Investors often make the mistake of investing in mutual funds without fully understanding the implications of the investment. One common area where investors are confused is with regards to aggressively managed equity funds. They invest in these funds without realising their true nature. The confusion occurs because investors are unable to fathom what gives such funds that ‘aggressive edge’. In this note, we analyse the factors that set apart aggressively managed equity funds from other equity funds.
Aggressively managed equity funds can be differentiated by either the style of investing or the nature of the underlying investments. Broadly, equity funds draw their aggressive edge from the following factors:
1. Aggressive stock bets A diversified equity fund should hold no more than 40% of assets in the top ten stocks. This helps the fund counter stock market volatility more effectively. Aggressively managed funds usually have more than 40% of their assets in the top 10 stocks. So if you come across an equity fund with a concentrated stock portfolio that has more than say 60% of assets in the top 10 stocks, you can be sure it is managed aggressively. Even within the top 10 stock holdings, you are likely to observe that the first few stocks account for a substantial chunk. Finally, such an investment pattern is likely to be the norm, rather than an exception.
2. Aggressive sectoral/thematic bets Sometimes an equity fund may have around 40% of its assets in the top 10 stocks and this could mislead the investor into believing that it is conservatively managed. If the investor reaches this conclusion without evaluating the fund’s sectoral portfolio then this would be a mistake. For instance, an equity fund could have more than a fourth of its assets (i.e. 25% of assets) in a single sector. Or it could be heavily invested in just 2-3 themes, which collectively account for a large chunk of its portfolio. And all along the fund could be well-diversified in its stock allocations, leading investors to conclude that it is managed conservatively. While the truth is, it’s an aggressively managed fund by virtue of its sectoral/thematic allocations.
3. Aggressive portfolio churning Then there are equity funds that have reasonably diversified stock and sectoral portfolios, but are managed aggressively. This can be attributed to their investment strategy, which involves churning their portfolios aggressively to benefit from the hottest market trends. Given that these funds could have well-diversified stock/sectoral allocations, how can investors identify such funds? The secret lies in evaluating the funds on the risk parameter. Such funds usually perform adversely on Standard Deviation i.e. they will have a higher Standard Deviation, which implies increased volatility. Also, studying their portfolios over a period of time will reveal their penchant for frequently churning the portfolio.
4. Underlying investments Finally, you may see an equity fund that is well-diversified across stocks and sectors and pursues a relatively steady investment style (i.e. low portfolio churn), but is still classified as aggressive. The reason for this classification is its underlying investment, which is inherently risky. Within equities various investments have varying risk levels. For instance, large cap companies are relatively more stable because they have established track records (in sales and revenues among other parameters) and are more liquid. On the other hand, mid cap companies tend to be riskier because they are under-researched (compared to large caps) and their systems are evolving; moreover, mid caps can also be relatively illiquid. Therefore, mid cap stocks and mid cap funds are riskier investment propositions than large caps/large cap funds, for instance. Then there are investments in emerging sectors which don’t have an established track record as yet; also, information about such sectors isn’t freely available, thereby accentuating the risk profile of the investments.
The above list isn’t a comprehensive one and there could be several other factors that can contribute to making a fund, an aggressively managed one. From an investor’s perspective, the key lies in accurately understanding a fund’s nature and being unambiguously aware of the risk involved before making an investment decision.
Century SIP SIP with Free Life Insurance Cover upto 100 Times Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 1 Human Life Cycle Phase I Phase II Child’s Marriage Child’s Education Housing Child birth Marriage 22 yrs 38 yrs 10- 20 yrs Phase III Education Age- 22 yrs Earning Years Post Retirement Years Age- 60 yrs Page 2 Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Phase II – Most Challenging Phase Meet Current Recurring Expenses Taking Care of Child’s Needs Build Capital Assets like House & Car Make Provisions for Retirement Our family continues to have these financial needs, whether we survive or not… Hence we NEED, Investments + Insurance Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 3 Century SIP A complete solution Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 4 Unique Value Proposition Century SIP Free Life Insurance Cover Power of Systematic Investing Mutual Fund House of the Year* * Awarded by CNBC TV 18 – Crisil; Please refer to slide number 38 for awards methodology; Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 5 Free Life Insurance Cover • Century SIP - SIP with Free Life Insurance Cover • Cost of Insurance to be entirely borne by the AMC • Uniform Insurance Cover* • Year 1 – 10 Times the Monthly SIP Installment • Year 2 – 50 Times the Monthly SIP Installment • Year 3 onwards – 100 Times the Monthly SIP Installment • Limits above are subject to maximum coverage of Rs. 20 lakhs per investor • Life cover continues even if SIP stops • Wide Range of Age Group Covered • Minimum / Maximum Entry Age – 18 Years / Below 46 Years • Cover continues upto the age of 55 years • Investor just needs to sign a “Declaration of Good Health” • No additional documents or medicals are required; only a small questionnaire to be filled up * Subject to specified terms & conditions Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 6 Various Scenarios Century SIP SIP Continues SIP Stops Scenario SIP continues upto Maturity (55 y of age) Scenario SIP continuing & unfortunate event of death happens Scenario SIP discontinues before 3 years from the date of 1st installment Scenario SIP discontinues after 3 years from the date of 1st installment Life cover continues upto age 55 & ceases thereafter Nominee is paid the Sum Insured + the Fund Value Life cover ceases Life cover continues @ fund value* subject to maximum of 100 times Monthly SIP Installment Note – Insurance cover would cease , if investor redeems (fully / partially) or switch out (fully / partially) units before completion of the Century SIP tenure * Fund Value = Value of units, accumulated under Century SIP, at start of the each policy year. Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 7 Benefit to the Family Century SIP @ Rs. 5,000 pm Fund Value Unfortunate Event of Death at the end of year 5 Life Cover 500,000 500,000 Total Benefit to the Family 408,348 908,348 1,650,193 Unfortunate Event of Death 1,150,193 at the end of year 10 Rate of Return assumed @ 12% pa Computations - Internal Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 8 Offers Uniform Insurance Cover Uniform Life Cover through out Life cover paid in addition to the fund value Life cover continues even if SIP discontinues* You get covered when you need it the most i.e. AS YOU GROW OLD Life cover reduces with payment of the SIP installments Life cover proceeds goes to the AMC, towards payment of outstanding SIP installments Scenario – 10 Year SIP @ Rs.2,000 pm Installment Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 9 Century SIP vs. Others Features Sum Insured Max 10 lakhs Sum Insured (if SIP stops before maturity) Life Cover Proceeds (in case of pre mature death) Benefits to Nominee (in case of pre mature death) Minimum SIP Installment Entry Load Exit Load Exit Load (in case of pre mature death) Age Group Maximum Age upto which Cover is Available MinimumTenure Maximum Tenure Payment Options * Based on Published Information of other available SIPs Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 10 Other SIPs with Life Cover* Depends on tenure of SIP Century SIP Upto 100 times Monthly SIP installment Max 20 lakhs Cover continues, if SIP stops after 3 years, @ fund value, subject to maximum of 100 times monthly SIP installment Goes to the nominee Fund Value + Life Cover equivalent upto 100 times SIP installments Rs. 1,000 pm 2.25% 2% upto 3 years & Nil thereafter Nil 18 Y to less than 46 Y 55 Y 3 years 37 years ECS, Direct Debits & PDCs No insurance cover Goes to AMC towards payment of remaining SIP installments Fund Value + Life Cover equivalent to outstanding SIP installments Rs. 2,000 pm 2.25% 2% thru out the tenure of SIP 2% on Fund Value and also on Insurance amount 20 Y to less than 46 Y 55 Y 3 years 15 years ECS & Direct Debits Life Cover Continues even if SIP Discontinues Century SIP Other SIPs with Life Cover ~ SIP discontinues before 3 years from the date of 1st installment SIP discontinues after 3 years from the date of 1st installment SIP Discontinues Life cover ceases Life cover continues @ fund value* subject to maximum of 100 times monthly SIP installment Life cover ceases * Fund Value = Value of units, accumulated under Century SIP, at start of the each policy year ~ Based on Published Information of other available SIPs Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 11 Century SIP vs. Term Insurance Century SIP Free Life Cover No Individual Underwriting No Medical Tests Term Insurance Annual / Single Premium Individual Underwriting Medical Tests* Century SIP @ Rs. 5,000 pm Life Cover – Y 1 = Rs. 50,000; Y 2 = Rs. 250,000; Year 3 onwards = Rs. 500,000 Term Life Insurance Premium for Various Ages Features Year 1 Sum Insured Premium Payment Term~ Annual Premium^ Total Premium Rs. 50,000 1Y Rs. 210 Rs. 275 25 Y Year 2 Rs. 250,000 1Y Rs. 1,050 Rs. 1,375 35 Y Year 3 Rs. 500,000 28 Y Rs. 2,100 Rs. 58,800 45 Y Year 3 Rs. 500,000 18 Y Rs. 2,550 Rs. 45,900 Year 1 Rs. 50,000 1Y Rs. 255 Rs. 255 Year 2 Rs. 250,000 1Y Rs. 1,275 Rs. 1,275 Year 1 Rs. 50,000 1Y Rs. 383 Rs. 383 Year 2 Rs. 250,000 1Y Rs. 1,913 Rs. 1,913 Year 3 Rs. 500,000 8Y Rs. 30,600 Rs. 30,600 Total Savings Rs. 60,060 Rs. 47,430 Rs. 32,896 * May or may not be required; ^ Based on market estimates; ~ upto age 55 Savings with Century SIP Page 12 Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Total Savings with Century SIP Could be… Whopping Rs. 200,200* !!! * Refer to Annexure 1 for workings Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 13 A Million Dollar Question… Is Investing in Equity the Right Choice??? Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 14 Kal Aaj Aur Kal 1985 Balcony Ticket : Rs 15/- 2008 Balcony Ticket : Rs 240/- Inflation Meter: 13.43% p.a. Source & Computations - Internal Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 15 Kal Aaj Aur Kal 1985 Hotel Bill: Rs.100/- 2008 Hotel Bill: Rs 1,200/- Inflation Meter: 11.96% p.a. Source & Computations - Internal Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 16 Kal Aaj Aur Kal 1985 Petrol Price: Rs. 8 / L 2008 Petrol Price: Rs.52 / L Inflation Meter: 8.80% p.a. Source & Computations - Internal Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 17 Kal Aaj Aur Kal 1985 MBA Course: 40,000/- 2008 MBA Course: 8,00,000/- Inflation Meter: 14.59% p.a. Source & Computations - Internal Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 18 Kal Aaj Aur Kal Aapka Daily Budget Consider this… Price Of Toothpaste Masala Dosa 1 Kg of Sugar 1 Kg of Salt 1 Kg of Onions 1 Litre of Milk 1985 5 5 4 2 3 4 All Fig. in Rs. 2008 50 25 22 10 18 28 Source & Computations - Internal Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 19 Kal Aaj Aur Kal Salary Accountant Manager 1985 Rs. 5,000 pm Rs. 8,000 pm 2008 Rs.24,000 pm Rs. 40,000 pm Appreciation 7.39% p.a. 7.59% p.a. “Aamdani Athanni, Kharcha Rupaiyah” Source & Computations - Internal Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 20 How Do I BEAT Inflation??? Investing in Equity is Risky, but Not investing in Equity could be Riskier… Note - Graph above is for illustrative purpose only based on our perception Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 21 Equity – Best Performing Asset Class Cumulative annualized returns (1985-2006) Source - CLSA Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 22 Equity – Best Performing Asset Class Growth is a NEED, not an option You are loosing even your capital Cumulative annualized returns (1985-2006) Tax Inflation Source – CLSA; Tax @ 33.33% of FD Returns Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 23 BSE Sensex – 5 Years CAGR Returns Sensex has Given Positive Returns 22 Times out of 25 (25 periods between 31st Mar 1984 to 31st Mar 2008) Source – BSE India; Computations - Internal Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 24 Why SIP? Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 25 The Formula of Creating Wealth Start Early Invest Regularly Create Wealth Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 26 Start Early You • • • • • Current Age: 25 years Start: Today Invest: 5 years Amount: Rs 12,000 p.a. Redemption at age 60 years • • • • • Your Twin Current Age: 25 years Start: At age 30 Invest: 20 years Amount: Rs 12,000 p.a. Redemption at age 60 years Total Investment You – Rs. 60,000 Your Twin – Rs. 240,000 You start investing Your twin start investing You stop investing Your twin stop investing Age (in years) Rate of return assumed @ 15% pa; Source - Internal Delays could severely affect your wealth creation goals Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 27 Invest Regularly Illustration Rs.1000/- invested every month for 30 years Even small amounts invested regularly can grow substantially Source - Internal Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 28 Invest Regularly • It is the small drops that make an ocean • Relieves you of the last minute pressure • Slow and steady wins the race • E.g. Split your Sec 80C investments into smaller amounts and invest every month • Reduces the risk of investing at the wrong time • Difficult to predict the market and know when is the right time We earn regularly; We spend regularly Shouldn’t we also invest regularly? Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 29 Systematic Investing • Similar to a Recurring Deposit with a bank • Method of investing predetermined amounts of money regularly to benefit from the stock market volatility • Convenient and Hassle-Free • Automatic investments, one-time instruction, transactions on the net • Similar to PF : Small amount invested regularly to become a sizeable sum after some years • Light on the wallet • As low as Rs. 1,000/- per month Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 30 BSE Sensex – 10 Years SIP SIP @ Rs. 1,000 pm in BSE Sensex (10 Years starting 1st May 98) SIP Returns @ 23.93% Returns for Investments in Lump-sum @ 17.22% (As on 30th Apr 2008) Power of Rupee Cost Averaging Rs. 425,867 30-Apr-08 Source - MFIE Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 31 Power of Rupee Cost Averaging • • • Buying MORE units @ low prices & buying FEWER units @ high prices Helps AVERAGE out your purchase price Illustration: Month 1 2 3 4 5 6 Total Amount Invested (In Rs.) Rs. 1,000 Rs. 1,000 Rs. 1,000 Rs. 1,000 Rs. 1,000 Rs. 1,000 Rs. 6,000 Unit Price No. of Units (In Rs.) Purchased 10.00 9.00 8.50 11.00 10.50 10.00 100.00 111.11 117.65 90.91 95.24 100.00 614.91 Equity investing is not about timing the market but time in the market Total Investment = Rs. 6,000 Value of Lump-sum Investment* = Rs. 6,000 Value of SIP Investment* = Rs. 6,149.10 * At the end of the 6th month Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 32 BSLAMC Top Performers Outperforming Benchmarks across Time Horizons NAV as on 30th Apr 08 (In Rs.) SIP Returns (%) Since Inception 36.25 26.34 42.40 37.97 39.48 26.34 37.66 26.34 Date of Inception / Date of 1st Installment 27-Aug-98 / 01-Oct-98 03-Oct-02 / 01-Nov-02 30-Aug-02 / 01-Oct-02 29-Mar-96 / 01-Apr-96 Scheme 1 Year 3 Years 5 Years Birla Sun Life Equity Fund (G) BSE 200 Birla Mid Cap Fund (G) CNX Mid Cap Birla Sun Life Frontline Equity Fund (G) BSE 200 Birla Sun Life Tax Relief 96 (D) BSE 200 84.91 230.01 -1.38 10.80 1.31 10.63 66.87 9.23 10.80 93.82 -5.75 10.80 28.44 29.02 28.50 27.75 32.48 29.02 26.61 29.02 41.97 33.24 39.69 34.83 37.69 33.24 33.40 33.24 Past performance may or may not be sustained in future. Load and Taxes are not considered for computation of returns. The data assumes the investment of Rs. 1,000/- on 1st day of every month or the subsequent working day. CAGR Returns are computed after accounting for the cash flow by using the XIRR method (investment internal rate of return). G – Growth & D - Dividend Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 33 Strong Industry Recognition 4 Fund Houses were eligible out of 26. Please refer to slide number 38 for awards methodology; Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 34 Other Features Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 35 Century SIP • • • Century SIP will be an optional feature Feature will be available with SIP investments in all equity schemes (open-ended) offered by the BSLAMC Minimum & maximum investments amounts: • Minimum investment – Rs. 1,000 pm • Maximum investment – There is no upper limit to the monthly installment. • Tenure of the SIP • 55 years less the current completed age of the investor • Load structure • Entry Load – 2.25% for purchase of units • Exit Load o o 2% if the units allotted under Century SIP are redeemed or switched out to another scheme before 3 years from the date of allotment; Nil thereafter In the unfortunate event of death of the investor, the nominee / joint holder may redeem the amount (fund value) without paying any exit load. Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 36 Life Insurance Cover • Eligibility criterions: Only individual investors, excluding Non Resident Indians & Persons of Indian Origin Minimum / Maximum Entry Age – 18 years / below 46 years Investors enrolling for investments thru Century SIP in designated schemes Investors signing genuine “Good Heath Declaration” and also providing their Date of Birth, Gender and Nominee details at the specified places in the application form • In case of joint holders in the scheme, only the first unit holder would be eligible for the insurance cover • • • • • • Commencement of the insurance cover The Insurance cover will start from the commencement of Century SIP. However, only accidental deaths will be covered for the first 45 days. • • • • When will the insurance cover cease* At the end of the tenure. i.e., upon completion of 55 years of age. Discontinuation of Century SIP installments within 3 years from the commencement of the same Redemption / switch-out (fully or partly) of units purchased under Century SIP before the completion of the Century SIP tenure • • • • Exclusions from the insurance cover Death due to suicide within first year of commencement of Century SIP Death within 45 days from the commencement of Century SIP installments except for death due to accident Death due to pre-existing illness, disease(s) or accident which has occurred prior to commencement of Century SIP * There will be no provision for revival of insurance cover, once ceased Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 37 Other Terms & Conditions • • • The Group Life Insurance Cover will be governed by the terms and conditions of the insurance policy with the relevant Insurance Company as determined by the AMC. Grant of insurance cover to any individual member shall be discretionary on part of Life Insurance Company. In case of death of the first unit holder, his / her legal representatives may file a claim directly with the designated branch of the Insurance Company supported by all relevant documents as required by the Insurer and the payment of the claim may be made to the legal representatives by the insurance company. All insurance claims will be settled in India and shall be payable in Indian Rupees only. Settlement procedure will be as stipulated by the Insurance Company. Insurance claims will be directly settled by the Insurance Company. There will be only one insurance cover linked to unique investor. This offer from the Insurance Company (with whom the AMC ties up) is being brought to the investors of the Scheme by the AMC on a best effort basis. The AMC will not be responsible or liable for maintaining service levels and/or any delay in processing claims arising out of this facility. The Mutual Fund, Trustees, AMC, or their Directors, officers or employees shall not be liable for any claims (including but not limited to rejection of any claim, non-settlement, delays etc.) arising out of the insurance cover provided to the unit holder. The Fund is bringing this offer to the investors of the Scheme only as an additional facility and is not acting as an agent for marketing/sales of insurance policies. Subject to what has been stated above, the AMC reserves a right to modify / annul the said Group Insurance Cover on a prospective basis. The AMC also reserves the right to change the insurance company from time to time. Charges of the insurance cover will be entirely borne by the AMC. Investors opting for Birla Sun Life Century SIP agree and confirm to have read, understood and accepted the Terms of Century SIP and Insurance cover. Insurance is subject matter of solicitation Page 38 • • • • • Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Statutory Details, Disclaimer & Risk Factors Statutory Details: Constitution: Birla Sun Life Mutual Fund (BSLMF) has been set up as a Trust under the Indian Trust Act, 1882. Sponsors: Aditya Birla Nuvo Limited and Sun Life (India) AMC Investments Inc. [liability restricted to seed corpus of Rs. 1 Lac] Trustee: Birla Sun Life Trustee Company Pvt. Ltd. Investment Manager: Birla Sun Life Asset Management Company Ltd. Investment Objective: Birla Advantage Fund: An Open ended Growth Scheme to achieve long-term growth of capital at relatively moderate levels of risk through a diversified research based investment approach. Birla Equity Plan: An Open-ended Equity Linked Savings Scheme to achieve long-term growth of capital along with income tax relief for investment. Birla India Opportunities Fund: An Open-ended Growth Scheme to achieve superior long-term growth of capital by investing in shares of companies that do one or more of the following: Leverage India’s intellectual capital for providing services, research and creative inputs; Seek to use current and impending changes in patent laws / import tariffs / quotas to supply goods and services; Leverage India’s lower labour costs for providing services and manufactured goods; Leverage India’s large population of English speaking people for providing services.Birla MNC Fund: An Open-ended Growth Scheme to achieve long-term growth of capital at relatively moderate levels of risk by making investments in securities of multi-national companies through a research based investment approach.Birla Midcap Fund: An Open-ended Growth Scheme to achieve long-term growth of capital at controlled level of risk by primarily investing in Midcap stocks.Birla India GenNext Fund: An Open ended growth scheme with an objective to target growth of capital by investing in equity/equity related instruments of companies that are expected to benefit from the rising consumption patterns in India, which in turn is getting fuelled by high disposable incomes of the young generation (Generation Next). The scheme will invest in companies that have the following characteristics: 1.Companies that seek growth in revenues arising out of demand from the younger generation (GenNext) for their products or services. 2. They should be engaged in manufacturing of products or rendering of services that go directly to the consumer. 3. The products and services should have distinct brand identity, thereby enabling choice.Birla Top 100 Fund: The fund seeks to provide medium to long-term capital appreciation, by investing predominantly in a diversified portfolio of equity and equity related securities of top 100 companies as measured by market capitalization.Birla Infrastructure Fund: The Fund seeks to provide medium to long-term capital appreciation, by investing predominantly in a diversified portfolio of equity and equity related securities of companies that are participating in the growth and development of Infrastructure in India.Birla Index Fund: An Open-ended Index-Linked Scheme to generate returns commensurate with the performance of Nifty subject to tracking errors.Birla Dividend Yield Plus: An Open-ended Growth Scheme to provide capital growth and income by investing primarily in a well diversified portfolio of dividend paying companies that have a relatively high dividend.Birla Sun Life Buy India Fund: A multi-sector open-end growth scheme with the objective of long term growth of capital, through a portfolio with a target allocation of 100% equity, focusing on investing in businesses that are driven by India’s large population and inherent consumption patterns. The focus of the scheme will be in the consumer and healthcare sectors. The secondary objective is income generation and distribution of dividend.Birla Sun Life New Millennium Fund: A multi-sector open-end growth scheme with the objective of long term growth of capital, through a portfolio with a target allocation of 100% equity, focusing on investing in technology and technology dependent companies, hardware, peripherals and components, software, telecom, media, internet and e-commerce and other technology enabled companies. The secondary objective is income generation and distribution of dividend. Birla Sun Life Basic Industries Fund: A multi-sector open-end growth scheme with the objective of long term growth capital, through a portfolio with a target allocation of 100% equity, focusing on investing in companies sensitive to economic cycles and commodity pricing cycles. The investments will be in companies which are often referred to as cyclical companies. The secondary objective is income generation and distribution of dividend.Birla Sun Life Equity Fund: An open-end growth scheme with the objective of long term growth of capital, through a portfolio with a target allocation of 90% equity and 10% debt and money market securities.Birla Sun Life Tax Relief ’96 Fund: An open-end equity linked savings scheme (ELSS) with the objective of long term growth of capital through a portfolio with a target allocation of 80% equity, 20% debt and money market securities.Birla Sun Life Frontline Equity Fund: An open-end growth scheme with the objective of long term growth of capital, through a portfolio with a target allocation of 100% equity by aiming at being as diversified across various industries and or sectors as its chosen benchmark index, BSE 200. The secondary objective is income generation and distribution of dividend.Birla Sun Life Special Situations Fund: An Open-ended diversified equity scheme with objective to generate long-term capital by investing in a portfolio of equity and equity related securities.The scheme would follow an investment strategy that would take advantage of Special Situations & contrarian investment style.Birla Sun Life International Equity Fund: An Open-ended Diversified Equity Scheme with an objective to generate long-term growth of capital, by investing predominantly in a diversified portfolio of equity and equity related securities in the domestic and international markets. Disclaimer - This document is meant for private circulation only and should not at any point of time be construed to be an invitation to the public for subscribing to the units of Birla Sun Life Mutual Fund (BSLMF) . Birla Sun Life Mutual Fund (BSLMF) does not solicit any action based on the information contained in the document and does not recommend any action based on the same. The information/graphs/charts contained in this document are based on certain assumptions and have been compiled from sources, which Birla Sun Life Asset Management Company Limited (BSLAMC) believes to be reliable, but cannot guarantee its accuracy or completeness. Opinions expressed and facts referred to in this document are subject to change without notice and BSLAMC is under no obligation to update the same. Please read the offer document carefully for scheme specific risk factors and other details before investing. Risk Factors: Mutual Funds and securities investments are subject to market risks and there can be no assurance or guarantee that the objectives of the Schemes will be achieved. As with any investment in securities, the NAV of the Units issued under the Schemes may go up or down depending on the various factors and forces affecting capital markets and money markets. Past performance of the Sponsors / Investment Manager / Mutual Fund does not indicate the future performance of the Schemes and may not necessarily provide a basis of comparison with other investments. The names of the Schemes do not, in any manner, indicate either the quality of the Schemes or their future prospects or returns. Unitholders in the schemes are not being offered any guaranteed/assured returns. For scheme specific risk factors and other details please read the offer document of the schemes available at Investor Service Centres and with Distributors carefully before investing. Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 39 Awards Methodology Award : CNBC TV18 - CRISIL Mutual Fund of the Year Award for 2007. Birla Sun Life Mutual Fund, Category – Mutual Fund of the Year, out of 26 fund houses. Fund Houses winning at least two awards for their schemes in the category level awards for 2007 were considered for the award based on consistency of fund house's performance across various scheme categories in the four quarterly CRISIL CPR rankings released during the calendar year 2007. The individual CRISIL CPR ranks for their schemes were aggregated on a weighted average basis to arrive at the final ranks for fund houses. Birla Sun Life Frontline Equity Scheme was among the 2 schemes that won the CNBC TV18 - CRISIL Mutual Fund of the Year Award in the category- Large Cap Oriented Equity Funds. In total 22 schemes were eligible for the award universe. Birla MIP was the only scheme that won the CNBC TV18 - CRISIL Mutual Fund of the Year Award in the category- Monthly Income Plans (Conservative). In total 9 schemes were eligible for the award universe. Birla Sun Life Short Term Fund was the only scheme that won the CNBC TV18 - CRISIL Mutual Fund of the Year Award in the category of Income Short Term Funds. In total 12 Schemes were eligible for the award universe. Birla Sun Life Income Fund was the only scheme that won the CNBC TV18 - CRISIL Mutual und of the Year Award in the category of Income Funds. In total 17 Schemes were eligible for the award universe. Schemes present in all four quarter CRISIL CPRs were considered for the award. The award is based on consistency of scheme's performance in the four quarterly CRISIL CPR rankings released during the calendar year 2007. The individual CRISIL CPR parameter scores averaged for the four quarters were further multiplied by the parameter weight as per the CRISIL CPR methodology to arrive at the final scores. Birla Infrastructure Fund was the only scheme that won the CNBC TV18 - CRISIL Mutual Fund of the Year Award in the category- Emerging Equity Fund of the Year. In total 14 schemes were eligible for the award universe. Open ended equity schemes having a one to two year track record as on December 31, 2007 and fulfilling CRISIL's eligibility criteria on disclosure were considered for the award. The award is based on the scheme's performance using the analytical approach of the CRISIL CPR rankings having the analysis period as the year 2007. A detailed methodology of the CRISIL CPR is available at www.crisil.com. Ranking & Award Source: CRISIL Fund Services, CRISIL Ltd. Past performance is no guarantee of future results. ICRA Award: Birla Income Plus (Category- Debt- Schemes –Long Term), 7- Star indicates- Best performance amongst the 5-Star Funds. 1 year Performance for the period ending December 31, 2007. Birla Sun Life Short Term Fund (Growth)- (Category- Liquid Plus Schemes), 7- Star indicates- Best performance amongst the 5-Star Funds. 1 year Performance for the period ending December 31, 2007. The rank is an outcome of an objective and comparative analysis against various parameters, including: risk adjusted return, fund size, sector concentration, portfolio turnover, liquidity, company concentration and average maturity. The ranking methodology did not take into account entry and exit loads imposed by the scheme. The rank is neither a certificate of statutory compliance nor any guarantee on the future performance of Birla Sun Life Mutual Fund or its Schemes. Ranking source and publisher: ICRA Online. Lipper Awards 2008: Methodology: Birla Sun Life Income Fund –Growth: Best Fund –Bond Indian Rupee –General for 3 year performance period ended on December 31, 2007 out of 100 funds and Best Fund –Bond Indian Rupee –General for 10 year performance period ended on December 31, 2007, out of 35 funds. Birla Gilt Plus- Regular Plan- Growth: Best Fund –Bond Indian Rupee –Government for 5 year performance period ended on December 31, 2007, out of 10 funds. Birla Sun Life '95 Fund: Best Fund- Mixed Assets Aggressive- General for 10 year performance period ended on December 31, 2007, out of 6 funds. Entry / Exit load not considered. Past performance is no guarantee of future results. Ranking source: Lipper –A Reuter Company. Scheme Name, Nature & Objective: Birla Sun Life Frontline Equity Fund (an Open- end growth scheme) with an objective of long term growth of capital, through a portfolio with a target allocation of 100% equity by aiming at being as diversified across various industries and or sectors as its chosen benchmark index, BSE 200. Birla Sun Life Monthly Income (an Open-end income scheme) with an objective to generate regular income so as to make monthly and quarterly distribution to unit holders with the secondary objective being growth of capital. Monthly Income is not assured and is subject to availability of distributable surplus. Birla Sun Life Short Term Fund (an Open-end short term income scheme) with an objective to generate income and capital appreciation by investing 100% of the corpus in a diversified portfolio of debt and money market securities with relatively low levels of interest rate risk. Birla Sun Life Income Fund (an Open-end income scheme) with an objective to generate income and capital appreciation by investing 100% of the corpus in a diversified portfolio of debt and money market securities. Birla Infrastructure Fund (an Open-end growth scheme) with an objective of providing for medium to long-term capital appreciation by investing predominantly in a diversified portfolio of equity and equity related securities of companies that are participating in the growth and development of infrastructure in India. Birla Income Plus (an Open-end income scheme) with an objective to generate consistent income through superior yields on its investments at moderate levels of risk through a diversified investment approach. Birla Gilt Plus (an Open-end Government Securities scheme) with an objective to generate income and capital appreciation through investments exclusively in Government Securities. Birla Sun Life '95 Fund (an Open-end balanced scheme) with an objective of long term growth of capital and current income, through a portfolio of equity and fixed income securities. Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 40 Thank You Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 41 Annexure 1 – Total Savings with Century SIP Century SIP @ Rs. 20,000 pm Life Cover – Y 1 = Rs. 200,000; Y 2 = Rs. 1,000,000; Year 3 onwards = Rs. 2,000,000 Term Life Insurance Premium for Various Ages Features Year 1 Sum Insured Premium Payment Term~ Annual Premium^ Total Premium Rs. 200,000 1Y Rs. 700 Rs. 700 25 Y Year 2 Year 3 Year 1 Rs. 1,000,000 Rs. 2,000,000 Rs. 200,000 1Y Rs. 3,500 Rs. 3,500 28 Y Rs. 7,000 Rs. 196,000 1Y Rs. 800 Rs. 800 35 Y Year 2 Year 3 Year 1 Rs. 1,000,000 Rs. 2,000,000 Rs. 200,000 1Y Rs. 4,000 Rs. 4,000 18 Y Rs. 8,000 Rs. 144,000 1Y Rs. 1,315 Rs. 1,315 45 Y Year 2 Rs. 1,000,000 1Y Rs. 6,575 Rs. 6,575 Year 3 Rs. 2,000,000 8Y Rs. 13,150 Rs. 105,200 Total Savings Rs. 200,200 Rs. 148,800 Rs. 113,090 ^ Based on market estimates; ~ upto age 55 Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing. Page 42
Robert Parker, Vice Chairman, Credit Suisse Asset Management believes that the cash levels are at record high worldwide, more than in 2001-02. According to him, leveraged investors have significantly reduced positions. He feels that global economy, specially G3 countries, will face a tough time in coming two-three months.
Parker said that Lehman may still have to write down over USD 30 billion worth of securities. According to him, news reports of Lehman talks with Korean bank are proving tough and Lehman might hive off difficult mortgage assets into separate company.
Parker doesn't see pools of heavy leverage in Asian markets. He said that China has seen continued capital outflow in Mutual Funds industry. He sees limited downside risk in global equities. According to him, there will be a sustainable rally in global equities only in Q2CY09, once earnings improve. He sees chances of trading rallies in India and World over next three-six months.
Excerpts from CNBC-TV18’s exclusive interview with Robert Parker:
Q: Much has happened since Monday first with Fannie and Freddie and now concerns with Lehman Brothers, how are you reading the global atmosphere right now?
A: Investor sentiments are very poor and we have models where we gauge how much cash investors are running and how much leverage investment is there in the market. Those indicators show that the cash worldwide is at a record high.
It’s quite interesting if you look at cash levels today relative to the last bear market of 2000 to 2003, the cash levels today are much higher than what they were at the worst points of 2001 and 2002. Also what’s very interesting over the past month is that we have seen leveraged investors significantly reduce their positions and there is a lot of talk about the role of hedge funds in the markets globally.
Hedge funds have been forced to reduce leverage and that in turn is in a wave of selling pressure. On Monday, the initial market reaction to the nationalization or conservatorship of Freddie Mac and Fannie Mae was very positive. But subsequently, that has met a wave of selling and to some extent justifiably so. Global economy particularly the G3 countries, notably America and Europe, face a period of quite severe economic weakness at least for the next two-three months.
Q: How are you reading the Lehman Brothers situation at this point in time and what would that mean for sentiment in the near term?
A: If we look at the newsflow over the last few weeks, firstly, there has been a lot of speculation that when Lehman will announce a further significant write down on its asset book related to the US mortgage market and that’s not just residential mortgages but also commercial mortgage backed securities in its quarterly results. The evidence available suggests that Lehman still has an excess of USD 30 billion of securities, which are difficult to value, trade.
Lehman strategy has been very different from the strategy of other banks, which have had heavy exposure to the mortgage problems in US. If we look at Merrill Lynch and UBS, they have attempted to clean up their balance sheets quite successfully. Three months ago, Merrill Lynch sold of a very significant part of its mortgage book at a distressed price level.
Lehman has tried to reduce its positions but in a more orderly way. The market is concerned about news reports of the discussions that Lehman Brother’s were having with the Korean Development Bank. With potentially a Korean consortium, it would appear that those discussions are proving quite difficult particularly at the light of statements by the Korean regulatory authorities that they want Korean Development Bank to be very cautious in these discussions. In means that the Korean regulator does not give a stamp of approval on these discussions.
There is talk in the markets that when Lehman comes out with its results, it will try and separate it’s book of difficult mortgage assets into a separate company. In previous financial crisis particularly in the 1980’s and 1990’s, the concept of good bank and bad bank was a very successful concept. The idea that Lehman might put these mortgage assets into a separate company is a very attractive idea but the market is concerned as to whether that is going to happen or not.
Q: Just to get back to the point that you were making about deleveraging with specific reference to Asia funds or emerging market funds, is it your sense that there might be much more by way of selling pressure?
A: The deleveraging over the last two months since June has been in trades, which have been very concentrated. The biggest leverage trade in June was investors including hedge funds, long commodity stocks and short financial stocks. There has been a major squeeze on those positions since June and associated with declining commodity prices and high level of volatility but we have seen a improvement over the past six weeks in the financial services sector.
With respect to Asia, there has been a trend capital outflow by foreign investors and this is the feature of Indian market over last six months. Asian markets particularly India and China had a foreign capital overhang back in the first quarter of this year. That overhang doesn’t exist. So, concept of leverage divestment is more of an issue in American and European Market. I don’t see pools of heavy over-leverage in the Asian Markets.
Q: India has actually been an outperformer in the past month or so even though it has not had the good side of flows. What is your own sense of how the next few months might shape up for India versus the couple of other emerging markets, developed countries?
A: India has been an outperformer last month particularly if you look at China. If you look at India versus China, both economies are commodity importers and the trade in the first half of the year has been long. In past months, you have seen divergence between India and China. There are number of factors due to that, first of all in China you have seen continued capital outflow in the mutual fund industry. On the other hand, you have not seen that heavy continued capital outflow here in India.
Q: Given the fact that you have talked about cash levels being at record points in this juncture what is your sense of where cash would distribute itself and when will this happen as hedge fund managers divide strategies for returns?
A: The downside risk in global equity markets is very limited. If you look at the situation today, investor cash at record levels, price earnings ratios are much more reasonable than they were two months ago. If you look globally, the relationship between global fixed income, global bonds and global equities is a stretched relationship. Equity is cheap, bond is expensive. We need evidence that the corporate earnings growth is going to move to positive momentum to have a sustainable start to rally in global equity markets.
It will probably happen in Q2 of 2009. So, there are a number of factors in place suggesting that the downside risk in markets is low in India. This is not like March 2003, which of course was the start of a four-year bull market trend. We are probably going to have trading rallies and trend will be sideways moving in Indian and the global markets over the next three months and possibly going into Q1 of 2009. Then we will have prospects of an improvement in economic growth, corporate earnings growth. We can have the ground being formed for a sustained bull equity market rally. Over the next month or so, it will be a trading rally. We have got very bad equity market conditions but from this level, further downside is limited.
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