicated in whole or in part in any form and/or<br />redistributed without prior written consent of the HDFC Mutual Fund/ HDFC Asset Management Company Limited. The recipient(s) should before investing in the<br />Scheme(s) make his/their own investigation and seek appropriate professional advice.<br />Value Research Fund Ratings – Ranking Methodology<br />Value Research Fund Ratings are a composite measure of historical risk-adjusted returns. In the case of equity and hybrid funds this rating is based on the<br />weighted average monthly returns for the last 3 and 5-year periods. These ratings do not take into consideration any entry or exit load. Each category must have<br />a minimum of 10 funds for it to be rated. Effective, July 2008, an additional qualifying criteria, has been included whereby a fund with less than ` 5 crore of<br />average AUM in the past six months will not be eligible for rating.<br />Five-stars indicate that a fund is in the top 10% of its category in terms of historical risk-adjusted returns. Four stars indicate that a fund is in the next<br />22.5%, middle 35% receive three stars, the next 22.5% are assigned two stars while the bottom 10% receive one star. The number of schemes in each category<br />is mentioned in Hybrid Equity Oriented category are 25. These Fund Ratings are as on December 31, 2010. The Value Research Ratings are published in Monthly<br />Mutual Fund Performance Report and Mutual Fund Insight. The Ratings are subject to change every month. The Rating is based on primary data provided by<br />respective funds, Value Research does not guarantee the accuracy.<br />Morning Star Rating – Rating Methodology: The Morningstar fund rating methodology is based on a fund’s risk-adjusted return within a given Morningstar<br />category. For each fund with at least a three-year history, Morningstar ratings are calculated every month for the 3 year, 5 year and 10 year period. The Overall<br />Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three, five and 10 year (if applicable)<br />Morningstar Rating metrics. Within each rating period, the top 10% funds receive a five star rating, the next 22.5% earn a four star rating, the next 35% get<br />three stars, the next 22.5% receive two stars, and the bottom 10% get one star. Loads are not considered for the rating purpose. The rating is based on NAV<br />provided by respective funds. The current fund rating is for the overall / 3 year / 5 year/ 10 year period as of December 31, 2010. HDFC Prudence Fund has<br />been rated 5-Star by Morningstar in the Morningstar India Open Ended Moderate Allocation Category. 74 funds which completed 3 years of performance were<br />considered for rating. Rating Source and Publisher: Morningstar. The ratings are subject to change every month. Please refer www<br />