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Microsoft PowerPoint - Sundaram BNP Paribas Investment ...

  1. 1. Sundaram BNP Paribas Asset Management Investment Process A member of March 2009 www.sundarambnpparibas.in 1 Sundaram BNP Paribas Asset Management
  2. 2. Vision, Mission & Philosophy • Respect others, their needs To take the least cost and most effective solution Never ever take short cuts and sentiments To be a significant To provide people Admit and share mistakes - internally • Develop and maintain trust player in the Indian the best experience Take necessary steps to avoid repetition of work Respect others, their needs, religion and • Communicate freely and asset management in accessing sentiments maintain confidentiality space and be one of the financialalways Be on time markets Communicate freely and maintain confidentiality • Be on time always top ten asset managers Develop and maintain trust • Never ever take short cuts Work as a coherent team • Admit and share mistakes … Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 2 Sundaram BNP Paribas Asset Management
  3. 3. Investment Philosophy We believe that… – A greater level of neglect in the Indian equity universe leaves fund managers with a wider array of opportunities to exploit through an active fundamental approach. – An extensive fundamental quantitative analysis, regular company visits with top management allow us to assess these markets, thus giving us access to attractive and relatively unknown companies with strong financial characteristics. – Long term outperformance is achieved by investing in large and medium/small sized companies with unique business strength in attractive sectors, sound and transparent management, visibility and durable growth at a reasonable price. The risk management is also crucial. – The local presence and expertise of the fund management team is key to exploiting market mispricings due to the lower level of research resulting in an inefficiency of information in Indian equities. Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 3 Sundaram BNP Paribas Asset Management
  4. 4. Investment process: an active fundamental approach External Research Fund Managers Idea Flow & RESEARCH TEAM Published Information Research Economist Company Visit Fundamentals & Idea Management Generation Recommended Assessment List Norms of Stocks Internal Investment Executive Approval Committee Committee APPROVED BUY LIST Fund Themes Sector and Stock Limits Construction STOCK Portfolio Top-Down SELECTION Bottom-Up Approach Stock Picking Best Trade Execution Diversification Risk Guidelines Final Fund Portfolio Liquidity Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 4 Sundaram BNP Paribas Asset Management
  5. 5. Process: Idea Generation Macro factors Company contact & interaction GDP, inflation, interest rates, money supply, Mandatory company contact at least credit growth, forex accretion once in six months Mapping sector patterns in GDP growth Understanding the economic cycle Third-party research Customized corporate and economic Company specific database Future growth drivers Management capability Broker research Capital intensity Access to reports of most reputed brokerage Balance sheet strength houses Emphasis on long–term prospects than on Extensively used for large-cap stocks near-term triggers History of research calls used to identify superior brokerage houses Peer study Brokerage models used for top 50 stocks by Comparison on quantitative as well as market-cap qualitative parameters Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 5 Sundaram BNP Paribas Asset Management
  6. 6. Process: Financials Quantitative Estimates Profit margins Street estimates tracked extensively Finance charges Earnings revisions and price impact Cash flows Earnings & revenue guidance Revenue and earnings growth Trends in estimates and guidance Value add Return on equity and Du-Pont analysis Risk Profile Return on capital employed Leverage Working capital efficiency Ability to raise equity Trend analysis for key parameters Cost of capital Peer and industry aggregate comparison Track record in debt repayment Qualitative aspects Qualitative Transparency Business / sector prospects Management quality and capability Product life-cycle / business cycle Fairness in treatment of minority shareholders Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 6 Sundaram BNP Paribas Asset Management
  7. 7. Process: Approval of Stocks Investment Committee Risk Controller Qualifications for investment Portfolio liquidity Investment restrictions Exceptional trading activity Norms for counterparts & intermediaries Significant investments in single stock Approval for certain investments Order and execution time Review compliance of internal rules & Trade allocations and trades done in the last performance half-hour Internal Investment Committee Compliance Officer Clear names for investment Adherence to SEBI norms Approve names of intermediaries and Offer documents stipulation counterparts Broker empanelment Review investment decisions Post facto clearance of trades Review fund performance - weekly Monitoring single stock exposure Tier I Tier II Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 7 Sundaram BNP Paribas Asset Management
  8. 8. Process: Portfolio Construction Regulation & internal norms Liquidity SEBI limits Regular monitoring of broad market trends Internal risk control guidelines Trading volumes in portfolio stocks Risk team monitors adherence Trend analysis Impact cost Diversification Defined entry & exit Owning a large number of stocks Discipline in buying and selling Capping single stock exposure at 10%; Flagging of overweight exposures rarely holding more than a 5% in a single stock Low turnover through judicious cash-equity balance Buying and selling in a phased manner Valuation View on the market Price Earnings Multiple and Price to Cash Active cash calls Flow Cash waits for right stock in mid- and small- Peer comparison cap spaces Relative attractiveness of sector and stocks Long-term approach Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 8 Sundaram BNP Paribas Asset Management
  9. 9. Portfolio construction: a core/satellite approach CORE PORTFOLIO SATELLITE PORTFOLIO 70% - LARGE CAPS 30% - MID/SMALL CAPS ● Identify the best sectors and industries ● Select the best Mid and Small Caps – Strong growth potential – Under-researched stocks offering – Whatever the macro economic cycle ● Strong growth in earnings ● Valuations cheaper than the whole DOMESTIC CONSUMPTION market INVESTMENT IN INFRASTRUCTURES – Important growth bias ● Select the “best in class” stocks within – Small Caps emerging into Mid Caps in the selected sectors the medium term – Primarily wealth creators NICHE PLAYERS ● RoCE (used to evaluate companies) – Emphasis on operating efficiency ● High RoE ● Earnings Yield > Cost of Capital COMPANIES LIKELY TO GENERATE CASH SURPLUSES Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 9 Sundaram BNP Paribas Asset Management
  10. 10. Process at work A member of www.sundarambnpparibas.in 10 Sundaram BNP Paribas Asset Management
  11. 11. Investment Process: At Work Early entrant into engineering & construction sector stocks Structural changes in textiles • Upturn in investment cycle • Capital support for modernization • Excess capacities created in mid-90s • Consolidation in the industry exhausted • Removal of quotas • Government’s emphasis on infrastructure Earliest to spot the turn in sugar price cycle Real estate • Rise in domestic consumption • Rising demand for residential and commercial space • Tight supply trends • Liberal norms for FDI investment • Shift to ethanol • SEZ • Lack of appropriate value for land banks Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 11 Sundaram BNP Paribas Asset Management
  12. 12. Prime picks when not fancied IVRCL Vardhman Spinning Construction Textiles Gammon Raymond Thermax Maharashtra Seamless Engineering Metals ABB Jindal Steel Balrampur Chini Unitech Sugar Real Estate Bajaj Hindustha Ansal n Properties This is an illustrative list Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 12 Sundaram BNP Paribas Asset Management
  13. 13. Prime picks when not fancied Container Tata Corp Chemicals Logistics Chemicals Blue Dart India Glycols Sundaram Clayton UTI Bank Auto Small-Sized Components Banks Bharat Karur Vysya Forge Bank Godrej RCF Consumer Consumer Fertilisers Products Emami Indo Gulf This is an illustrative list Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 13 Sundaram BNP Paribas Asset Management
  14. 14. Key player in the Asset Management process ● The Risk Management team ensures effective risk control for investors of the funds managed by the AMC ● Investment Risk: Assignments – Market risk : Identification, measurement and control of market risks – Credit risk : Maintenance and control of limits according to Credit Committee, risk measurement – Valuation risk : Mark to Market : Definition of processes and methodologies – Support to investment management area : Risk analysis, Performance Analysis – Risk information to other area – Risk control of new products parameters and risk disclosures ● The objective of the risk management process is to monitor and measure the risks of portfolio construction, diversification and holdings, and their contribution to the overall risk profile of each fund, with clear definitions of process and procedures ● Managed by an independent team, risk management is an integral part of the investment process ● To perform risk analysis, Market and Credit Risk team is using third-party, as well as proprietary tools Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 14 Sundaram BNP Paribas Asset Management
  15. 15. Risk management A clear risk organisation Managing Director Risk Officer Risk Committee Compliance Officer Monitor internal risk budget Establish risk policy Govern internal control Measure performance Evaluate performance Compliance monitoring Analyze funds’ risk Review major risk factors Review legal documents Review of new products risk Confirm risk action plan New product filings BNPP AM New Markets Monthly Meeting Global Compliance Officer Share risk policy • With BNPP AM New Markets CIO, Report risk factors on a regular CRO and BNPP AM Strategist basis Discuss investment strategy & On site review, when and performance and review risk where necessary Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 15 Sundaram BNP Paribas Asset Management
  16. 16. Profile of Fund Managers A member of www.sundarambnpparibas.in 16 Sundaram BNP Paribas Asset Management
  17. 17. The fund management team Satish Ramanathan CFA as Head of Equity, plays a vital role in the management of all equity portfolios of Sundaram BNP Paribas Mutual Fund. He is fund manager for the following Sundaram BNP Paribas funds: Select Mid Cap, Tax Saver, Equity Multiplier, Select Small Cap, Entertainment Opportunities and Balanced Fund. Satish, a Chartered Financial Analyst, is an engineering graduate from IIT Chennai and completed his MBA from Texas A&M University. Satish joined Sundaram BNP Paribas Asset Management in April 2007. He brings rich background with experience of more than a decade-and-half in research and fund management with stints at Sundaram BNP Paribas, ICICI Securities and Franklin Templeton. K. Ramkumar is the Head of Fixed Income. He has followed the course of the Indian economy and facets that impinge on fixed-income securities market closely for more than a decade-and-half. Ramkumar manages Flexible Fund – Short Term Plan, Flexible Fund – Flexible Income Plan, Bond Saver, Monthly Income Plan and Value Plus. He shares the responsibility for managing Ultra Short-Term Fund & Fixed-Term Plans. He is a science graduate from Madras University and a Cost Accountant. He is a Certified Associate of Indian Institute of Bankers and has done Diploma in Business Finance from the ICFAI, Hyderabad. His prior experience includes 12 years with UTI Mutual Fund and 4 years with SBI Funds Management. Srividhya Rajesh is the portfolio manager for Sundaram BNP Paribas Select Focus and Sundaram BNP Paribas Capex Opportunities Fund. She has been with Sundaram BNP Paribas since 1996 and brings rich experience to research and fund management, having tracked markets across phases. Srividhya Rajesh is a CFA Charter Holder and a management graduate from BITS Pilani. She has also done specialized courses in equity research & financial applications from ICFAI. A two-year stint at the broking arm Kotak Mahindra opened a window to the equity markets. Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 17 Sundaram BNP Paribas Asset Management
  18. 18. The fund management team S Krishnakumar has over the past year moved exclusively into fund management after heading the research team at Sundaram BNP Paribas Asset Management. His experience in tracking the mid- and small-cap space is a significant skill set having started in the 1990s, long before they came into prominence. Krishnakumar manages the S.M.I.L.E Fund (Small & Medium Indian Leading Equities) and Energy Opportunities. He is an engineer from the highly reputed Regional Engineering College, Trichy (now National Institute of Technology); he has an MBA from LIBA, Chennai. He has an experience more than 15 years. Before joining our fund house, he was Vice President (Research) at Anush Shares & Securities, a Chennai-based brokerage. Rahul Pal tracks the economy (local and global) and fixed-income markets closely to eke out opportunities for value creation. He manages the following Sundaram BNP Paribas Funds: Money Fund, the fixed-income portfolio of Balanced Fund and shares the responsibility for managing the portfolios of Ultra Short-Term Fund & Fixed- Term Plans. Rahul brings the expertise of having tracked different phases of the economy and markets in India in a short span of eight years. Rahul is a Chartered Accountant. A three-year stint at IDBI Treasury provided an apt learning ground on the intricacies of fixed-income market. Rahul then joined Sundaram BNP Paribas Asset Management with an active role in fund management J Venkatesan has being with Sundaram BNP Paribas Asset Management as fund manager for more than three years now. He has more than two decades experience in tracking financial markets in India. He manages the following Sundaram BNP Paribas Funds: Growth, India Leadership, Rural India and Financial Services Opportunities. He is a Cost Accountant and a Post-Graduate in Commerce. A seven-year stint at Canara Bank was followed by a shift to the asset management industry through Canbank Mutual Fund (now Canara Robeco). With a rich experience of close to ten years in fund management, he joined Sundaram BNP Paribas Asset Management in January 2006. Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 18 Sundaram BNP Paribas Asset Management
  19. 19. Disclaimer The disclosures, disclaimer and risk factors highlighted on this page are also available at www.sundarambnpparibas.in. A reference to this disclosures & disclaimer page may also be appended as a hyper-link to e-mails sent on behalf of Sundaram BNP Paribas Asset Management and this page at www.sundarambnpparibas.in can be accessed by clicking on the hyperlink appended to such e-mails. If you reach this page at www.sundarambnpparibas.in through a hyperlink contained in a communication issued by Sundaram BNP Paribas Asset Management, this page must be treated an integral part of that communication. Please note his page contains important information that you must read. Past performance may or may not be sustained in future. Past performance is no guarantee of future result. Mutual Fund Investments are subject to market risks. Please read the offer document carefully before investing. For more details on fund-specific features, detailed risk factors and information on Sundaram BNP Paribas Asset Management, please read the Offer Document and/or visit www.sundarambnpparibas.in. Copy of the offer document, key information memorandum and application form may also be obtained from the offices / investor service centres of Sundaram BNP Paribas Asset Management, its distributors and online. General Risk Factors: All mutual funds and securities investments are subject to market risks, and there can be no assurance or guarantee that fund's objectives will be achieved. NAV may go up or down, depending on the factors and forces affecting the securities market. Main types are market risk, liquidity risk, credit risk and systemic risks. At times, liquidity of investments may be impaired. There is uncertainty of dividend distribution and risk of capital loss. Past performance of the Sponsor/Asset Management Company/Fund does not indicate the future performance. Investors in the schemes are not being offered any guaranteed or indicated returns. The names of the schemes do not in any manner indicate either quality or future prospects and returns. Statutory: Mutual Fund: Sundaram BNP Paribas Mutual Fund is a trust under Indian Trusts Act, 1882 Sponsors (Liability is limited to Rs 1 lakh): Sundaram Finance Ltd & BNP Paribas Asset Management. Investment Manager: Sundaram BNP Paribas Asset Management Company Ltd. Trustee: Sundaram BNP Paribas Trustee Company Ltd. General Disclaimer: This document in the Disclaimer/Disclosures page) is issued by Sundaram BNP Paribas Asset Management, an investment manager registered with the Securities and Exchange Board of India in India and is produced for information purposes only. It is not constitute a prospectus or offer document or an offer or solicitation to buy any securities or other investment. Information and opinion contained in this document are published for the assistance of the recipient only; they are not to be relied upon as authoritative or taken as a substitution for exercise of judgment by any recipient. They are subject to change without any notice and not intended to provide the sole basis of any evaluation of the instrument discussed or offer to buy. It is neither a solicitation to sell nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or be taken as investment advice. The information and opinions contained in this communication have been obtained from sources that Sundaram BNP Paribas Asset Management believes to be reliable; no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. Sundaram BNP Paribas Asset Management neither guarantees its accuracy and/or completeness nor does it guarantee to update the information from time to time. This communication is for private circulation only and for the exclusive and confidential use of the intended recipient(s) only. Any other distribution, use or reproduction of this communication in its entirety or any part thereof is unauthorized and strictly prohibited. By accepting this document you agree to be bound by the foregoing limitations. This communication is for general information only without regard to specific objectives, financial situations and needs of any particular person who may receive it and Sundaram BNP Paribas Asset Management is not soliciting any action based on this document. Sundaram BNP Paribas Asset Management in the discharge of its functions, may use any of the data presented in this document for its decision-making purpose and is not bound to disclose the same. Copies of the offer document and application form with key information memorandum may be obtained from the offices of Sundaram BNP Paribas Mutual offices and its authorized distributors or downloaded from www.sundarambnpparibas.in . For scheme specific risk factors, asset allocation, load structure, fund facts and taxation aspects please refer offer documents available online and at branches/Investor Service Centres Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 19 Sundaram BNP Paribas Asset Management
  20. 20. Contact us SMS: SFUND to 56767 Toll Free: 1800-425-1000 www.sundarambnpparibas.in Call: 044 28578700 E-mail:service@sundarambnpparibas.in Sundaram BNP Paribas Tax Saver www.sundarambnpparibas.in 20 Sundaram BNP Paribas Asset Management

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