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DSP Equity Savings Fund
1. [Title to come]
[Sub-Title to come]
Strictly for Intended Recipients Only
Date
* DSP India Fund is the Company incorporated in Mauritius, under which ILSF is the corresponding share class
DSP EQUITY SAVINGS FUND
An open ended scheme investing in equity, arbitrage and debt.
2. 2
Core Beliefs of Equity Fund Manager
The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by
the scheme and the same may change in future depending on market conditions and other factors.
3. 3
What The Fund Manager Will Try To Avoid
• Chase every theme
• Run a small-cap/micro-cap heavy portfolio
• Run a 50+ stock portfolio
• Think relative to benchmark
• Ignore quality of earnings
• Investing in IPOs
• Be excessively fearful of mistakes of omission
• Buy stocks at high valuation multiples based on high (projected) growth
The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by
the scheme and the same may change in future depending on market conditions and other factors.
4. 4
DSP Equity Savings Fund
Targeting
Lower
Drawdown
s
Limiting
Risk of
Permanent
Loss of
Capital
Counter
Cyclical
Approach
Focus on
Absolute
Return
Multi-Asset
Portfolio
Seeking
Returns
Higher of
Benchmark
or Inflation
DSP Equity
Savings
Fund
The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by
the scheme and the same may change in future depending on market conditions and other factors.
5. 5
What is DSP Equity Savings Fund (ESF)?
Source: Internal.
DSP Equity Savings Fund seeks to provide capital appreciation with lower volatility
Majority of the time between 35% - 40%
Can be taken up 55% in case broad Equity
Indices are trading below historical averages
– typically after a crash
Typically, close to 30%
Typically, close to 30%
1-to-3-year duration, sovereign +
AAA
Net Long Equity
20%-55%
Cash Future
Arbitrage
10%-55%
Debt
10%-35%
(INVIT/REITS 0% to 10%)
Gross equity exposure:
>65%
Equity Taxation
The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by
the scheme and the same may change in future depending on market conditions and other factors.
6. 6
Long Only Equity
Source: Internal.
• Long Equity (Ex of Arbitrage) is maintained between 35% & 40% for majority of the time.
• The fund is enabled to take this exposure to 55% primarily in event of a crash when broad
Equity Indices are trading below historical averages.
• This incremental exposure is expected to be trimmed down to usual range of 35% - 40% as
the markets recover.
The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by
the scheme and the same may change in future depending on market conditions and other factors.
7. 7
Equity Hedging
Source: Internal.
• Out of the money put options are used, based on a systematic strategy, to hedge the long equity.
• The degree of hedging is primarily determined by how expensive markets are (hedge more
if markets are expensive, less when they are not, no hedging if markets are cheap and risk
return equation is favorable).
• Hedges:
• Enable to have constant long equity exposure of 35% to 40%.
• Potential to reduce large falls in NAV in case of a sharp fall in markets.
The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by
the scheme and the same may change in future depending on market conditions and other factors.
8. 8
Equity Hedging
• OTM (Out of the Money) NIFTY Index Put options are used to hedged equity portion. The number of PUT
options (hedging ratio) is dependent on market valuations and momentum.
• Illustration (actual numbers could be different)
• Assumptions: 1) 5% OTM Nifty PUT option is used to hedge 2) Equity Portfolio Return is similar to Nifty
3) The PUT costs 0.5%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
19.5%
14.5%
9.5%
4.5% -0.5%
-5.5% -5.5% -5.5% -5.5% -5.5% -5.5%
Nifty 1M
Return
(F&O
Expiry to
Expiry)
20% 15% 10% 5% 0% -5% -10% -15% -20% -25%
Unhedged Portfolio Return Hedged Portfolio Return
Disclaimer: The above graph is just for illustration purpose and based on assumptions. Actual scenario could be different and based on
many factors. There is no assurance of any returns/capital protection/capital guarantee to the investors in this scheme or fund.
The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by
the scheme and the same may change in future depending on market conditions and other factors.
9. 9
When will Hedges be Ineffective?
1. When portfolio significantly underperforms the Index
• The hedges will protect only to the extent the Index falls. If the portfolio crashes while
Index is stable the hedges would be ineffective.
2. If there is slow and steady fall in Index
• If for example the index falls about 3% every month the puts might not provide much
protection because every month we roll over to a lower strike. The PUTs usually help in
case of sharp crashes to the extent of the hedged portfolio.
3. The Hedges can drag returns in up-trending markets
• The cost of hedges for 12 months ending July-2023 was 1.1%. Typically, in absence of
crashes we expected this cost to be close to 0.75% on average. The hedges can make up
for this drag in sharp crashes.
Back
Source – Internal. The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and
currently followed by the scheme and the same may change in future depending on market conditions and other factors.
10. 10
The Hedges Might Offer Protection In Case Of Sharp Falls
500
5000
Nifty 50 Index (Log Scale)
Past performance may or may not be sustained in future and should not be used as a basis for comparison with other investments.
There is no assurance of any returns/capital protection/capital guarantee to the investors in the Scheme. Source - NSE
Periods when hedges will be
effective
11. 11
What’s The Portfolio Construction Approach
• Intrinsic Value/Margin of Safety/Large Cap oriented portfolio of typically less than 30
stocks
Investment Framework Of Fund Manager
Valuation Framework Of Fund Manager
The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by
the scheme and the same may change in future depending on market conditions and other factors.
12. 12
Equity: Entry Process
Can the business be held for 10 years?
• It means at this point there is no reason to believe we might have to
sell before 10 years
• Does not mean we will necessarily continue holding for 10 years
Are the embedded valuations conservative?
• Is the stock available at a price where we can make “Inflation + ~10%”
even on conservative expectations of future growth & profitability
Yes
Yes
Is the downside low?
• In case of adverse business developments, is the downside limited?
• We are looking at loss in the intrinsic value of the business instead of
quoted value which could be volatile
Long Term Orientation,
Typically No Allocation to
Cyclicals
Value Bias
Value = Intrinsic Value -
Price
Absolute Return Approach
BUY
Since quality
companies are easier
to value due to
durability of their
business, predictability
of cash flows, and
lower tail risks they
usually form a large
part of the portfolio.
But the portfolio
generally has a Value
bias and may not have
Quality/Growth or
Momentum bias.
Entry will typically not
be from 30% of the
most expensive stocks
in the market (based
on our internal
quantitative
parameters)
Yes
The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by
the scheme and the same may change in future depending on market conditions and other factors.
13. 13
Equity: Exit Process
Source: Internal
Is a better risk return available elsewhere?
• The best reason to sell
Price factoring in overly aggressive assumptions?
• Is the stock expected to deliver < “Inflation + approx10%”
based on even aggressive assumptions of future growth
and profitability
Or
Was the Thesis Wrong?
• Has new information or business developments materially
changed the initial hypothesis
Or
More tolerant of over-valuation in exit decisions (to compensate for value bias in entry)
The investment approach / framework/ strategy / portfolio / other data mentioned herein are dated and currently followed by
the scheme and the same may change in future depending on market conditions and other factors.
14. 14
Performance Scorecard
Source: MFIE; Scheme Benchmark – Nifty Equity Savings Index. Returns are as on Jul 31, 2023 for Regular plan, Growth Option. Inception date – Mar 28,2016.
Refer Annexure for scheme performance of above Scheme in SEBI prescribed format and of other schemes managed by same Fund Managers. Past
performance may or may not sustain in future and should not be used as a basis for comparison with other investments. It is not possible to invest directly in
an index.
POINT-TO-POINT RETURNS
Time Period DSP Equity Savings Fund Nifty Equity Savings Index
1 Year 9.72% 10.07%
3 Year 11.88% 11.13%
5 Year 7.39% 8.87%
Since inception 8.16% 9.61%
15. 15
Portfolio Positioning
Source: Internal. Data as on Jul 31, 2023. The sector(s)/stock(s)/issuer(s) mentioned herein do not constitute any research report/recommendation of
the same and the scheme/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).
* Nifty Put options with Sep 2023 expiry with notional exposure of ~32% of total AUM
Equity, 35%
InvITs, 1%
Arbitrage, 33%
Put options*, 0.08%
Debt, 25%
Cash & Cash
Equivalents, 4%
Asset allocation as of 31 Jul 2023
Equity InvITs Arbitrage Put options* Debt Cash & Cash Equivalents
16. 16
Equity Portfolio Holdings
Source: Internal. Data as on Jul 31, 2023. The sector(s)/stock(s)/issuer(s) mentioned herein do not constitute any research
report/recommendation of the same and the scheme/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).
SECURITY NAME WEIGHTAGE
HDFC BANK LIMITED 4.57%
ICICI BANK LTD 3.83%
AXIS BANK LTD 2.91%
CIPLA LTD 2.21%
IPCA LABORATORIES LTD 1.79%
ITC LTD 1.77%
SBI LIFE INSURANCE CO LTD 1.69%
SUN PHARMACEUTICAL INDUS 1.52%
ALKEM LABORATORIES LTD 1.44%
HERO MOTOCORP LTD 1.40%
EUREKA FORBES LTD 1.34%
SAMVARDHANA MOTHERSON INTERN 1.26%
TECH MAHINDRA LTD 1.17%
OIL & NATURAL GAS CORP LTD 1.16%
ICICI LOMBARD GENERAL INSURA 1.12%
LUPIN LTD 1.03%
SBI CARDS & PAYMENT SERVICES 0.99%
ALEMBIC PHARMACEUTICALS LTD 0.96%
SHARDA CROPCHEM LTD 0.81%
COROMANDEL INTERNATIONAL LTD 0.80%
HCL TECHNOLOGIES LTD 0.54%
TEAMLEASE SERVICES LTD 0.53%
POWER GRID CORP OF INDIA LTD 0.37%
17. 17
Annexure – Performance of DSP Equity Savings Fund in SEBI prescribed format
Growth option considered
Fund Manager Managing
Since
Abhishek Singh May 2021
Kedar Karnik Jul 2021
Jay Kothari Mar 2018
18. 18
Annexure - Other funds managed by same fund manager
Data as on 31 Jul 2023. Regular plan growth option considered
19. 19
Annexure - Other funds managed by same fund manager
Data as on 31 Jul 2023. Regular plan growth option considered
20. 20
Annexure - Other funds managed by same fund manager
Data as on 31 Jul 2023. Regular plan growth option considered
21. 21
Disclaimers & Product Labelling
This document is for information purposes only. In this material DSP Asset Managers Private Limited (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 statements contained herein may include statements
of future expectations and other forward looking statements that are based on prevailing market conditions / various other factors 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. While utmost care has been
exercised while preparing this document, the AMC nor any person connected does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses
and damages arising out of the use of this information. The recipient(s) before acting on any information herein should make his/their own investigation and seek appropriate
professional advice. The portfolio of the scheme is subject to changes within the provisions of the offer documents 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. The sector(s)/stock(s)/issuer(s) which are currently part of portfolio do not constitute any
research report/ recommendation of the same and scheme/ Fund may or may not have any future position in these sector(s)/ stock(s)/issuer(s). The investment approach /
framework/ strategy mentioned herein is currently followed by the scheme(s) and the same may change in future depending on market conditions and other factors. All
opinions and data included in this presentation are as on 31 Jul 2023 (unless otherwise mentioned) and are subject to change without notice. There is no assurance of any
returns/capital protection/capital guarantee to the investors in this scheme of DSP Mutual Fund. For scheme specific risk factors, load structure, Investment strategy, detailed
asset allocation structure and more details, please read the Scheme Information Document and Key Information Memorandum of respective scheme available on ISC of AMC and
also available on www.dspim.com. For Index disclaimer click here
Large-caps are defined as top 100 stocks on market capitalization, mid-caps as 101-250 , small-caps as 251 and above.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Scheme Product Suitability
Riskometer
DSP Equity Savings Fund Nifty Equity Savings Index
DSP Equity Savings
Fund
(An open ended scheme
investing in equity,
arbitrage and debt)
This Scheme is suitable for investor who are
seeking*
o Long term capital growth and income
o Investment 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
*Investors should consult their financial advisers if in doubt about whether the Scheme is suitable for them.