The document describes the DSP Dynamic Asset Allocation Fund, which dynamically manages allocation between equity and debt based on an assessment of equity market attractiveness. The fund uses a two-factor model incorporating fundamental and technical signals to determine a core equity allocation ranging from 20-90%, with the remainder allocated to arbitrage and debt. Back-tested performance shows the model achieved higher returns per unit of risk compared to the Nifty 50 TRI over various time periods while also reducing volatility. The document outlines the investment process and efficacy of the model in participating in bull markets while limiting downside in bear markets.
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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%
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.