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ICICI Prudential Global Stable Equity Fund presentation

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ICICI Prudential Global Stable Equity Fund presentation

  1. 1. NFO Period: Aug 27, 2013 to Sep 10, 2013 Global StableGlobal Stable An Open Ended Fund of Funds Scheme E Q U I T Y F U N D Fundamentally Strong Diversification Benefits Dividends Global Stable Equities Global Businesses Consistent Earnings
  2. 2. Contents Why invest outside India?1 Is it a good time to invest in developed world equity?2 The product – ICICI Prudential Global Stable Equity Fund3 2
  3. 3. WHY INVEST OUTSIDE INDIA? 3
  4. 4. Perspectives on Global investing 4 Asset Class Perspective Currency Perspective Business Access Perspective Country Risk Perspective
  5. 5. 5 • Indian equities have shown extreme performance in recent past. • Like Indian equities, global equities as an asset class, offer investment opportunities. CY2006 CY2007 CY2008 CY2009 CY2010 CY2011 CY2012 Jan–July 2013 India India UK India Sweden US India Japan Sweden Germany Canada Sweden India UK Germany US Germany Australia Swiss Netherland Germany Japan Swiss Australia Canada US Australia US Swiss France Netherland Australia Canada Canada Netherland Netherland France Netherland Sweden Canada Australia UK Swiss US France US UK Australia Swiss Sweden Canada UK France Netherland Sweden US France Netherland France Japan UK France France Australia US Swiss Germany Swiss Swiss Germany Sweden Germany UK Sweden Netherland Germany Japan Japan UK Canada Japan Japan India Japan Australia India Canada India India India UK India Sweden US India Japan Sweden Germany Canada Sweden India UK Germany US Germany Australia Swiss Netherland Germany World Avg Japan Swiss Australia Canada US Australia US Swiss France Netherland World Avg World Avg Australia Canada Canada Netherland Netherland World Avg France Netherland Sweden World Avg World Avg Canada Australia UK Swiss US France US UK Australia Swiss Sweden Canada UK World Avg France Netherland Sweden US France Netherland France Japan UK France France World Avg Australia US Swiss Germany Swiss Swiss Germany Sweden Germany UK Sweden Netherland Germany Japan Japan UK Canada Japan Japan India Japan Australia India Canada India Better Performing Worse Performing Source: Bloomberg, The ranking is based on equity market performance which is calculated using individual MSCI Country & World Indices Winners keep rotatingAsset Class Perspective
  6. 6. Source: Bloomberg, Data as on 31/07/2013 6 Have Indian investors diversified? • Indian equity represents ~2% of the world’s equity assets! • The size of the untapped pool for Indian investors is too large to ignore 35.9% 7.7% 6.3%5.3% 5.6% 3.4% 5.4% 3.0% 2.5% 2.2% 20.9% Countrywise share of World Market Cap US Japan UK China Hong Kong Canada France Germany Switzerland Australia India Others < 2% 35.9% 7.7% 6.3%5.3% 5.6% 3.4% 5.4% 3.0% 2.5% 2.2% 1.8% 20.9% Asset Class Perspective
  7. 7. 7 Source: Bloomberg. Correlation is a statistical measure of how two securities/indices move in relation to each other. Correlation is on returns for period from 01/01/2003 to 31/07/2013. Returns are calculated using MSCI Country & World Indices. Low correlation • Investment in Global equities compliments Indian equities by offering low correlation and diversification benefits 0.42 0.28 0.37 0.41 0.40 0.29 0.41 0.40 0.43 0.41 0.40 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Correlation of Daily Returns with Indian Equities 0.42 0.28 0.37 0.41 0.40 0.29 0.41 0.40 0.43 0.41 0.40 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 Asset Class Perspective
  8. 8. • Trade point of view: Currency of a high growth country tends to depreciate, as rising incomes lead to demand for foreign goods and hence demand for foreign currency (USD) • Economic point of view: Currency of a high inflation economy tends to depreciate as it erodes purchasing power and the same (imported) goods cost more • Flow point of view: Currency of a country having low/negative real interest rate tends to depreciate as funds flow from low real rate to high real rate economies 8Source: Bloomberg, Data as on 31/07/13 Weakening INR is structural and fundamental 0 10 20 30 40 50 60 70 INR INR/USD Jul-73 Jul-77 INR Jul-81 Jul-85 Jul-89 Jul-93 Jul-97 Jul-01 Jul-05 Jul-09 Jul-13 Currency Perspective
  9. 9. 9 Businesses not available in India • Does Indian equity market offer the avenue to invest in a company which runs the world’s largest chain of discount stores? • Can you invest in the world’s largest social network company which is part of the Fortune 500 list? • Would you want to invest in the world’s largest software company, but don’t know how to invest, since it is not listed in India? • Do you think that use of computers will proliferate and microchip stocks will gain, but don’t know how to take exposure to the world’s largest microchip company? • Looking at the global spends on defense, do you think companies in defense and aerospace would do well, but don’t know how to invest in such companies? Business Access Perspective
  10. 10. Source: Jefferies, Data as on 31/07/2013. The above is not an exhaustive list of risks. 10 India has inherent risks which need to be addressed • Risk of high Current Account Deficit • Risk of eroding purchasing power • Risk of high dependence on energy import bill • Political and economic risks Allocation to multi-currency assets helps mitigate most of these risks -4 -3 -2 -1 0 1 2 3 4 5 6 -40 -20 0 20 40 60 80 100 India's Current Account Balance CAD (in USD bn) CAD (as % of GDP)- RHS -4 -3 -2 -1 0 1 2 3 4 5 6 -40 -20 0 20 40 60 80 100 USD bn % of GDPIndia's Current Account Balance CAD (in USD bn) CAD (as % of GDP)- RHS Country Risk Perspective
  11. 11. IS IT A GOOD TIME TO INVEST INTO DEVELOPED WORLD EQUITY? 11
  12. 12. Source: Bloomberg, EU – European Union, Data as on 31/07/2013 • Major global economies and regions are experiencing improving growth • A falling unemployment rate augurs well for economic outlook for these global majors Economic Fundamentals 12 US, 7.4 UK, 7.8 Japan, 3.9 Switzerland, 2.9 Canada, 7.1 0 2 4 6 8 10 12 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12 Jul-13 Unemployment Rate (%) US, 7.4 UK, 7.8 Japan, 3.9 Switzerland, 2.9 Canada, 7.1 0 2 4 6 8 10 12 Unemployment Rate (%) EU, -0.3 -20 -15 -10 -5 0 5 10 15 US, 1.7 UK, 1.4 GDP Growth (% QoQ) Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12 Jul-13 Japan, 4.1
  13. 13. Sentiment 13Source: Bloomberg, EU – European Union, Data as on 31/07/2013 • Buoyancy in consumer confidence, which has shown improvement from its 2008 lows, could improve demand and aid faster recovery • Purchasing managers seemed to be more positive on the economic outlook Purchasing Managers Index (Range 1 to 100) US, 52.3 UK, 54.6 EU, 50.3 Japan, 50.7 0 10 20 30 40 50 60 70 80 90 100 Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13 Consumer Confidence Index 0 20 40 60 80 100 120 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 -120 -100 -80 -60 -40 -20 0 US (LHS) Japan (LHS) Euro Zone (RHS)
  14. 14. • Contrary to popular perception that less growth potential is the “new normal”, US corporate profits are in line with previous trends • The so called deleveraging US consumer is spending even more than in 2007 Corporate Health and Consumer Spending in US 14Source: Citi Research. Data as available on 31/07/2013 US Corporate Profits Real Personal Consumption Expenditures (SAAR, Bil.Chn.2005$)
  15. 15. • Most global equities offer higher dividend yields vs G-sec indicating valuations are still attractive after the recent run-up • Markets like US are outperforming traditional high beta markets like EM due to the ability to generate high Free Cash Flow margins Valuation 15Source: Citi Research. Data as available on 31/07/2013 Government Bond Yield vs Equity Dividend Yield Global Non-Financial Listed Companies Free Cash Flow
  16. 16. Is past performance an indication of future? • In a Post-crisis world a repetition of large out performance may be less likely • Since economies experience cycles of out & under performance, global exposure has its merits 16Source: J.P. Morgan, FactSet, and Dataquery 402.6% 200.4% 174.6% 95.9% 33.7% -12.4% 97.7% 6.1% -7.6% 25.5% -2.7%-50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% Since Jan 2003 Since Jan 2004 Since Jan 2005 Since Jan 2006 Since Jan 2007 Since Jan 2008 Since Jan 2009 Since Jan 2010 Since Jan 2011 Since Jan 2012 Since Jan 2013 Market Performance of Major Economies as on July 31, 2013 World US Japan UK France Australia Sweden India 402.6% 200.4% 174.6% 95.9% 33.7% -12.4% 97.7% 6.1% -7.6% 25.5% -2.7% 50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% Since Jan 2003 Since Jan 2004 Since Jan 2005 Since Jan 2006 Since Jan 2007 Since Jan 2008 Since Jan 2009 Since Jan 2010 Since Jan 2011 Since Jan 2012 Since Jan 2013 Market Performance of Major Economies as on July 31, 2013 World US Japan UK France Australia Sweden India
  17. 17. 17 Global Stable Equity FundGlobal Stable Equity Fund An Open Ended Fund of Funds Scheme The Product • Long term wealth creation solution • An open-ended fund of funds scheme that seeks to provide adequate returns by investing in the units of one or more overseas mutual fund schemes, which have the mandate to invest globally * Investors should consult their financial advisers if in doubt about whether the product is suitable for them. HIGH RISK (BROWN) This product is suitable for investors who are seeking*: (BLUE) investors understand that their principal will be at low risk (YELLOW) investors understand that their principal will be at medium risk (BROWN) investors understand that their principal will be at high risk Note: Risk may be represented as:
  18. 18. The Product Structure 18 INDIA LUXEMBOURG GLOBALLY Investor Global Equities ICICI Prudential Global Stable Equity Fund (IPGSEF) Nordea1 - Global Stable Equity Fund - Unhedged (Referred to as ‘Underlying Fund’)
  19. 19. • What it intends to achieve? – Seeks to invest in stable companies globally • with a view to outperform the market over a full market cycle • with roughly two-thirds the volatility of the MSCI World Index* • How it aims to achieve this? – “Stability”: Seeks to identify universe of lower risk, stable companies based on fundamental factors – “Surprise Radar”: Validate that the above analysis which is based on historical factors, can be expected to maintain its relevance in the future – Utilize proprietary valuation models to identify attractively valued stocks and construct a 100-120 stock portfolio The Underlying Fund: Investment Overview 19* Excess return and volatility numbers are only targets. There is no guarantee that these targets will be achieved.
  20. 20. 20 Stocks often behave like people… ……the more successful and popular they are the more ups and downs they experience in their lives. Stress is guaranteed, but not a happy ending! The Underlying Fund: The Philosophy
  21. 21. How does the fund pick stable return equities? • Concentrate on absolute performance • Look for ordinary “boring stories” • Stable management • Stable business model • Stable profits 21 The alternative – stable return equities The Underlying Fund: The Philosophy Often unattractive when measured against a benchmark but appealing from an absolute return standpoint
  22. 22. The Underlying Fund: What are stable equities? 22 1 Earnings before interest, taxes, depreciation and amortisation.� 2 A valuation figure calculated as a company's current share price divided by its earnings per share. A stable price performance alone is not enough The Fund looks for as low a price volatility as possible Past volatility may provide information on future volatility! P/E = Price-earnings ratio2 A high ratio can give rise to high risks. The Fund looks for companies with a stable earnings and dividend trend Financial variables can be smoothed out. The Fund therefore looks for stability in transparent variables such as cashflow and EBITDA1 Price = Earnings * P/E ratio Broad Basis: The stability analysis takes in a total of five criteria: Price, Earnings, Dividends, EBITDA and Cashflows
  23. 23. The Underlying Fund: Investment Process 23 4th step 3rd step 1st step Quarterly Stable Equities Portfolio (100-120 stocks) •3100 Stocks Data Integrity Screens Quarterly Liquidity Screens Stability Screens Valuation Screens & Fundamental verification Weekly Quarterly Risk control 5000+ stocks 3,600 3,000 350 2nd step 4th step 3rd step 1st step Quarterly Stable Equities Portfolio (100-120 stocks) •3100 Stocks Data Integrity Screens Quarterly Liquidity Screens Stability Screens Valuation Screens & Fundamental verification Weekly Recurringprocess Quarterly Risk control 5000+ stocks 3,600 3,000 350 2nd step2nd step Daily
  24. 24. The Underlying Fund: Holdings 24As on July 31, 2013 Country Weight United States 55.42 Japan 9.24 United Kingdom 8.19 France 5.91 Switzerland 4.22 Canada 4.04 Spain 3.09 Others 8.40 Net Liquid Assets 1.49 Total 100.00 Sector Weight Health Care 26.03 Information Technology 13.17 Consumer Staples 12.91 Telecommunication Services 9.00 Energy 8.10 Financials 7.76 Consumer Discretionary 7.54 Utilities 7.16 Others 8.33 Total 100.00 Top 10 Securities Weight Microsoft 2.66 KDDI 2.52 Aflac 2.30 Novartis 2.28 Wal-Mart Stores 2.27 Chevron 2.22 Total Petrochemicals 2.21 Vinci 2.20 Stryker 2.19 Johnson & Johnson 2.15
  25. 25. The Underlying Fund: Sector changes overtime 25As on July 31, 2013 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Sector Distribution Financials Energy Utilities Info Tech Health Care Cons Staples Cons Disc Telecom Services Industrials Materials Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011 Jul 2011 Jan 2012 Jul 2012 Jan 2013 Jul 2013
  26. 26. IPGSEF: Investment Overview 26 • An open ended Fund of Funds scheme • The scheme will primarily invest in • units/shares of Nordea 1 - Global Stable Equity Fund - Unhedged (N1-GSEF-U) • and/or any other overseas mutual fund schemes • Benchmarked against the MSCI World Net Return Index • Investment expertise of Nordea Investment Fund S.A. managing the “Stable Returns” strategy since 2006
  27. 27. 27 IPGSEF: Investment Overview India Day T 9.00 AM –3.00 PM (IST) Investors submit request for purchase or redemption of units at official acceptance points India Day T+5 9.00 AM –3.00 PM (IST) Monies for redemption request will be credited to Investor Account post conversion into INR India Day T and T+1 Before 7.00 PM (IST) Based on availabled funds / investment report, the fund manager shall place purchase / sell order with Nordea India Day T+3 and T+4 9.00 AM –3.00 PM (IST) Settlement of deals based on the purchase / sell trade executed. FX rate will be fixed by the FM for sell orders on receipt of USD in our account (T+4) and accordingly funds will be wired from USD account to INR account India Day T+2 9.00 AM –3.00 PM (IST) FX rate will be fixed by the FM for purchase orders and accordingly funds will be remitted to the custodian for wire to USD account
  28. 28. Scheme Features Options Direct Plan – Growth Option; Direct Plan – Dividend Option; Regular Plan – Growth Option; Regular Plan – Dividend Option Dividend payout and reinvestment facility available Minimum Application Amount Rs 5,000 (plus in multiple of Re.1) Minimum Additional Rs 1,000 (plus in multiple of Re.1) Application Amount Minimum Redemption Amount Rs. 500 (plus in multiple of Re. 1) Entry Load Not Applicable Exit Load For redemption/switch-out of units upto 3 months (including the last day of the third month) from the date of allotment For redemption/switch-out of units after 3 months but before 18 months from the date of allotment For redemption/switch-out of units after 18 months from the date of allotment Nil Benchmark Index MSCI World - Net Return Index 3% of the applicable NAV 1% of the applicable NAV 28 Note: Investors may please note that they will be bearing the expenses of this Scheme in addition to the expenses of the underlying Schemes in which this Scheme makes investment.
  29. 29. Disclaimers Disclaimer: ICICI Prudential Asset Management Company Limited (the AMC) has used information that is publicly available, including information developed in-house. Some of the material used in the document may have been obtained from members/persons other than the AMC and/or its affiliates and which may have been made available to the AMC and/or to its affiliates. Information gathered and material used in this document is believed to be from reliable sources. The AMC however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party in this material no such party will assume any liability for the same. All recipients of this material should before dealing and or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice and carefully read the scheme information document. 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, the performance of the financial markets in India and globally, changes in domestic and foreign laws, regulations and taxes and changes in competition in the industry. All data/information used in the preparation of this material is dated and may or may not be relevant any time after the issuance of this material. The AMC takes no responsibility of updating any data/information in this material from time to time. The sector(s)/stock(s)/companies referred in this document do not constitute any recommendation of the same and underlying Scheme (viz. N1-GSEF-U) may or may not have any future position in these sector(s)/stock(s)/ companies. Past performance may or may not be sustained in the future. Investors may note that currently, the Scheme intends to invest in the units/shares of Nordea 1 – Global Stable Equity Fund – Unhedged (N1 – GSEF - U). The Scheme may also invest in one or more other overseas mutual fund schemes, with similar investment policy / fundamental attributes and risk profile and is in accordance with the investment strategy of the Scheme. Investors are requested to refer the SID of the Scheme for detail. The AMC (including its affiliates), the Mutual Fund, the trust and any of its officers, directors, personnel and employees, shall not be liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The recipient alone shall be fully responsible/are liable for any decision taken on this material. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. 29
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