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I •III
III
-II,8
123rd Meeting of the I,FINANCE INVESTMENT AND AUDIT I
EMPLOYEES' PROVIDENT FUND ORGANISATION
.NEW DELHI
..····-COMMITTEE·
[A SUB- COMM1'l'TEF; OF TIlE CENTRAL BOARD,
EMPLOYEES' PROVIDENT FUNDI
On,.I
6.,;,R
18.01.2016 at 11:00 A.M.~,,;
j-~,~ ;i
I7;.VENUE: j
Conference Hall, •3*id, Floor, EPFO (Head Office), ~
Bhavishya Nidhi Bhawan, i14, Bhikaljl Cama Place, f!
NEW DELHI - 110066. II•
EMPLOYEES' PROVIDENT FUND ORGANISATION
AGENDA BOOK123R1 Meeting of the Finance Investment and Audit Committee,
Central Board, EPF.
Date: 18.01.2016 Time: 11.00 A.M.INDEX OF ITEMS
ItemNo. Agenda Page No.
1. Confirmation of the Minutes of 12211<1Meeting of the Anance 1-6Investment & Audit Committee (FIAC ) held on 09.12.2015
2. Action taken report on the recommendation 'of the 122nc1 7-8Meeting of the Anance Investment & Audit Committee (FIAC)held on 09.12.2015
3. Presentation on Investments in ETF by Experts ---- - - -- - - --- - - - - - - ----- -- ----- -- -- -. ---.--------- ---- .--- - -- - - .'---,-"-_._'- .. .-._------'.-.- ..
4. Relaxation for extended CBlO borrowing up to 30 days on case 9-10
to case basiS by Chairman, FIAC/CPFC subject to ratificationby the Board.
5. Selection of Mutual Fund ETF manufacturer fot investment of 11EPFOs investment In ETF.
6. CBLO borrowing transactions by the Portfolio Managers during 12-19the period 21.11.2015 to 31.12.2015.
7. continuation of Mis Chandabhoy & Jassobhoy as External 20-23Concurrent Auditor (ECA).
8. Rate of Interest (ROI) to be aeclited to EPFMembers' To beplaced
Accounts for the year 2015-16 on the Table
9. Any other Item (s) with the pennlssion of the Chair
123rd Meeting of FIAC 18,01.2016
Item No, 1: Confirmation of the Minutes of 122nd Meeting ofthe Finance Investment and Audit Committee heldon 09.12.2015 at EPFO,Headquarter, New Delhi.
Minutes of 122ndFinance Investment and Audit Committee'
(FIAC) meeting held on 09.12.2015 was circulated vide letter No.
Invest.1/(122~ Mtg.)FIAC/2015/19670 dated 28.12.2015. Copy of the
minutes is enclosed as Annexure -'A' of this Item.
Minutes may be taken as confirmed.
"
Telephone: 26178450
R J. '/1)::'X v , C· .: t.1'1· - r ,l~~ (-!.-:..------ ",....._._._-
Fax No: 26194349
Cfi~'Cutt 31"\q fMit :8"10"Employees' Provident Fund Organisation
(~qc( ~ Ji;mpr, ~lR1IiR) ,(Ministry of Labour a EmpIovrrient, Govt. Of India)
"1i\4Ia:q I Head Offtc:e .IIbtytsbyIIIIdbl BbawaD,1HhIJqd1 Cam' "'!ICI, Newp.IbI:l100§§
2. 8 nEe
No. Invest.I/(122nd Mt9.)/FIAc/201~!10
To
Date: 28.12.2015
All Members,Flnan.ce· Investment & Audit Committee,Central Board of Trustees, Employees' Provident Fund•
•
Sub: Minutes of 122nd Meeting of the Finance Investment & Audit Committee (FIAe),CBT,EPF held on 09.!~~2Q..1~C!tEefO~Head-0fflce,..New-Delhi-Reg~·-· - ...---- ...---...
_ ...----_. __ . ---.-.--.--~.--------'--.-
Sir,
Minutes of 122nd Meeting of the Finance Investment & Audit Cor;nmittee held on .
09.12.2015 approved by the Chairperson are enclosed herewith for your kind perusal andnecessary action please.
End:· As above
Yours faithfully,
\\....J~\'I'\\<(VI~~[~~rfwlL)
R.P.F.C·U(IMC)/Unk R.p.F.c.-n (Invest.)
-'." .
,:/'.',
\.
c -.• '0
- 2-
CORY forwitded fOr Information and necaary action toi-
1. P.S. to Central Provident Fund eommlssloner, EPFOHead OffIce.2. PS. tqFA & CAd, E~pQ Heac.otftce.3. ~I.C.P.F.C -I (IMC~EPFOHead Office.4. Regional ProvIdent Fund Comrritsstoner~II (Conference), EPFOHead Office.
5. Regional provtdent Fund Commissioner-II (IMC),EPFOHead Omce.,
6. Regional Provident Ft.IndCommlssloner-n (IMC)EPFOHead Omce.) ,
~\>I'~(VISHAL AGARWAL)
R.P.F.c~Il(IMC)/Unk rtP.F.C.-U (Invest.)--- - - - - -- ----- -- ---- --- -- - .----.--~-.--;.--.---_ ..--------------_._--_._._- -.--------- -- _ .
, .
•
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Minutes of the 122nd Meeting of the Finance Investment & Audit
Committee (FIAC) held on 09-12-2015
1. The 122nd Meeting of Finance Investment & Audit Committee was held on 09-12-
2015 from 02.30 P.M, onwards in the Conference Hall, 3rd Floor, EPFO, Head Office,
New Delhi.
2. 'The following members/representatives were present in the meeting.'
1. Sh. K.K. Jalan Chairmen, FIAC, Central Board and Central Provident Fund
Commissioner(
2. Sh. Heera Lal Samariya Additional Secretary (L&E), Ministry of Labour &, , .Employment, Govt. ofIndia,
3. Sh, Sudhir Shyam Director, Deptt. of Financial Services, Ministry of Finance, as
representative of Joint Secretary, MoF, Govt. of India;. as.
Domain Expert.
4. Sh. Balasubrahmanyam Member, Central Board. (Employers' Representative)
.Kamarsu - . - ..
5. Sh. J. P. Chowdhary Member, Central Board, (Employers' Representative)
6. Sh. Pawan Kumar As representative of Sh. Prabhakar J. Banasure, Member,
Central Board, (Employees' Representative)
The following members could not attend the meeting:
1. Dr. G. Sanjeeva Reddy Member, Central Board, (Employees' Representative)
2. Ms. Meenakshi Gupta Joint Secretary & Financial Advisor, Ministry of Labour &
EmploymentJ
In addition to the above, Shri Sanjay Kumar, FA & CAO, EPFO and Convener was
also present during the meeting.
3. The Chairman welcomed all the members and officers present in the meeting.
Thereupon the agenda were taken up.
~.. '.1.-)~-• 5••Item No.1: Confirmation of the Minutes of 12lst Meeting of the Finance Investment
& Audit Committee held on 16-10-2015.
The minutes of 121st Meeting of the Finance Investment & Audit Committee
held on 16-10-2015 were confirmed.
Item No.2: Action taken report on the recommendation of the 12111Meeting ofFinance Investment & Audit Committee (FIAC) held on 16-10-2015.
The action taken report as placed was taken note of by the Committee.
Item No.3: Amendment in terms of Agreement of Portfolio Management ServiceAgreement entered with Portfolio Managers.
FlAC deliberated upon .the issue. It was felt that the restrictions sought to be
imposed on transactions by the Fund Ma nagers with related party should not
be left totally uncontrolled. The Committee felt that changing the terms of
agreement in one go should not be the approach. As FA&CAO listed the
difficulties, it was decided that the proposed transactions (as proposed by FA)
- be allowed as were being allowed earlier.
The Committee further decided that the working of the investment with the
amended clause will be observed for some time and it shall be reviewed within
next few months in order to decide if this provision requires any further
amendment to make it practical in the present COntextof the market.
Item No.4: Accounting policy and method of Accounting for equity & relatedInvestment.
After detailed discussion, the accounting policy and method of accounting for
equity and related investment was approved.
Item No.5: CBLO borrowing traasactions by the Portlolio Managers during theperiod 19.09.2015 to 20.11.2015.
The committee took note of the agenda.
\ .
·... " ,.~'-.'•.. -.•
Item No.6: Agenda Item on one time ex-post facto sanction of FIAC for continuingCBLO borrowing- Regarding HSBC case.
The Committee took note of the facts presented in the Agenda item. FA
pointed out that the permission may be given for borrowing upto 30 days. It
was felt that a separate agenda may be brought for increasing the tenure of
borrowing from 15 days to 30 days.
Item No.7: Revised Estimates for the year 1015-16 and Budget Estimates for the year1016-17 for EPFO and the schemes administered by EPFO.
The agenda was approved by the committee with the following remarks anddirections:
i) On the receipt side, the Committee observed that the forecast/estimatesfor contribution received in 2016-17 are on the lower side and it shouldbe raised to minimum 10% of the RE of 20 15-16.
ii) The entire contribution to the Gratuity and the Pension fund of the staffand officers ofEPFO should be charged as a one time in expenditure in
. the current financial year.
IteJllNo.8: Update on Investment in Exchange Tra!I~d :li)m~(ETF')•.____ • __ ._ ._ •• ~e' "" --.----.- -.'-.- .. -.--.------~ --- -.--.---~--~.--.,"~-.---.- -".
The Agenda on the investment in ETFwas discusse.d and it was furtherdecided that the investment in ETF was further to be reviewed. For this'purpose, eRlSIL, NSE & BSE will be requested to make a .separate expertpresentation in the next meeting of FlAC. The experts in this meeting shall berequested to focus their presentation on the following broad points:
i) Relevance of investment in equity by Pension Fund.ii) Security of the investment money in the Pension Fund.iii) The periodicity of review of the decisions of investment in equity.iv) The ideal size of fresh accretions that should be invested in equity
considering the AUM to EPFO and the equity market of India.v) The right mix of the products among the equity and related investment
for investment by EPFO at present and in future.
The meeting ended with a vote of thanks to the chair
\ ; ..i..J- ••
::r123rd Meeting of FIAC 18.01.2016.
Item No 2: Action Taken Statement on the minutes of 122ndmeeting of theFinance Investment and Audit Committee (FIAC) held on09.12.2015.
SrNo.
(Action Complete)
Decisions/Directions of FIe , Action Taken
1.
Amendment In terms of Agreement of PortfolioManagement Service Agreement entered withPortfolio Managers.
,FIAC deliberated upon the Issue, It was felt that therestrictIOnssought to be imposed on transaction by theFund Manager with related party should not be left: totallyuncontrolled. The Committee felt that changing the terms.of agreement In one go should not be approach. AsFA&.CAOlisted the difficulties, It was decided that theproposed transactions (as proposed by FA) be allowed aswere being allowed·earller.
The Committee further decided that the working of theInvestment with the amended clause will be observed forsome time and it shall be reviewed within next few monthsin order to decide if this provision requires any furtheramendment to make It practical In the present context ofthe market.
Decisionhas been Communicated toall Portfolio Managers.
(Item no. 3 of 1.22'" RAc.)
Accounting policy and method of Accounting forequity. related Investment. . Approved Accounting policy has
been :E:irculatedto all- exempted-establishments.2. After detailed diSCUssion,the accounting policy and
method of accounting for equity and relatedinvestment was approved.
(Item no. 4 of 1.zrt RAc.)Process of operatlonalization ofsaid accounting policy has beeninitiated
3.CBLO borrowing transactions by the PortfolioManagers during 19.09.2015 to 20.11.2015. The Item was for Information of the
Committee. Accordingly, no furtheraction was required.The Committee took note of the agenda.
(Item no. 5 of 122nd FIAC)
Agenda item on one time ex-post facto sanction ofFIAC for continuing CBLO borrowing- Regarding An agenda'on the matter is beingHSBC case. placed in this Meeting.The Committee took· note of the facts presented in the
4. Agenda Item. FA pointed out that the permission may begiven for borrowing upto 30 days. It was felt that aseparate agenda Item be brought for Increasing the tenureof borrowing from 15·days to 30 days.
(Item no. 6 of 122nd FIAC)
••The Agenda on the investment in mwas discussed and itwas further decided that the investment in ETF was furtherto be reviewed. For this purpose, CRISIl, NSE &. SSE will berequested to make a separate expert presentation In thenext meeting of F1AC.The experts in this meeting shall berequested to focus their presentation on the following broadpoints:
6. (I) Relevance of investment In equity by Pension Fund.(II) Security of the Investment money In the Pension Fund.(iii) The periodicity of review of the decisions of investment
in eqUity.(iv) The ideal size of fresh accretions that should be
Invested in equity considering the AUM to EPFO andthe equity market of India.
(v) The right mix of the products among. the equity andrelated investment for investment by EPFO at presentand in future.
(Item no. 8 of 122nc1 FIAC)
Revised- -Estimates for the year 2015·16 and The same has been noted forBudget Estimates for the year 2016·17 for EPFO compliance.and the schemes administered by EPFO.
(Item no. 7 of 122nd FIAC)
Update of Investment In Exchange Traded Fund(ETF). As decided, .presentations are
being made in this Meeting.
9
•ITEM No.4: Relaxation for extended CBlO borrowing up to 30 days on case to
case basis by' Chairman, FIACICPFCsubject to ratification by theBoard.
Pursuant to the recommendation of CBT in Its 204th Meeting held on26.08.2014, the Ministry of Labour & Employment vide its letter no. G-20025/1/2014-55-11 dated 12thMay, 2015 approved borrowing of funds from CBLOfor participation in Primary Auctions of Government Securities and CorporateBonds. Accordingly, the direction of Govt. on borrowing of funds from CBLO wascommunicated to all Portfolio Manaf}ers, that Inter-alia mentioned followingconditions:
a) No borrowing will be done for more than 15days.b) Prior to entering into such transaction, the Portfolio Managers shall intimate
through emeit to Investment Monitoring Cell (IMC), at EPFOHead Office thedetails of proposed borrowing to be made and the matching purchase ofsecurity. The proposal should also contain the expected profit/gains from thetransaction.
c) The Portfolio Managers shall report full outcome of the transaction to the IMCafter the borrowing is dosed.
d) The IMC shall compile all such transactions and p/~~~ tb~__s;Jmebefore EIAC---,n 7fSnexflmmedTatelY fOiiowing-meeiing~----- .e) The outcome shall also be placed before the Board for Information in next
following meeting.
2. With reference to the above, the minutes of 122fK1Meeting of RnanceInvestment & Audit Committee (FIAC) held on 9-12-2015 (placed as Annexure'A') on agenda of "One time -ex-post facto sanction of FlAC for continuing CBLOborrowing -regarding HSBC case" may be referred wherein the decision on thesame has been recorded as under:
"The Committee took note of the facts presented in the Agenda item. FA pOintedout that the permIssion maybe given for borrowing upto 30 days. It was felt that aseparate agenda may be brought for Increasing the tenure of borrowing from 15days to 30 days".
3. When the agenda for 15days was put up, at that.tlme itself It was suggested.that borrowing should be allowed for 30 days. However, It was Initially agreed thatwe should allow borrowing for 15days. It needs to be noted that EPFOgets fundsonly during aperiod of approximately 5 days and rest of the 25 days, EPFOremains
'1:\I !./, •short of money. Borrowing was allowed to take care of a good opportunity comingfor investment during these 25 days. Therefore, it is necessary that borrowing forinvestment be open for 30 days instead of 15 days. As we have seen in somecircumstances, the borrowing Is required for more than 15days.
4. One such case which came on 31st December'was that of Yes Bank whereborrowing became necessary for more than 15 days to catch opportunity ofInvestment for YesBank Basel 111Tier 11bonds issue having maturity of 10 years @8.90% p.a. As it was felt that proposal may not be ~vai/able later on, accordingly,Investment was made for 1500 crores where the borrowing was required for 18days instead of 15days.
5. Accordingly, RAC is required to take a dedsion to increase borrowing periodfrom 15 days to 30 days and make ex-post facto approval for borrowing forapproximately 18days instead of 15days.
Proposal: The proposals' at Para '5' Is placed for approval and recommending theproposal of extending the duration to CBT.
II•Item No.5: Selection of Mutual Fund ElF manufacturer for investment of EPFO!i
investment in ElF. '
1. The Rnance Investment &. Audit Committee (RAe) in its 120th Meeting held on 23rdJune, 2015 recommended' investments of EPFO corpus in 581 manufactured ETF forthis current year!.e. 2015-2016.
2. The Hon'ble Chairman, CBT EPT had approved the recommendations of RAC on29.07.2015.
3. Subsequently, the Board in its 208th Meeting held on 16th September, 2015 approvedby FlAC proposal also ratified the fees charged by SBI Mutual Fund for its ETF asnegotiated by the Sub-Committee constituted by RAC which is @0.07% per annum onnet asset.
4. Investment in ETF manufactured by 5BI Mutual Fund was started w.eJ 06th Aug~st,2015.
5. The tenure of appointment of S8I Mutual Fund as manufacture of ETF for investmentsby EPFO is ending on 31st March, 2016. Mutual Funds as ETF manufacture have to beappointed a fresh.
6. Accordingly, it is proposed to constitute a sub-Committee for Selection of Mutual Fund- EfF manufacturer for investment of-EPFOsinvestment in moThe Terms of reference---·.of the proposed Committee may be as follows:
a) To prepare and approve Request for Proposal (RFP) document for Selection ofMutUal Fund ETF manufacturer for investment of EPFOsInvestment in ETF.
b) To undertake the entire process of evaluation of RFP, technical bids, finandal bidsetc. and select a Mutual Fund ETF manufacturer for investment of EPFOsinvestment In ETF.
c) To recommend the selected entity to the RAqCBT.
7. Since the entire process of selection of Mutual Fund ETF manufacturer for investmentof EPFOs investment in ETF may take some time beyond 31st March, 2016, it Isproposed to extend the tenure of SBl Mutual fund for another three month~ l.e. upto3d" June, 2016 on the same fees i.e. @ 0.070/0 per annum.
The proposal contained In Palil 6and Para 7al'tJplaced before the Committee forapprovaL
12
Item No.6: CBlO borrowing transactions by the PortfolioManagers during the period 21.11.2015 to.31.12.2015.
Pursuant to the recommendation of CBT in its 204th Meeting held on26.08.2014, the Ministry of Labour & Employment vide its letter no. G-20025/1/2014-55-11 dated 1~ May, 2015 approved borrowing of funds from CBLOfor participation in Primary Auctions of Government. Securities and CorporateBonds. Accordingly, the direction of Govt. on borrowing of" funds from CBLO wascommunicated to all P~rtfolio Managers, that inter-alia mentioned followingconditions:
a) No borrowing will be done for more than 15days.b) Prior to entering Into such transaction, the Portfolio Managers shall Intimate
through email to Investment Monitoring Cell (IMC), at EPFO Hea,d Office thedetails of proposed borrowing to be made and the matching purchase ofsecurity. The proposal should also contain the expected profit/gains from thetransaction.
c) The Portfolio Managers shall report full outcome of the transaction to the IMCafter the borrowing is closed.
d) The IMC shall compile all such transactions and place the same before FIACin its next immediately following meeting.
e) The- outcome shall also be placed- before the Board for information In next - -fbllowing meeting.
2. The information of the CBLO borrowing transactions till 20.11.2015 done bythe Portfolio Managers had already been placed in 12~ Meeting of the FIAC heldon 09.1.2.201.5.
3. The CBLO borrowing transaction for the period 21.11.2015 to 31.12.2015 madein respect of following investments: .
I. SOLs (Chattisgarh, Jharkhand, Andhra Pradesh, uttar Pradesh, Punjab, WestBengal, Telangana Haryana, Karnataka, Madhya Pradesh)
11. Various Banks (HDFC Bank, Bank of India, Canara Bank,. lOBI Bank, StateBank of Mysore, Yes Bank,. State Bank of Hydeiabad, Allahabad Bank, SBIBasel 111Tier II Bonds)
4. The following ~re the details (Jf profit made in the period of investment onborrowed fund:
•(A) rcrcr Securities Primary Dealership Ltd
SI.No. .Entities/lssue Transaction Range of CBlO No. YTM Range Net Gains ofrs Date borrowing of (Ann) of Rate EPFOin Rs.
Amount (Rs Day ofCBlOCrs) s borrowi
ng(roundedto2digits)
1 Chhattisgarh 09-12-2015 71.08 - 92.22 5 8.39% 6.44%-SOL 6.90% 1,82,321.72
2 Andhra 09-12-2015 30.02 5 8.40% 6.44%-Pradesh SOL 6.90% 73,693.48
,
3 UPSOl 09-12-2015 6.98-7.62 6 8.40% 6.44%-6.90% 21,679.24
4 Punjab SOL 09-12-2015 25.02 - 25.13 6 8.40% 6.44% -6.90% 72,142.35
5 West Bengal 09-12-2015 0.37 6 8.39% 6.44%-- SOl ------- ----- -- .. _--. --------. ---- _ .. - - - - -_ .._----- -'---~..- ..--q-- - o~90% -- - -- t,068.4S-
6 HOFCBank 15-12-2015 156.72 1 8.35% 6.90% 62,473.32
7 Telangana 23-12-2015 32.2 5 8.44% 6.98% 64,221.94SOL
8 West Bengal 23-12-2015 12.76 5 8.44% 6.98% 25,449.44SOL
9 HaryanaSOL 23-12-2015 27.1 5 8.44% 6.98% 54,050.14
10 State Bank of 30-12-2015 2.99 1 8.40% 6.85% 1,270.71Hyderabad
Net Gains of EPFOdurins the period 2,07,465.55
•(8) HSBCAMC
51.No. Entities/Issu Transaction Range of CBlO No. YTM Range Net Gains ofers Date borrowing of of Rate EPFOin Rs.
Amount Day ofCBlOs borrowi
ngSDl_Chattlsg _ 6.94%-
1 arh 26-11-2015 65.04-39.83 5 8.33% 6.71% 1,19,442.77SDL_Jharkha 6.94%-nd 26-11-2015 60.73-24.01 5 8.32% 6.71% 99,609.94
SDl_Chattlsg 6.88%-2 arh 09-12-2015 36.48 5 8.39% 6.50% 1,02,943.94
6.88%-SOL AP 09-12-2015 125.3 5 8.39% 6.50% 3,52,448.41
6.88%-SOL UP 09-12-2015 96.46-9.98 5 8.38% 6.50% 2,34,916.15
,
3 HOFCBank 15-12~2015 178.8 1 8.34% 6.93% 69,193.15
•4 BOI 31-12-2015 90.97 1 8.53% 7.31% 30,471.21
CANARABANK· 31-12-2015 360.05 1 8.39% 7.31% 1,07,156.80
_.- - -- -IDBf -- -.- ----" -31~12;'2015- - -- 13S - -- .-- 1- -8.61% -, 7.31%·· 48,307:81" -
SBM 31-12-2015 35 1 8.41% 7.31% 10,570.007.31%-
YESBANK 31-12:'2015 222.50-19.65 4 0.089 6.84% 1,47,188.4713,22,248.64
Net Gains Of EPFOdurinsthe period
(C) Reliance Capital AML
51. Entities/lss Transaction Range of No. YTM Range Net GainsNo. uers Date CBLO of of of EPFO
borrowing Da Rate in Rs.Amount ys of
CBLOborro
- wing8.17% U.P. SOl 1,19,00,00,000.
1 2025 26-11-2015 00 1 8.32% 6.86" 47,600.008.16% Kamataka 14,45,00,000.0
2 SOL 26-11-2015 0 1 8.32% 6.86" 5,762.748.17% U.P. SOL 1,15,90,00,000.
3 2025 27-11-2015 00 3 8.32% 6.69% 1,SS,274.254 8.17% U.P. SOL 30-11-2015 61,80,00,000.0 1 832% 6.75" 26,582.47
•2025 08.17% U.P. SDl 31,95,00,000.0
5 2025 01-12-2015 0 1 8.32% 7.07% 10,941.788.17% U.P. SOL 25,55,00,000.0
6 2025 02-12-2015 0 1 8.32% 6.52% 12,600.008.17% U.P. SOL
7 2025 03-12-2015· 3,40,00,000.00 1 8.32% 6.71% 1,499.73
U.P. SOL & 2,58,70,00,000.8 Chattisgarh SOL 09-12-2015 00 1 8.38% 6.90% 1,04,897.53
62,25,00,000.09 W.B.SOL 09-12-2015 0 1 8.37% 6.90% 25,070.55
U.P. SOL & 2,36,15,00,000.10 Chattisgarh SOL 10-12-2015 00 1 8.38% 6.79% 1,02,870.82
59,95,00,000.011 W.B.SOL I 10-12-2015 0 1 8.37% 6.79% 25,950.96
U.P. SOL& 2,36,25,00,000.12 Chattisgarh SOL 11-12-2015 00 3 8.38% 6.55% 3,55,345.89
51,95,00,000.013 W.B.SOL 11-12-2015 , 0 3 8.37% 6.55% 77,711.51
U.P. SOL & 1,13,25,00,000.14 Chatti~garh SOL 14-12-2015 00 1 8.38% 6.84% 47,782.19
17,75,00,000.015 W.B.SOL 14-12-2015 0 1 8.37% 6.84% 7,440.41
1,59,70,00,000.16 HOFC BANK LTC 15-12-2015 00 1 8.35% 6.90% 63,442.47
8.64% Allahabad .~-~'.' - ----_ .... '-- ._- .-- -- -" -'--' -_ ... ,---- .._-. --- ~- -"-'"- ._._-- ,,-.-.-~ ---- -'. Banfiler2--- -
•• ____ • __ , __ 0' •. __ ._ •• _. __ . __ --.----- -,--_.-._-- - --
Bonds 49,85,00,000.017 20.12.2025 18-12-2015 0 4 8.64% 7.05% 86,861.92
8.33% SBt Basel11\nn Bond23.12.2025 5,10,40,00,000.
18 735799 23-12-2015 00 5 8.33% 6.96% 9,55,103.45Haryana SOL & 2,37,85,00,000.
19 M.PSDL 23-12-2015 00 5 8.41% 6.96% 4,71,150.708.33% SBIBasellllTi II Bond23.12.2025 5,10,40,00,000.
20 735799 28-12-2015 00 1 8.33% 6.97% 1;90,218.45Haryana SOL & 1,85,20,00,000.
21 M.PSOL 28-12-2015 00 1 8.41% 6.97% 73,080.458.33% SBI BaselIUTi" Bond23.12.2025 5,10,40,00,000.
22 735799 29-12-2015 00 1 8.33% 6.89% 2,01,363.29Haryana SOL& 1,75,55,00,000.
23 M.PSOL 29-12-2015 00 1 8.41% 6.89% 73,105.758.33% SBI BaselIIITi n Bond23.12.2025 5,10,40,00,000.
24 735799 30-12-2015 00 1 8.33% 6.83% 2,09,180.1025 Haryana SOL& 30-12-2015 1,65,05,00,000. 1 8.41% 6.83% 71,260.90
•M.PSOl 008.33% SBI BaselIIITI II Bond23.12.2025 5,10,40,00,000.
26 735799 31-12-2015 00 1 8.33% 7.00% 1,85,981.37Harvana SOL& 27,60,00,000.0
27 M.PSDl 31-12-2015 0 1 8.41% 7.00% 10,661.92
Net Gains of EPFOduring the period 35,98,741.59
(D) UTIAMC
51. Entities/Issuer Transaction Range of No. YTM o.f Range Net Gains ofNo. s Date CBLO of seeurity of Rate EPFO in Rs.
borrowing Day ofCBlO
Amount 5 borrowing
1 09-0ee-15 5 8.3768% 6.95%-8.23% CGSOL 2,4~,89,24,80 300cr 4,77,587.61090EC2025 6.74
2 09-Dee-15 5 8.3768% 6.99%-8.23% UPSOL 2,48,89,24,80 200er 4,77,587.61090EC2025 6.74
3 09-0ec-15 5 8.3791% 7.00%-8.22%WBSOL 2,11,23,74,80 209.70 4,06,010.01090EC2025 .-.. .. §.74 +-.-- --- •. -- ~ _.-._-_.- ~ - .. .---- .._-- ref--- .~ ~-.. ------ -----
48.27% MP SOL 1,52,73,71,67 6.96%-23DEC2025 23-Dee-15 3.59 5 8.4248% 200er 3,00,264.53
58.27%WBSOL 1,20,57,03,51 6.98%-23DEC2025 23-Dec-15 6.03 5 8.4258% 75.85cr 2,37,193.26
6 7.00%-8.27%15 SOL 33,42,54,827. 155.2523DEC2025 23-0ec-15 95 5 8.4356% er 66,205.35
7 7.01%-100 cr,
8.33%SBI23 3,23,76,33,04 7.02%-OEC2025 23-0ee-15 6.35 5 8.33% l00cr 5,94,438.30
8 6.91%-8.27%MP SOL 1,51,23,48,80 107.10230EC2025 28-Dee-15 7.84 1 8.4248% er 60,382.08
98.27%WBSOL 1,18,30,99,28 6.95% -,23 OEC2025 28-Dee-l5 0.34 1 8.4258% 200cr 47,268.87
10 ' ,-
8.27%TSSOl 32,73,88,179. 6.98% -23 OEC2025 28-Dee-15 07 1 8.4356% l00cr 13,168.18
.. • \111 7.00%-
141.35cr,
8.33% 5BI23 3,19,14,77,47 7.02%-DEC2025 28-Dee-15 3.46 1 8.33% 73.10er 1,19,133.92
12 6.90%-8.27% MPSDl 1,51,02,47,08 121.1023DEC2025 29-Dec-15 1.$4 1 8.4248% cr 61,626.36
13 6.94%-8..27%WBSOL 1,18,30,09,53 300.0023DEC2025 29-Dee-15 7.11 1 8.4258% er 48,305.68
14 6.95%-8.27% TSSDl 32,74,50,948. 200.0023DEC2025 29-Dee-15 20 1 8.4356% er 13,458.68
158.33% SBI23 3,18,91,12,49DEC2025 29-Dee-15 5.71 1 8.33% 1,21,850.31
168.52% BOl31 , 1,17,34,70,94 7.00%-DEC2025 31-Dee-15 4.20 1 8.52% 16.90er· 41,157.54
17 8~40%CANARA 7~21%-SANK31DEC 70,40,82,566. 100.002025 31-Dee-15 52 1 8.40% er 22,379.73
18 7.22%-8.40% 5BM31 11,73,47,094. 100.00DEC2025 31-Dee-15 42 1 8.40% er 3,729.96
19 8.62% lOBI 7.33%---BANK3-1DE(> - .- - - S8;61,35~472:- ··100.00·· ---~--.-.--
-- -"-
2030 31-Dee-15 10 1 8.62% cr 22,186.2620 8.90% YES
BANK31 DEC 58,67,35,472.2025 31-Dee-15 10 1 8.90% 26,687.25
Net Gains of EPFOduring the period 31,60,621.49
(E) S8I
Rate ofRange of CBlO No. CBlO
51 Transaction Borrowing of Borrow; Net Gains ofNo. Entities/Issuers Date (Amtin ers) Days YTM ng EPFO(lnRs.)
8.19%UKSDL1 2025 26/11/2015 25.00 1 8.35% 6.65% 11,625.21
8.18%WBSDl2 2025 26/11/2015 36.00 1 8.34% 6.65% 16,631.64
8.19% UKSDl3 2025 27/11/2015 25.00 3 8.35% 6.76% 32,615.36 .
8.18% WBSDl4 2025 27/11/2015 18.00 3 8.34% 6.76% 23,329.07
•8.23% CGSDL
5 2025 12-09-2015 25.00 1 8.38% 6.87% 10,332.268.23% CGSOL
6 2025 12-09-2015 50.00 1 8.39% 6.87% 20,807.148.23% CGSOL
7 2025 12-09-2015 11.45 1 8.40% 6.87% 4,796.248.22%WBSOL
8 2025 12-09-2015 9.47 1 8.39% 6.87% 3,938.798.23% UPSOL
9 2025 12-09-2015 25.00 1 8.38% 6.87% 10,332.268.23% UPSOL
10 2025 12-09-2015 50.00 1 8.39% 6.87% 20,807.148.23% UPSOL
11 2025 12-09-2015 19.04 1 8.40% 6.87% 7,976.838.23% CGSOL
12 2025 12-10-2015 50.00 1 8.39% 6.80% 21,766.048.23% CGSOL
13 2025 12-10-2015 11.45 1 - 8.40% 6.80% 5,015.778.22%WBSOL ,
14 2025 12-10-2015 9.47 1 8.39% 6.80% 4,120.318.23%UPSDL
15 2025 12-10-2015 9.65 1 8.38% 6.80% 4,173.328.23% UPSOL
16 2025 12-10-2015 50.00 1 8.39% 6.80% 21,766.048.23% UPSOL
17 2025 12-10-2015 19.04 1 8.40% 6.80% 8,341.948.23%C6 SOL
18 2025------ --- -lZ-U:Z01S--- - - -- - -SO]X) 3- -- -8~39%- - -6-:47%-7S,859.77 --- - -
8.22%WBSOL19 2025 12-11-2015 11.45 3 8.40% 6.47% 18,152.11
8.23% UPSOL20 2025 12-11-2015 9.47 3 8.39% 6.47% 14928.15392
8.23% UP SOL21 2025 12-11-2015 9.30 3 8.38% 6.41% 14588.33862
8.23% UPSOL22 2025 12-11-2015 - 50.00 3 ~.39% 6.47% 78859.76712
8.23% UPSOL23 2025 12-11-2015 19.038 3 8.40% 6.47% 30189.55675
8.23% CGSOL24 2025 14/12/2015 11.447 1 8.40% 6.76% 5141.215415
8.22%WBSOL25 2025 14/12/2015 9.465 1 8.39% 6.76% 4224.037607
8.23% UP SOL26 2025 14/12/2015 2.088 t 8.40% 6~76% 937.7878734
8.35% HOFC27 BANK2025 15/12/2015 528.00 1 8.35% 6.98% i,98,180.82
8.27% 15 SOL28 2025 23/12/2015 25.00 5 8.44% 6.95% 51,061.04
8.27%WBSOL29 2025 23/12/2015 42.54 5 8.44% 6.95% 86,881.37
8.27%WBSOL30 2025 23/12/2015 31.56 5 8.43% 6.95% 64,013.31
•8.40% SBHNeD
31 2025 30/12/2025 105.90 1 8.40% 6.82% 45,841.648.62% lOBIUnsec NeD
32 2030 31/12/2015 350.00 6 8.62% 7.21% 1,35,205.488.52% Bank ofIndiaUnsec
33 NCD2025 31/12/2015 1050.00 6 8.52% 7.21% 3,76,849.328.40% (anaraBa!1kUnsec
34 NCD2025 31/12/2015 355.40 6 8.40% 7.21% 1,15,870.148.4O%SBMUnsec NeD
35 2025 31/12/2015 70.00 6 8.400" 7.21% 22,821.928.90%Yes BankUnsec NeD
36 2025 31/12/2015 525.00 6 8.90% 7.21% 2,43,082.19
Net Gains of EPFO during the period 18,14,069.34
Net Gains of EPFO during the above said period.(A+B+C+D+E)= Rs. 1,01,03,146.61/-
The item is placed befol'e the FIAC for information. The same shallalso be placed in the next CSTmeeting for information.
Item No.7: Continuation of MIs Chanda bhoy & Jassoobhoy as External Concurrent Auditor CECA}
1. As per the decision taken in 196th meeting of Central Board, EPF held on 20.07.2011,MIs Chandabhoy & Jassoobhoy was appointed as External Concurrent Auditor (ECA)for conducting Audit of the Fund of EPFO managed by the Portfolio Manager.
2. Central Board, EPF in its 205th meeting held on 19.12.2014 has approved theextension of the period of appointment of MIs Chandabhoy & Jassoobhoy as ECA onnomination basis till October 2016 on the earlier terms and conditions.
3. As per the decision taken in 207th meeting of Central Board, EPF held on 31.03.2015,UTI Asset Management Company Ltd. was appointed as 5th Portfolio Manager witheffect from 01.07.2015.
4. As per the terms and conditions of appointment of ECA, following clause I sub-Clause of Chapter 2 of RFP i.e. Duties and Responsibilities of ExternalConcurrent Auditor (ECA)' are as below -
2.1 The ECA while conducting Audit of the Fund of EPFO managed by the Fund Managers,must:
2.1. J Ensure that the audit is to be conducted by a team consisting of one leader and atleast two staff personnel. The leader of the team should be a qualified charteredaccountant with a least three years' experience in the field of Portfolio Audit. The auditshould be carried out under direct supervision of a Partner of the. chartered accountantfirm if the leader of the Team is not a partner of the Chartered Accountam firm.
2.1.2 Ensure that they are not engaged/or audit ojthe samejund manager(s) ofEPFOfor any purpose other than the terms of reference contained In the RFP.
2.1.3 Ensure to the best possible extent, that the team leader appointed to conduct theaudit should continue In his role till the completion of the assignment. For any reason, ifthere is a change in the team leader appainted 10 conduct the audit, the same should beintimated to the EPFO immediately. (Annexure A)
S. However,MIs Chandabhoy & Jassoobhoy has informed that they are the auditors of the UTI PortfolioManagement Service for.past several years i.e. befate their appointment as Concurrent Auditors of.EPFO. (Annexure B)
6. If the sub-clauses 2.1.1,2.1.2 & 2.1.3 are read in coherence with the main clause 2.1 then it appearsthat 'they' in the sub-clause 2.1.2 refers to the team/individual employees/Chartered Accountantsmentioned in 2.1.1.
7. MIs Chandabhoy& Jassoobhoy, ECA has submitted thrOughemail the list of persons involved in theaudit of EPFO and UTI AMC res~ively, (Anllexure C).
8. In consideration of the above, FIAC may recommend to the Central Boiardthat .MlsChandabhoy&Jassoobhoy, ECA may continue the audit of EPFO accounts on the earlier tenns and conditions tillOctober2016 as the persons involved in the audit of EPFO accounts and UTI accounts are different.
The proposal at para 8 is before the Committee for consideration and approval
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2.Dutlesand Responsibilities of the ExternalConcurrent Auditor (ECA)~----------------------------
2.1. The EeA, while conducting audit of the fund of EPFO managed by thefund managers, must:2.1.1. Ensure that the audit is to be conducted by a team consisting of one
leader and at least two staff personnel. The leader of the leamshould be a qualified chartered accountant with atleast three yearsexperience in the field of Portfolio Audit. The audit should becarried out under direct supervision of a Partner of the charteredaccountant firm if the leader of the Team is not (\ Partner of theChartered Accountant firm.
2.1.2. Ensure that they are not engaged for audit of the same fundmanager(s) of EPFO for any purpose other than the terms ofreference contained in this RFP.
2.1.3 Ensure, to the best possible extent, that the team leader appointedto conduct the audit should continue in his role tiB the completionof the assignment. For any reason, if there is a change in the teamleader __,,-pp<)_int~~__t9 _conduct. the audit, the same- shoul+vbeintimated to EPFO immediately.
\ )I:)(Y1(YU?.)<: YJ "/'--( ~ [J
). 'J
208. Phoenix House.'A' Wln~462. Senapati Bapal Marglower ParelMumbai·4()() 013India
Ref. No, 272
Phone: +91 22 2498 1516Fax: +91 2224981718Email: mailOcnj.inWeb: www.cnj.in
July 13, 2015
Mr. Abhay RanjanRegional PF Commissioner - I (IMC)Employees' Provident Fund OrganisationBhavishya Nidhi Bhavan,14 - Bhikaji Cama Place,New Delhi - 110066.
Dear Sir,
We refer to your letter No. Invest.l/ 1 (35)1 02/ ECA/ 2011/ 5691\ dated ·)'uIY 2, 2015,wherein you have informed us that Central Ooard of Trustees, Employees Provident FundOrganisation has apPointed a new (fifth) PortFolio Manager, UTl Assets ManagementCompany Limited aln9with previous other four 'Portfolio Managers to manage theinvestment corpus of CST, EPF.
tn this regard, we would like to state that we are the auditors of the .UTIPortf.OJio.--M~Jl~ge_menLServices for past several years re: before our appointment as concurrentauditors of EPFO. However Clause 2.1.2 of RFP (Duties and Responsibilities of ExternalConcurrent Auditor (teA), states to 'Ensure that they (ECA) are not engaged for audit ofthe same fund manager (s) of EPFQ for any purpose other than the terms of referencecontained in this RFP'.
This intimation is to comply with terms and conditions of our appointment as ECA..Further we wish to inform you that audit team and partner involved for both theassignments are different. We assure you that in future also we shall assign differentpartners for finalising UTI PMS certification work and EPFO audit to ensure that there isno conflict of interest.
Hope this meets with your requirements and in case you require clarification, please feelfree to contact us.
;.",-,.;
Thanking you, \.:~
Yours faithfullyFor Chandabhoy 8&JassoobhoyChartered Accountants
'---".(~?i->:\\.. r" ..- .-~~.,.--'.'\~r""'~ ,,- ' ••.;:;..--
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Fwd: RE: Details of Audit Teams I Partners engaged byChandabhoy and Jassoobhoy for EPFO and UTI AMC respectively·regd.
To: -APFC INV. EPFO. MOL, New De"''' <[email protected]>.Investment Data of EPFO <[email protected]>
Cc: FA & CAO EPFO <[email protected]>.ACC I <ace [email protected]>, (FA&IMC) <>
I Date: 12108If5J)2:23 PMFrom: '1fPi=c, Investment, EPFO, Head office, New Delhr <rc.invost;:tt:[email protected]!l>
for necessary action pis.
-- Original Message -From: Ambesh <[email protected]>Date: Dee 8,201512:26:10 PMSubject: RE: Details of Audit Taams I Partners engaged by Chandabhoy and Jassoobhoy (or EPr'" " d !lTI,U Ierespectively -regd.To: [email protected]: [email protected], [email protected], [email protected]
Dear Sir I (s),
With reference to your trail mail, we are forwarding herewith details of the audit tcarw ,>,rtnPfS deployed forrespective assignments ofEPFO and MIs UTIAMC Pvt. ltd. (Portfolio Manager for Err''''
for EmUi'l' I Pro •.•. .•. Fund Ore:anisation IEPF01:-~ .. c·
S. No. Name 8&Designation1. Mr. Ambesh A..Dave (Partner) --2. Ms. Dhwani Gala (CA), now Partner
Ms. SumaJli3 S.idd.bjki~(CA.Finalist}--·· -_.. -.-- .. - --_ ..¥--- - ... - -- ..3. ._- •....... -. •.....•._.-
-4. Mr ..Chirag Nathwani (eA Finalist) -5. Mr. Tushar Shukla (Senior Audit Assistant)-
6. Ms. Umashri Kotian (Senior Audit Assistant) .7. Ms. Pragati lanna (Senior Audit Assistant)
... _.__._._-----
_ .. ---_ ...__ .._----MIs UTIAMCN. ltd. (Portfolio Manager for EPFO);-
Name & Designation..
5..No.1. Mr. Samir M ..Chinoy (Partner)2. Ms. Nimlsha Sevak, (CA Finalist) .-3. Mr. Pravin Purohit (CA Finalist) --4. Mr. ParthShah teA Finalist) ..
5. Mr. Bhavik Raichura (Senior Audit Assistant) ....
Kindly feel free to contact us, in case you require any further clarification.
Thanks and with best regards.
Ambesh A..DaveParnter
Chanda bhoy & IassoobhovChartered Accountants208 Phoenix HOlJse,'A' Wing,1162 Senapati Bapat Marg.
l:rr(JS:I/mail.gcN..#nifwC ..$IatiClfftVQNShelt.htrnl?tDIICFen&3.0.1.0.0 10051217
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Indices as anInformation Tool forPortfolio Diversification andAsset Allocation
Mahavir KaswaJanuary 2016
.,. ASIA INDEX Pvt. Ltd.,. A SSE and sap OJI Venture
For Financial Professionals. Not for Public Distribution. PROPRIETARY.Pennission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices.
~
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TABLE OF CONTENTS
01020304
INVESTMENT AND AVAILABLE ASSET CLASS
PORTFOLIO DIVERSIFICATION
ASSET ALLOCATION
S&P BSE SENSEX AND EPFO
I- nU'M "~V\o." r n. ••.•.•.•. For Financial Professionals. Not for Public Distribution. PROPRIETARY.
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QUOTE
"Even though investing seems risky, not investing means taking risks, too, when youconsider the long-term threat of inflation," says' Certified Financial Planner professionalPeter Lazaroff, CFA, portfolio manager at Acropolis Asset Management in St. Louis. "Ifyou don't grow your money, you may not be able to afford things in the future. So, youinvest to grow wealth and preserve purchasing power."
A ASIA INDEX Pvt. Ltd.....,.. '" 8SE NId S6POJI v.nt..".
.For Financial Professionals. Not for Public Distribution. PROPRIETARY .
Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 3
fP4t·iIiWHAT INVESTORS LOOK FOR IN AN INVESTMENT
• Performance• Acceptable risk• Low Costs• Diversification• Understanding• Independent analysis
.~ ASIA INDEX Pvt. Ltd. For Financial Professionals. Not for Public Distribution. PROPRIETARY.~ •. es!! and S6P 0.11Vent"". Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 4
..41 '.. • • •• •. • • • • • I" • " " I " " " " " " " " " " " " " ,
•.•.......... ---------------~-----~.,.ASSET CLASS
Potential Asset Classes:• Equities (stocks): Buy shares of a company/business. An equity investment can be
spread across - region, size, sector, strategy, theme for example ...• Fixed Income (debt): Lending money to a company or government for interest.• Cash and cash equivalents: The money in a savings account or hidden under a
pillow.• Real Estate and Commodities: Owning something physical like property, natural.
resource commodities and precious metals like gold .
•• ASIA INOEX Pvt. Ltd,.,. A SSE .nd 56P OJI Venture
For Financial Professionals. Not for Public Distribution. PROPRIETARY .Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 5
"sa.··.' ..··.·..:', •• •.... ·.' ... " •..•-~-I·· .." .Cc,
DEBT AND EQUITY
Debt: In a debt investment, typically an investor lends money to an individual, a company or a government atpredetermined interest rate/coupon. The interest rate/coupon may be fixed or floating. The investor tymcally -
» Earns predefined coupon/interest (fixed or floating) on principal amount.» Experiences relatively lesser volatility as compared to equity (based on historical data).» Deals with Interest rate and reinvestment risk.» Does not participate in the growth of the organization that has borrowed.
Equity: In an equity investment, the investor typically purchase shares of company in anticipation of capitalgains and/or dividend income. Equity investments are often characterized as high risk-high return and mayalso act as a hedge against inflation due to the potential for relatively higher returns over longerterm.The investor typically -
» Participates directly in the growth of the organization.» Receives no assured returns.» Experiences relatively higher volatility as compared to debt.
ilIA ASIA INDEX Pvt. Ltd. For Financial Professionals. Not for Public Distribution. PROPRIETARY.~ .IJ. SSE .,nd S&P OJI 'Atntu,. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 6
'" n"i41'fl~'7.. n-n f!wfJ]7fwft-!!-lf-ft- 11 JJ " " " " " " "" " " " " " II ,
· - ..-- - - - - - - .- - -. - - - - - -- .~-.
TABLE OF CONTENTS
o1 INVESTMENT AND AVAILABLE ASSET CLASS
02 PORTFOLIO DIVERSIFICATION
03 ASSET ALLOCATION
04 S&P SSE SENSEX AND EPFO
..•• ASIA INOEXPvt. Ltd."'" A 8SE and UtI' OJ! v.ntll,.
For Financial Professionals. Not for Public Distribution. PROPRIETARY.Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 7
:S&P. ' •••.• ,.' '. I.' ~.IIi.-...••..-.......•.....--.-. -I. •.•...PORTFOLIO DIVERSIFICATION
• Diversification is a widely known investment strategy that is intended to helpmitigate the risk associated with unpredictability of markets. It tends to beespecially important during times of increased uncertainty.
• Key benefits may include - reducing portfolio volatility.• Diversification is typically achieved by combining two or more assets that have
low correlation.• The lower the correlation between assets, the greater potential reduction in risk
that can be derived.
_A ASIA INDEXPvt. Ltd. For Financial Protesslonats. Not for Public Distribution. PROPRIETARY_..- '" 8st: .md s&P OJt Venture Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 8
" ~;X;M+"""i"'~ ~ "IF" " " " " " " fP 1P 1Ft! Tlfi'f-~ - - - ••- - - - ~• • '.. n • - - • II II . IT n n n rr n nTn~:1rJL
•.•............... ---.-------~---~-..,••~ ...............•"'-----BACK·TESTED INDEX PERFORMANCE: DEBT AND,EQUITY
-s&P BSEIndia 10 Year Sovereign Bond Index -S&P BSESENSEX(TR)
1,200
800
1,000
600 .....-------------------------------------------------------------------------------------
400 ..•.----------------------------------------------------------------..-------------------------------------.------------------------------------------------------------------------------------------
200 ....---------------------------
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• We will discuss various asset mix strategies that uses equity and debt in different proportion.
• We use the S&P SSE SENSEXIndex (TR) to represent the 'equity' piece and the S&P BSE India
10 year Sovereign Bond Index to represent the 'debt' piece.
Source: Asia Index Pvt. Ltd.; Data since December 31, 2001 up to December 31, 2015; Past performance is no guarantee of future results. Charts are provided for Illustrative purposes. Pastperformance is no guarantee of future results. These charts may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more Information
IJut ind8~retums..jtJCludina hvDOtheticalperformance. F F- . I P f - IN' P b' . PROP IEA:5IA INUtJCJ-1Vt~ L"tU.r - or manoa ro essona s. ot ,or u hc Distribution. R TARY.ASSE oanllS&P DJ. Velltw. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 9
.s&P"~..'..........•...••-----iifdiE~ALLOCATION STRATEGIES: DEBT AND EQUITY
1,200
1,000
Performance of various strategies during last 14 years:Back-tested Data from December 31, 2001 through December 31, 2015
- - - 100% Debt - 5% Debt : 95% Equity -10% Debt: 90% Equity- 50% Debt: 50% Equity-90% Debt: 10% Equity-95% Debt: 5% Equity --- 100% Equity
800
600
400
200
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ y~~~ ~<F ~~ ~~ ~<F ~~~ ~<F ~<F ~<F .~ ~~
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
r:fV' ~~~ ~~<F
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~
Source: Asia Index Pvt. Ltd.-;.8ack test data since December 31,2001 up to December 31,2015; Past perfonnance is no guarantee offuture results. Charts are provided for illustrative purposes. Pastperfonnance is no guarantee of future results. These charts may reflect hypothetical historical perfonnance. Please see the F'erfonnance Disclosure at the end of this document for more infonnath>n.ut~fi~i~i'i..rtWPDthetical perfonnance. For Financial Professionals. Not for Public Distribution. PROPRIETARY.fill Po8$£ Uld s.\P ·0.11V...t_ Permission to reprint or distribute any content from this presentation requires the written approval of sap Dow Jones Indices. 10
-l-fttrn"n " 1111ft" ~nlt ltJfJ Ian 1J"JfJ!J[J[JJT1fJf-l
.............._-------------------~~.BACK·TESTED RISK RETURN PROFILE
Statistics100%
Debt
5% Equity: 95%
Debt
90%
Equity :10% Debt
95%
Equity:5% Debt
100%
Equity
10 year
3 year
Risk adjusted •returns 1.09
Source: Asia Index Pvt. Ltd.; Back test data since December 31, 2001 up to December 31, 2015; Past performance is no guarantee offuture results. Charts are provided for Illustrative purposes. Pastperformance is no guarantee of future results. These charts may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information
O'utindex cetums..iflCludil1a hvoothetical performance. '" . ,A:51A INUf:: ~ 'P\1L. L"tO'. r- - For FinanCIal Professionals. Not for Public Distribution. PROPRIETARY.A SSE ~ 56P o.n 'l9l1tur. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dew Jones Indices. 11
fM»~.BACK·TESTED CALENDAR YEAR RETURNS
Calendar20152014201320122011201020092008200720062005200420032002
10% Equity: 50% Equity: 90% Equity: 95% Equity :90% Debt 50% Debt 100/0Debt 50/0Debt 100%
Source: Asia Index Pvt. Ltd.; Back test data since December 31, 2001 up to December 31, 2015; Past performance is no guarantee of future results. Charts are provided fOr illustrative purposes. Pastperformance is no guarantee of future results. These charts may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information
sut~rA ~i~i'l.'t~thetica' performance. For Financial Professionals. Not for Public Distribution. PROPRIETARY.fIi1 A eSf. ,,"d saP 0.11v.ntur. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 12
• ..!1i*"~.rt~"r.". 1M?." " " " " ft.ft " " & .n w 11->: -rl"IL_ - ~:,,--. C!'" -...•..1IL__fl u. .1£ . . .. . . [t.. IT IT Jl n~TLn IT n nn
..••••............. __ ._-----------••,~.ALLOCATION STRATEGIES: DEBT AND EQUITY
Performance of vartous strategies during last 14 years:Back-tested Data since December 31,2001 up to December 31,2015
1,200
1,000
800
600
400
200
- - - 100% Debt - 25% Equity: 75% Debt -75% Equity: 25% Debt - - - 100% Equity
-----_ ..--"----------------- ..,-~"~~~ ~"v ~,., ~ ~ ~'o ~ ~tQ ~q . ,~ ~~ * N' ~ ~
~<J ~<:f ~<:f ~<:f ~<:f ~<J ~<:f ~<:f ~<:;J .~~ ~<:f ~<:f •..~ •..~ •..~~ ~ ,., ,., ,., ,., ,., ,., ,., ,., ,., ,., 0/ 0/ 0/
Source: Asia Index Pvt. Ltd.; Back test data since December 31, 2001 up to December 31, 2015; Past perfonnance is no guarantee of future results. Charts are"provided for illustrative purposes. Pastperformance is no guarantee of future results. These charts may reflect hypothetical historical perfonnance. Please see the Performance Disclosure at the end of this document for more information
SA~ ~i~it~~thetical performance. For Financial ProfeSSionals. Not for Public Distribution. PROPRIETARY.fII A SSE _ SltP OJ. Vent"" Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 13
A~t'~",
ALLOCATION STRATEGIES:BACK·TESTEDRISK RETURN PROFILE
!Id!-.
Data Label Stats 100% Debt25% Equity:75% Debt
75% Equity:25% Debt 100% Equity
10 year
3 year
Source: Asia Index Pvt. Ltd.; Back test data since December 31, 2001 up to December 31, 2015; Past performance is no guarantee of future results. Charts are provided for illustrative purposes. Pastperformance is no guarantee of future results. These charts may reflect hypothetical historical performanca. Please see the Performance Disclosure at the end of this document for more information
5.utj(}1f1.~i~i~QYPothetical performance. For Financial Professionals. Not fO; Public Distribution. PROPRIETARY.f1I A SSE IOndSIt' OJI VI8tltUt'. Permission to reprint or distribute any content from this presentation requires the written approval of sap Dow Jones Indices. 14
l~Y[$m r ~a! ~r! a DID DmgS'R B RR IR~aIE-
·...... - .'. - -- - - - - - -~.
BACK·TESTED CALENDAR YEAR RETURNS
Calendar20152014201320122011201020092008200720062005200420032002
100%Debt 25%Equity: 75%Equity: 100%Equity75%Debt 25%Debt
Source: Asia Index Pvt. Ltd.; Back test data since December 31, 2001 up to December 31, 2015; Past performance is no guarantee of future results. Charts are'provided for illustrative purposes. Pastperformance is no guarantee of future results. These charts may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information
.,ut jnde~ retums...it:ICludioQ hvootheticai performance. F F' . IP f . IN' .... 0 ARA:5IA lNUcA -fo'Vt~ L."tO',r· - or msnoa ro essona s. ot ior Public Dlstnbutlon. PR PRIET Y.
A IISf aM saP OJI Vtntur. Permission to reprint or distribute any content from this presentation requires the wriHen approval of S&P Dow Jones Indices. 15
DIVERSIFICATION: PASSIVE EQUITY INVESTINGSTRATEGIES
-
:S&P.•••••..•.•r. •• •..·••...........:-- ..1'•.. c... <,
• Indices are designed tocaptore different segments of the market - by size, sector,factorand/or asset class.
• Diversification is typically considered an important investment strategy for long terminvestments
• Diversification tends to be incorporated according to asset class, size, sector andfactor.
• Diversification is intended to provide hedging of idiosyncratic, single stock risks andthe benefits of exposure to different segments.
• In the following slides, we intend to demonstrate the difference in index performance.during different market cycles using various 'equity' S&P BSE indices .
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For Financial Professionals, Not for Public Distribution. PROPRIETARY.Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices, 16
" rr"'j"'~1t:~1t1r1r " " " " " " rr " ft " " ft " " " " " " " " " rt n=n-n rrt ;
......•................ ....-- - - - - - - - -gp••
ALL STANDARD INDICES - BACK·TESTED PERFORMANCE
600- - - s&P BSESENSE)((TR)___ S&PBSfLargeMldcap_IR ..
- s&P SSEDividend Stability Index TR
- s&P BSEAllcap TR
..... _~S&P-.BSEMldcap.SeleGtlod.ex.IR... . .....,.,.500
400
300
200
100
Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-ll Sep-12 Sep-13 Sep-14 Sep-1S
S&P BSE SENSEX(TR) S&P BSE AIICap TR
S&P BSElargeMidCap TR
Maximum drawdown
12 month
Drawdown date
Correlation
-54•.6%
30-Nov-08
. -6C).5%
30-NoV-08
10 year 1 0.984
Source: Asia Index Pvt. Ltd.; Data since September 3D, 2005 up to September 3D, 2015; Pa$f performance is no guarantee offuture results. Charts are provided for illustrative purposes. Pastperformance is no guarantee of future results. These charts may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information
S'f~ ~~~i'l..ftW'pothetical performance. For Financial Professionals. Not for Public Distribution. PROPRIETARY.fIi' Ii. SSE Me! saP DJIVemu,. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 17
BACK·TESTED PERFORMANCE DURING MARKET'CYCLES~--•.
• Before Financial Crisis
sap BSE SENSEX (TR) sap BSE AIICap TR sap BSE I.IrgeMIdCap TR saP BSE DMderid StabIIty saP BSE MIdCIIp SelectIndex 11t Index 11t
• During Financial Crisis
sap BSE SENSEX (TR) sap BSE AllCap TR saP BSE LargeMIdCIIp TR saP BSE DMderid StabIlity saP BSE IoIfcItap SelectIndex 11t Index TR
• Recovery fromFinancial Crisis
saP BSE SENSE)( (TR) saP BSE AIICap TR saP BSE LargeMldCap TR saP BSE DIYIdend Stabl\ty saP BSE MIdCap SelectIndex 11t Index TR
Source: Asia Index Pvt. Ltd.~Data since September 30, 2005 up to September 30, 2015; Past perfonnance is no guarantee of future results. Charts are provided for illustrstlve purposes. Pastperformance is no guarantee of future results. These charts may reflect hypothetical historical performance. Please see the PerformanceDisclosure at the end of this document for more informationsut A~ ~i'f9JYei'Lft~pothetical performance. For Financial Professionals. Not for Public Distribution. PROPRIETARY.
'" A 8SE ••• d saP DJI V.ntUl1l Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices.
r ftrt',fl:tt:rr! rerz-' ".11 " ~ ft ft " " " " " " a a " " n " n n n=rJ:l1"l.................................. ~~ ..~---...
__________________ m _
.,~•.ALL FACTOR INDICES - BACK·TESTED PERFORMANCE
- - - S&P BSE SENSEX (TR) - S&P BSE Enhanced Value Index TR - S&P BSE Low Volatility Index TR
- S&P BSE Momentum Index TR - S&P BSEQuality Index TR
700600500400300200100
Sep-os Sep-06 Sep-07 Sep-QS Sep-09 Sep-l0 Sep-ll Sep-12 Sep-13 Sep-14 Sep-15
S&P BSESENSEX (TR)
S&P BSE EnhancedValue Index TR
S&P BSE lowVolatility Index TR
S&P BSEMomentumIndex TR
Maximum drawdown
12 month
Drawdown date
Correlation
-54.60103c}Nov:.oa
-57;4%
3O-NoV-08
10 Year correlation O~867703 0.90.1284 .().9:~ .
Source: Asia Index Pvt. Ltd.; Data since September 30, 2005 up to September 30, 2015; Past performance is no guarantee of future results. Charts are provided for illustrative purposes. Pastperformance is no guarantee of future results. These charts may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information
~t§. ~i~i1(.rHr.pothetical performance. For Financial Professionals. Not for Public Distribution. PROPRIETARY.fiIi' It. SSE aM stoP OJ. V.MUI'. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 19
~~.BACK·TESTED PERFORMANCE DURING MARKET'CYCLES
• Before Financial Crisis
S&P SSESENSEX(TR) S&P SSEEnhanced S&P SSELow Volatility S&PSSEMomentum S&P SSEQuality IndexValue Index TR Index TR Index TR • TR
• During Financial Crisis
S&P SSESENSEX(TR) Sap SSEEnhanced S&P SSELow Volatility S&PSSEMomentum S&P SSEQuality IndexValue Index TR Index TR Index TR TR
• Recovery fromFinancial Crisis
Sap BSESENSEX(TR) S&P SSEEnhanced S&P SSELow Volatility sap SSEMomentum S&P SSEQuality IndexValue Index TR Index TR Index TR TR
Source: Asia Index Pvt. Ltd.-;·Data since September 30, 2005 up to September 30, 2015; Past performance is no guarantee of future results. Charts are provided for illustrative purposes. Pastperformance is no guarantee of future results. These charts may reflect hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more Information*.ut jJgfJ. ~i~ii~{rP<>thetical performance. For Financial Professionals. Not for Public Distribution. PROPRIETARY.fill' A SSE Mtd S&P OJI Vttntur. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 20
l crCtc"'!rc~t=:f1 fl aa-:a L1~ rtr~a U ft a·!lft ..Jf zz tr·a· D ,a .a· ·a ..a 11 ..~ %11111
.......................... _----------.p~.TABLE OF CONTENTS
o1 INVESTMENT AND AVAILABLE ASSET CLASS
02 PORTFOLIO DIVERSIFICATION
03 ASSET ALLOCATION
04 sap BSE SENSEX AND EPFO
.ilIA ASIA INDEX Pvt. Ltd.~ "SSE..,d s&P DJI v."tVl'.
For Financial Professionals. Not for Public Distribution. PROPRIETARY.Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 21
~}
's·,····u· " ••••.... ".~~~".~..-:.~,•.• ' ....•............... /
ASSET ALLOCATION
• Asset allocation is the process of developing a customized, diversified investmentportfolio by strategically mixing different asset classes in varying proportions. -
• It aims to reduce the "ups and downs" associated with investing and make it easier tostick with investors' long term investment objectives and avoid market timing.
• Asset allocation includes combining asset classes such as equities, bonds and cashin varying proportions within one customized, diversified investment portfolio that issuitable to the risk-return profile of a given investor. '
.•• ASIA INDEX Pvt. Ltd.~. A 8Se Md S&P DJI VeAtur.
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••.............. -.~--.-----.------;pp~.
ALLOCATION STRATEGIES: DEBT AND EQUITY ... CONTINUED
• The debt only (100% debt) strategy noted the least portfolio volatility and also notedthe lowest annualized performance over the last 14 years.
• Among the various strategies discussed, as allocation to equity increases (S&P BSESENSEX), annualized performance and risk adjusted returns improved over last 14years up to the strategy '25% equity and 75% debt', after that risk adjusted returnsnoted decline.
• This is possible because as one asset may perform strongly while the other does not.• S&P BSE SENSEX Index (Equity) and S&P BSE India 10 year Sovereign Bond Index
(Debt) noted correlation of daily total returns, as low as 0.068797 from Dec 31,2001 to Dec 31,2015 .
..• ASIA INDEX Pvt. ltd.~ PoSSE ••ne! SloP OJt V.m",.
For Financial Professionals. Not for Public Distribution. PROPRIETARY.Permission to reprint or distribute any content from this presentation requires the wriHen approval of S&P Dow Jones Indices. 23
ASSET ALLOCATION
Asset allocation strategies are considered key driver ofinvestment results
Security SAlar.tinn4.69(,
MarketTming1.89(,
Other Factors2.19(,
S&P••. ·•.·.·•·•~:~-·--~-f ' .
• Generally significant percentage of thevolatility of investment performance is drivenby asset allocation decisions
• Factors such as when investors commitassets and which securities they buy areconsidered to have a relatively small impacton long-term investment results.
"
Source: Brinson, Hood, Beebower. "Determinants of Portfolio Performance". Financial Analysts Journal. July-August 1986; Brinson, Singer,Beetbower. "Determinants of Portfolio Performance II: An Update". Financial Analysts Journal. May-June 1991. Excerpt from the paper on 'Thepotential benefits of diversification' by Goldman Sachs
.•• ASIA INDEX Pvt. Ltd,• A 8SE ••.•d s&P OJI '4ntllf.
For Financial Professionals. Not for Public Distribution. PROPRIETARY.Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 24ctrm"~ rr rr ~..!a a ann !n n !1J-t+-+fJP ft.. E - W if D nPrJJT"""'-rlu " ~. II_Il_Il __ll. R_JL __
• •. ,··-.,.~~'fT'ff~'''~,,~··,,-
..••••••............... _---.- .._--:S&P.~.--~-. -'iNiJaB
DECIDING ON THE ASSET ALLOCATION
Apart from a few other factors, asset allocation often results from overall balancingamong the following considerations:1. Goals -Includes long term objectives e.g. - meet liabilities.2. Time horizon - The investor often seeks to balance longer term objectives with
shorter term considerations. Generally, time horizons include a minimum of one ormore than one market cycle i.e. 3 to 5 years, to allow sufficient time for a givenasset allocation strategy to work through a market cycle. -,
3. Risk tolerance level -An investor defines the level of risk s/he is willing to take inan effort to generate returns .
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.••~ .....•...... '----TABLE OF CONTENTS
o1 INVESTMENT AND AVAILABLE ASSET CLASS
02 PORTFOLIO DIVERSIFICATION
03 ASSET ALLOCATION
04 S&P BSE SENSE)( AND EMPLOYEES PROVIDENT FUND ORGANIZATION
For Financial Professionals. Not for Public Distribution. PROPRIETARY.Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 26
l {t''''rtlr1l tr tr rra rra rrrr n Irl nn 1i 8 ~~~, D D D D J R ~ J J. II•• ASIA INOEXPvt. Ltd¥'" •.•.8S~ ••.•d SloP DJlY.mur.
••••••••••••••••••••••BACK·TESTED ANNUALIZED RETURNS:EMPLOYEES PROVIDENT FUND ORGANIZATION AND:S&P BSE SENSEX PRICE RETURN OVER LAST 36FINANCIAL YEARS(31 MARCH 1979 TO 31 MARCH 2014)
30.00%
25.00%
E 20.00%:::I~••i 15.00%.t!'i:::IC.a 10.00%
5.00%
0,00%
.._. -- .- - - - --•••~- .-• sap BSE SENSEX • EPF Interest rate
1 3 10 36is 205 30Years
Source: Asia Index Pvt. Ltd. And www.epfindia.com; Data since April 3, 1979 up to March 31, 2015; Past performance is no guarantee offuture results. Charts are provided for illustrative purposes.Past performance is no guarantee of future results. These charts may reflect hypothetical historical performance. Please see th8 Performance Disclosure at the end of this document for more
~
11 about.iDdex l'Btums. including hypothetical performance. '.. . . .A fNUtX .t'Vt. Lto. For Financial Professonals.Not for PublIC Dlstnbution, PROPRIETARY.IISE -' s&P OJI V.mu,. Permission to reprint or distribute any content from this presentation requires the written approval of S&P Dow Jones Indices. 27
~-----~~~~~~---
MP4!.,,'., .-.,-, " ', .. ,....,_+4, ,..,...~. ", ,"::. ,'" ':'"J.:. ~ - -<,- •....
BACK·TESTED PERFORMANCE DISCLOSURE
Charts and graphs are provided for illustrative purposes. Past performance is no guarantee of future results. These charts and graphs may reflect hypothetical historicalperformance. All information presented prior to the launch date is back-tested. Back-tested performance is not actual performance, but is hypothetical. The back-test calculationsare based on the same methodology that was in effect when the index was officially launched. However, it should be noted that the historic calculations of an Economic Index maychange from month to month based on revisions to the underlying economic data used In the calculation of the index.
AIPL defines various dates to assist our clients in providing transparency on their products. The First Value Date is the first day for which there Is a calculated value (either live orback-tested) for a given index. The Base Date is the date at which the Index is set at a fixed value for calculation purposes. The Launch Date deSignates the date upon which thevalues of an index are first considered live: index values provided for any date or time period prior to the index's Launch Date are considered back-tested. AlPL defines the LaunchDate as the date by which the values of an index are known to have been released to the public, for example via the company's public website or its data feed to external parties.
Past performance of the Index is not an indication of future results. Prospective application of the methodology used to construct the Index may not result In performancecommensurate with the back-test returns shown. The back-test period does not necessarily correspond to the entire available history of the Index. Please refer to the methodologypaper for the Index, available at www.spdji.com and www.asiaindex.co.in for more details about the index, including the manner in which it is rebalanced, the timing of suchrebalancing, criteria for additions and deletions, as well as all index calculations. '
Another limitation of using back-tested information is that the back-tested calculation is generally prepared with the benefit of hindsight. Back-tested Information reflects theapplication of the index methodology and selection of index constituents in hindsight. No hypothetical record can completely account for the impact of financial risk in aCtual trading.For example, there are numerous factors related to the equities, fixed income, or commodities markets in general which cannot be, and have not been accounted for in thepreparation of the index information set forth, all of which can affect actual performance.
r
Index returns shown do not represent the results of actual trading of investable assets/securities. It is not possible to invest direcUy in an index. AIPL or its agent maintajac:UBSE Indices and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Index returns do not reflect payment of any salesfees an investor may pay to purchase the securities underlying the Index or investment funds that are intended to track the performance of the Index. Theand charges would cause actual and back-tested performance of the securities/fund to be lower than the Index performance shown. As a simpleon a US $100,000 investment for a 12-month period (or US $10,000) and an actual asset-based fee of 1.5% was imposed at the end of the period oninterest (or US $1,650), the net return would be 8.35% (or US $8,350) for the year. Over a three year period, an annual 1.5% fee taken at yearendyear would result in a cumulative gross return of 33.10%, a total fee of US $5,375, and a cumulative net retu"!. Qf~7.2% (or US $27,200).
~ lIS Ll\ii'JO X Pvt,~.', A 8$[ ;I'''' SI!.POJI V"ntu'.,
............... --- ..---------~--~-GENERAL DISCLAIMER
S&P.~~·~·-···-·-,.-..·-··fii_,;" "~" ""',
II
© Asia Index Private Limited 2014. All rights reserved. The sap BSE Indices (the "Indices-) are published by Asia Index Private Limited ("AIPL"), which is a joint venture amongaffiliates of sap Dow Jones Indices LLC ("SPDJI") and BSE Limited ("SSE-). Standard & Poor'S® and S&P® are registered trademarks of Standard & Poor's Financial ServicesLLC ("S&P") and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones·). BSE® and SENSEX® are registered trademarks of SSE. Thesetrademarks have been licensed to AIPL.
Redistribution, reproduction and/or photocopying in whole or in part are prohibited without written permission. This document does not constitute an offer of services injurisdictions where AIPL, SSE, S&P Dow Jones Indices LLC or their respective affiliates (collectively "AlPL Companies-) do not have the necessary licenses. All informationprovided by AIPL Companies is impersonal and not tailored to the needs of any person, entity or group of persons. AIPL COmpanies receive compensation in connection withlicensing its indices to third parties. Past performance of an index is not a guarantee of future results.
It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that Index. AIPLCompanies do not sponsor, endorse, sell, promote or manage any investment fund or other investment vehicle that is offered by third parties and that seeks to provide aninvestment return based on the performance of any index. AIPL Companies make no assurance that investment products based on the index win accurately track indexperformance or provide positive investment returns. AIPL and sap Dow Jones Indices LLC are not investment advisors, and the AIPL Companies make no representationregarding the advisability of investing in any such investment fund or other investment vehicle. A decision to invest in any such investment fund or other Investment vehicleshould not be made in reliance on any of the statements set forth in this document. Prospective investors are advised to make an investment In any such fund or other vehicleonly after carefully considering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared by or on beh~1fofthe issuer of the investment fund or other vehicle. Inclusion of a security within an index Is not a recommendation by the AIPL Companies to buy, sell, or hold such security, noris it considered to be investment advice. ClOSingprices for sap BSE Indices are calculated by AIPL or its agent based on the closing price of the individual constituents of theindex as set by their primary exchange. Closing prices are received by AIPL or its agent from one of its third party vendors and verified by comparing them with prices from analternative vendor. The vendors receive the closing price from the primary exchanges. Real-time intraday prices are calculated similarly without a second verification.
These materials have been prepared solely for informational purposes based upon information generally available to the public from sources believed to be reliable. Nocontained in these materials (including index data, ratings, credit-related analyses and data, model, software or other application or output therefrom) or(Content) may be modified, reverse-engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system,permission of AIPL. The Content shall not be used for any unlawful or unauthorized purposes. AIPL and its third-party data providers and licensorsCompanies (collectively" AIPL Parties") do not guarantee the accuracy, completeness, timeliness or availability .9f the Content. The AIPL Partieserrors or omissions, regardless of the cause, for the results obtained from the use of the Content. THE CONTENT IS PROVIDED ON AN "ASDISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, SUT NOT LIMITED TO, ANY WARRANTIES OFPARTICULAR PURPOSE OR USE. In no event shall the AIPL Parties be liable to any party for any direct, indirect, incidental, exemplary,consequential damages; costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) inContent even if advised of the possibility of such damages.
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THANK YOUMahavir KaswaSenior Manager, Product Management+91 [email protected]
Koel GhoshHead - Business Development, South Asia+91 [email protected]
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r «""j¢'rrnr" rrnnV-'~
m..QC--r-t-m<
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•...
Asset Allocation by Global Pension Funds7 major pension markets are Australia,Canada, Japan, Netherland, Switzerland, UK& US
• Funds from these market invest in Equity,Debt and other assets
• Average asset allocation by pension funds of7 major markets are
• 42.3% equities• 30.6% bonds• 2.3% cash• 24.8% other assets (including property
and other alternatives)• Australia, Canada, UK and US have higher
allocations to equities
.EqIIily .Banda .other • c:::.h
us
AlBtralia
Cmada
Japen
Netherlands
SWitZerland
UK
P7
Source: Report by Tower Watson - Global Pension Funds Survey 20152
Foreign Pension Funds Investing in India am• Foreign pension funds invest in India throughforeign portfolio investor (FPI) route
• Assets under custody has doubled in last 3 years
• Majority of foreign pension funds investment is inequity
• Debt investment of pension funds in India is only1% their total investment
• Total FPI investment in India is Rs.23,08,769 crs(Equity: 85%, Debt: 15%)
• Other FPI includes - Sovereign wealth funds,Mutual funds, Broad based funds, Insurance Co,Trusts etc
Source: NSDL
1,80,000
1,60,000
1,40,000
1,20,000
1,00,000
80,000
60,000
40,000
20,000
Assets Under Custody (Rs Crs)
2012 2014 20152013
3
Performance of Equity Markets Globally6000 Indian equity markets have outperformed global markets
5000
4000
3000
2000
1000
Country Index CAGR over15 years
-Nifty
-Bovespa
-Kospi
-S&PSOO
-HangSeng
-Nikkei
-FTSE100
4
1000 base on Jan 01, 2000o2000 2001 2002 2003 2004 2005 2006 2007 2008 20092010 2011 2012 2013 2014 2015
Equity Markets for Long Term Investments-Nifty 50 TR5 year rolling returns Calendar Year Returns
50,0%
40,0%
30,0%
20.0%
10.0%
0.0%
-10.0%"" Lr) ID ID ,... ,... co '" s 0 0 ....• .-t N m m "" "" Lr)0 0 9 9 0 0 9· 0 .-t ....• ....• .-t .-t ....• .-t .-t ....• ....•u , .:.. :> I . .:..
~ >- I I ..D. I I I C::; ..0 Q, c: c: till U :; Q, ... >CII CII CII
Q, 0 ::l co ::l co co CII Q) CIIQ, 0 ::l
0....., u. Lr) « z ....• ....., « .~ 0 s 0
....., u, VI -c z .....,
100.0%
77% 78%80.0%
60.0%
40.0% -,
20.0% .
0.0%
57%
39%142
% L 29% 33%,_,.,.,1:1 r lh9% 1:LLr)"" 0 N m ~ Lr)
-20 0% J C5 C5 C5 C5 8 8 8 8 § S S S S S. N N N N N N N N N N N N N N
-40.0% . -13% -15% -24%
-60.0% ~
-3%
-51%
• Since July, 2004, Nifty 50 Total Return' (TR) index has given an average 5 year rolling return of 17%with thehighest return being 47% .
• Since July 2004, 5 years rolling return has always been positive except for 2 instances were returns were -0.02% and -0.04%
• Short term volatility does not impact long term investors as observed in the past including 2008 financialcrisisData till December 31, 2015 5
1,00,00,000
90,00,000
80,00,000
70,00,000
60,00,000
50,00,000
40,00,000
30,00,000
20,00,000
10,00,000
o
Total Mcap (Rs Crs)
•....•........•.........•..•.......1......•.••......,I, ttll,I_~ __,-.._--....~~~---. ; .U'l 1.0 ,.... 00 C7\ 0 '"" N 1'1') .q- U'l 1.0 ,.... 00 C7\ 0 .-4 N I'll .q- U'l Lf\C7\ C7\ C7\ C7\ C7\ 0 0 0 0 0 0 0 ~ 0 ~ '"" ...• '"" '"' .-4 '"" ...•.!. , .!. , .:.. .!. .!. .!. .:.. .!. , .!. , , .!. .!. .!. .!. .!. ,... ... ... ... •.. UIII III III III to III III to to to III to f1I to to f1I to III to f1I "' QI
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0
• Total market capitalization is Rs.98,31,658 crores as on Dec 31, 2015 at NSE
• Free market capitalization is Rs. 44,35,011 crores as on Dec 31, '2015 at NSE
• About 1700+ companies are listed on NSE
6
EPFOInvestment in Equity - Projections •• Projections of EPFOinvestment in equity market over next 10
years
• Assumptions• Incremental investments in 2016 - Rs. 1,10,000 crores• Incremental investments increase @ 10% till 2025• 5%/10%/15% of contributions invested in equity market
every year
• At end of 2025, equity investment of EPFOcould be about Rs.87,600 crores with 5% yearly investment.
Year In Rs Crs AsOn
Source: Mutual Funds - AMFI, FPI- NSDL
Market capitalization as on Dee 31,2015 is considered
7
:::J<CDV1t"""'t
3CD::Jt"""'t
s: 0Q).,@
""0r+~ t"""'tQ)r+ --(1) 0III
::JV1--::J
z m~ ..QQ)r+m C0c --t"""'t
-<s:OJ...,ACDt"""'t
tn
Global Pension Funds investment in ETFs• Top 10 pension funds based on ETF holdings
!~_~~R&Jt~§Js~ "_"_~;"~_-..::..~ ,,."_.",,. ~. ------ ----_ ___._0rDi0 T~ Pwlsm PlanBoard Ciu1adicpiiiiw5tmOiirBoJr,f-------"-------~·-·--- .."----·-..·-"-~---- ...--- ..-------
Sotne: Tharmor Reuters, U'FGI.
• All the top 10 pension funds have over 70% assets allocation in equity ETF
• 6 out of 10 pension funds have 100% investment in Equity ETFsonly
9
Options for ETFInvestment
BROAD (10) SECTOR (11) STRATEGY (14) DEBT (7)
~ Nifty Bank Nifty Energy Nifty 10 yr BenchmarkNifty Low Volatility SO G-Sec
_:::au:: 1"-
Nifty 200 Nifty FMCG Nifty Services Sector.......... ,.--.,.~-..- ....... --...'" ..,.-.- ..'".~-.-..•.-.- ....
Nifty High Beta 50•••• Nifty 4-8 yr G-SecNiftyl00 Liquid 15 Nifty Media ~ Nifty India Consumption
Nifty Growth Sectors 15
~ Nifty Pharma Nifty PSENifty 15 yr and above G-
Nifty Midcap 100 SeeNifty50 PR tx Inverse
Rlmll i r"",.Nifty Smallcap 100 Nifty Realty Nifty500 Shariah
Nifty50 TR tx Inverse-Nifty50 USD<:';;Jt;tLWtii:;§Uif~
../ ETFs are available ... _---"._._- ....._ ..._._ ............. _._ .._ ..._._ .._ ...__ .._-_._.--_._---Nifty Quality 30 10
-I:c.»zA-<oc
cnzOll»-<"TI::JC CD::J CDc. •.•.tni:~§::J 01» ••••CQCD3CD::J••••"'C
~r-a:.
Asset Allocation Profile of Global Pension Funds (7 largest market, Share in %)
IEqtily .Bonds .other ICash
Australia
Canada
Japan
Nethertands .
SwitzerlandUK
us
P7
• Average asset allocation:42% equities31% bonds2.3% cash24.8% other assets (includes property &other alternatives)
• Australia, UK and US have higher allocation to equities
Equity investment is used as a tool to enhance returns bypension funds globally
Source: Report by Tower Watson - Global Pension Funds Survey 2015 ."!!'~'1.D,!S8Z FUNDS MANAGEMENT PRIYATE LIMIl"EO (A joint venture between set &. AMUNDI)
Factors that favor a structural Bull Market in India
.•"!!'.f!'!t.D.!58! FUNDS MANAGEME:NT PRIYATE UNITED (A joint venture between S8t a. AMUNOI) .&.
en -"CD••••
•
'"e eni(It
Dr:r
0-)Iz
-)I
CD
'"m 3::rm~
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a D)
c::::s
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~,e "....••0
:;,.•.., -0
_.~.
••-.<
edo
~
en;cridodo;::,III011•••lit
Ic:z0....-
Real GDP growth (%) I 6.9
Nominal GDP growth (%) I 13.6
CPllnflation (%) t 10.0
Fiscal deficit (% GDP) I 4.4
CAD (% GDP) I -1.7
BoP (US$ bn) I 15.5
Repo Rate (%)* I 8.00
INR/US$ I 60.7
Brent (US$/bbl) . I 96.2
Bank Credit growth (% ) I 14.9
.!!]~D,!581 FUNDS f'1ANAGEf'1ENT PRIYATf! Uf'1ITf!D (A joint venture between SBX 81 AMUNDI)
Source: SBIMF Research; NB: Green indicates improvement, Pink indicates deterioration; * data is end period
,,-'~
~?Ie
en V) .... .... .... .... .... t-Jat 0 0 t-J -1:=0 0'1 00 0 t-J -1:=0 0'1 00 0•••• c"'" n Dec/76 i--'- c:c:i ~ Jun/77 --j tn
OJ I -!II I0" Dec/77 i :::s:r :::l ::II0Jun/78 i '*'" 3 S»z -,., 0'" i 0'II) Dec/78 1
~ cia :::s:I"T1 Jun/79 3"' 111 0~ Dec/79 ic. a."T1 I CD"'0 c:::J Jun/80 1 ;! c.II> S'
~
... Dee/80 :xlQI a...•. rD111 Jun/81 QI
S»(JQ
C C» :::sDee/81 :::l a.:I~ Jun/82 ~ ."2-10 I Dee/82 (;'- i '<)Ii
Jun/831•... n ;0 ::2;. Dec/83 i S'<Jun/84 j CDGJ
S»i Dee/84 I UJ~ CDa.0" Jun/8S ii !
Dee/8S .jGJ
Jun/86 ~fa::JI/) IOJ Dec/86 "'\...••~:z .... .... •... .... t-Jc ....z 0 t-J ~ en 00 0 t-J ,f:o 0'1 00 00
Dee/76...-Jul/77 ~ c:Feb/78 tn..Sep/78 a:J
0Apr/79 :::s.... a.
0Nov/79 < -e-< 0..• n i'~. Jun/80 ::00:" a:111 II)a: .,
UJJan/81!::xl
Aug/81 rDC» -
I (JQ S»Mar/82 QI :::s:::l a.
1/1 Oct/82 CDROMay/83 i .a
~~O." CVI
~-,~::10 Dee/83
~- :I:Jul/841/1
I~ Feb/8S CD'a.Sep/8S 5"
Q.II)
aZ Apr/86 )(
Ii Nov/86
0 VI .... ....""
t-J W0 0 VI 8 VI 00 0 0 0
eftIII•••""c:i(IS
:r:Itz:ItfIl:rm~••C!<C
5c:r~e""'")10•....0~<'*~ +ae-
i'*••::JIII01•....-Ic:z0...•-
N•en0III....0
"ne
~! -0cn0:r
AI:ItZIt ••·Kl CD:r
"'Cm~ a••Z!
-It_.<••= ccc~:I0;~
0- ::r,.....0I'<(10!iai(tIII::.IIIOJ-SPIc:z0--
Corporate profit likely to bounce back
5.44.7
3.0
1
7.87.3
5.56.5 6.2
Corporate profit toGDP (%)
6.2
-B_---
Market Capitalization toGDP (%)
10395ProfitCAGR
A'f.ffg~.W FYl5-18 of 18% 47------4.3-- .J .lI.g,. A.e .~~
m -=t LO CD
~ ~ ~ ~N m.-t .-t~ it
•••••. 00 en 0 .-t000 .-t .-tit it ~ it it
-=t III W.-t .-t CDit it .-tit
52
W•......-t~
W00.-t~
III
~ ~•.....~LL. ~ ~
88 Average of 76% forthe period
00
~
Earnings growth likely to show cyclical recovery
--lO---- 80------66 -7(1-
.-t.-t~
N.-Iit
~it
III
EWCD•• 4
~~it
Sensex EPS (INR)
.-t~LL.
N
~ ~ ~III
~ ~ ~~~
III.-t~~ ~
.-t.-tit
~it
N.-t~
~it
S81 FUNDS MANAGEMENT PRIYATE LIMITED (A joint venture between S81 a AMUNDI)
Source: MOSl, SBIMF Research
WCD.-tit
IoU•......-Iit
"'D- SBI FUNDSVA •••..••••..Pft_
·3.Attractive Valuations
S8I FUNDS HANAGIEMENT PRIVATE UNITED (A joint venture between set 81 AMUNOI)o)~D,!
Rise in premium for India relative to other emerging markets implies expectations of earnings recovery in coming quarters,
120%
100%
80%
60%
40%
20%
0%
-20%
-40%27-Dec-00 27-Dec-02 27-Dec-04 27-Dec-06 27-Dec-08 27-Dec-10. 27-Dec-12 27-Dec-14
I -MSClindia's PIEpremo WIt MSCIEM I
160%
140%
120%
100%
80%
60%
40%
20%
0%Mar-02 Mar-04 Mar-06 Mar-OB Mar-10 Mar-12 Mar-14
, -MSCllndia - PBrelativeto MSCIEM I
#SBIFUNDS.JJ.,.0•••••_ftrn.ca .S8l FUNDS "ANAGEr-tfNT PRIVATE Ur-tITEO (A jOint venture between S8t &AMUNDI)
Source: Morgan Stanley, SBIMF Research
/
1ft~
aI••••
-." r-ei
--.cIII:r
C,. --z
a.It1ft
--m ~:rm~"IiJa~e~e......)10.....0
l<•i0-
f0-III::II1IIt:It....•Ic:z0....-
Fils have pumped in 93bn in last five years Oils have turned net buyers for six consecutive quarters now
120 1100
80 i60 -/
USDbn1.5 1.6 1.6
-1.0
._-----,------..,- ·r-·--- N 'lit ~ 'lit 'lit II) II) II).........,...., N m m m m.... .... .... .... .... .... .... .... .... .... .... .-f2010 2011 2012 2013 2014 2015 Q. , L , ,~
, , ,~
o!. c!: ,u· c: Q. •.. c: Q. Q.
QI QI 1'0 ::J QI 1'0 ::J ~ 1'0 ::J QII/) 0 :E ...• I/) 0 :E ...• :E ...• 11'1
-Cumulative Fllinvestment (USDbn)
Increased number of Mutual Fund SIPs getting opened508verymonth
450 11400350300 -f
250200150100 ..;50 ..---;----r---,---~--~r_--~--_r--~--~m m 'lit 'lit ~ ~ II) II) II).-f ...• .-f ...• .-f .-f .-f ...• ...•, , , ~ , , , ~ ,
3 u c: Q. 3 u c: Q. 3...•0 ~ « ....0 ~ « ....
.4!!!!!'!!.D,!
o.-f N N N N m m.-f .-f .-f ...• ...• .-f .-f, , ~ , , , ~u c: Q.3u c: Q.o ~ <C ..•• 0 ~ «
- FreshSIP.Qp.eoedjr.l.~JIIQnthUn'OQQ$) ._ __ .. .__
581 FUNDS MANAGEMENT PRIVATE LINITED (A Joint venture between S8! I: Af!iIUNDI)
Source:MOSL, SBIMF Research
• Last cycle savings attracted by physical assets
• Financial Assets as % of savings are just 45% - only 4%of these are in equities
• Equity flows would track the equity returns and theexcess returns of Equity over Gold have turned positive
• Improved attractiveness, government measures toaugment financial savings and Interest of domesticinvestor in Equities provides for a long term bull case inIndian Equities.
Source: Sebi, BSE, NSE, Morgan Stanley, Bloomberg
13% -Share of Equity Investments in Total Financial Asset at Cost11%
9% .
7%
5%
3%
1%
%~~~~~-~~~~-~~~~-~~~~-~4 ~~~~~~~~~~~~~~~88~8.~~~_______________ NNNNNNN
~~~~~~~~~~~~~~~~~~~~~~
40% 1.0%
-0.5%
30%Excess 5-yearCAGR Equity Returns
over Gold 0.5%
10%
-2.5%
20%0.0%
-1.0%0% I , 'IU \,11 -,\.A ,Jr;t? 1,/l.I. , ,A.
-1.5%
-10%-2.0%
-20% Excess Equity Savings over. gold(RS)
-30%
81 m.•... .•...
-3.0%
~ ~8 0 N ~
N ~ ~ ~
.!!!,~D,!§•.. m.•... ~ ~
S81 FUNDS MANAGEMENT PRIYATE UNITED (A joint venture between S61 • AMUNDI)
III
~cze•..•...,
• •0-
~ 0- ro -I-< Q.) ..a zr(JQ ro ~ c ro0
0- i3": - ~0- ro :::J -< roru ro' O'Q :3 O'Q
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(JQ -. n 0ru ~ - :3ru ::::!. 0 ro(JQ ::::s ::::s 0.. n0 O'Q :3 0 :::;'0 - ro co, ::::r ::; --; :::Jro ro r-+ ru:3 "::; ro OJ ~,..,. ::::s ::::s OJ 0....• --;-< 0.. 0..
A C..0 ro e-+0 0C -"0 -h
Vl ::::sU ro OJ
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(!) ro :3VlOJ OJ'< :30.. ., .....•
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00.....• ~ ::; OJ 0..0-:::J ::::s O'Q 0 ,....,.
O'Q Vl -<< cro ....• Vl ...-t' ~OJ CDVl 0- Vl -'- OJ .-to OJ0 ro Vl -. '""., n 0 ro AVl -c ::; Vl (!)Vl .-to~ n OJ Vl- ro ., ::;ro O'Q::::r ru rr ro
0::;
A OJ 00.. ro -U:::J~ 0O'Q - -<::::r n::::r ro r+ m .-to
0 n 0 nVl ru....•C A ::::rN .....• m m0 , ro ro:::J ro U ro <::; A- mVl- 0 ::::sVl c 0 -.-to , -h Vl.....•
:3 n OJroVl 0 ::::sVl OJ ., 0..., U::::s A 0 ...•...
m ., a.;o,r-+ a.;
C Vl .-ton ro ::;m a.;C0..
::;0.. Vl
Long Term Performance of different instruments-CNX Nifty Index -Crisil CompositeBondIndex
- CrisilShortTermBondIndex -Crisill0 yearG-secIndex0 4500•••• 4000••
"'0 350(IIenra 300.aI(II 250•••en(II
200:s-~ 150 .
100Jul-05 Jul-06 Jul-07
386
210,'-192
182
.r---- ..--.----r-------.----,---~-.____r
Jul-08 Jul-09 Jul-ll Jul-15Jul-10 Jul-12 Jul-13 Jul-14
nstrument Name CAGRReturns
NIFTY 50 INDEX 14.46%
CRISIL Short Term Bond Index 7.70%
CRISIL Composite Bond Index 6.74%
CRISIL 10 yr GSEC Index 6.17%
Source: Bloomberg. SBI Funds Management Private Limited .)!!!J!LN..•D!S81 FUNDS MANAGEI"fENT PRIVATE LlNITED (A joint venture betwun S8X Ii AMUNOI)
90%
80%
70%
." 60%GIE 50%.-';I. 40%
30%
20%
10%
0%Negative Returns
Oaily.rolling returns - 2005 -2015// »:>
,,I::,,,,,,,,,i,,.\.,,.,-. '
.3 years
.5 years
• 7 years
• 10 years
0%-5%---,~,
5% - 10% \~O% - 20% .Return range '<. .•................ ;
20%-30% 30%& above
• By the very nature of it, equity investments, tend to be volatile in short term• The volatility of equity investment is inversely proportional to its holding period• Longer the holding period, lesser the chances of negative returns• As shown above, investors who have had a holding period of 10 years, have never made negative
returns, and have the highest probability of making returns over 10% CAGR
581 FUNDS MANAGEMENT PRIVATE Uf'tITEO (A joint venture betw,een S8E & AMUNOI)O)f!l.!!.'1D.!
rvo of times sap ISE Sensex has given apositive return
Clan 1980 - lan 2016)100% 190% 180%70% -60% ~50% ~
400/0 i30% 120% ~10% I0% l--------'----1 - ,-----, ---;----r--'---;--T-T--T---""---T--r-r-T--r-T-T----I --r-T-T--r -r--r--r----r --T--r---T--'----
£ £ ~ ~ ~ ~ ~ ~ ij ij ij ij ~ ~ ij ~ ~E E ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ t ~~ ~ ~ M ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~ ~ M _ N N N N N
Hotding Period
std Deviation of Sensex returns by HoldingPeriod (Jan 1980-Jan 2016)
40%35%30%25%20%15%
10%
~:lI I I. I I ••• _ ••• I =..I ••••• I I i-' i. i'£. ..cu "'"'E E 15 IrJ L L L L L L L L L L
CJ 10 10 10 co •• I\J I\J CJ IIIQ.1 tJ tJ CJ Q.1 CJ «J • CD QI QI tJ>. >. >- >. >- >- >- >. >- >. >. >.I"- 01 ...-t Pl U) ••••• 0\ ~ P'I If') ••••• 01...-t ...-t ...-t ...• ...• N N N N N
Ia II Ia" G.I ">. >- >.
••• Ii) •.•• 1"1 It}
Holling Period
• Risk and return are directly related to the holding period of investment• In the long term, the chances of making negative return diminishes• Risk, defined by standard deviation, shows a decreasing trend as the holding period increases
.!!.f!!.~o.!S8X FUNDS MANAGEMENT PRIVATE LIMITED (A joint venture between S8t • AfI1UNDI)
Staggered investment relieves invesitors from the pressure of. guessing themarket direction
20%
15%
10%
5%
0%
16.82%
12.39%
Fixed Investmentevery year at lowest
Sensex value
Fixed Investmentevery year at highest
Sensexvalue
Fixed SystematicInvestment
• The differential between the best timed investment & systematic investment is only 4.43% in10 years.
• However, if the investor gets the timing wrong, and invests at" market highs", he wouldunder perform systematic investment by the best timed investment by 3.49%
#SBIFUNDS.JJ,.0...,..-_Pft .•!iBI FUNDS MANAGEMENT PRIVATE UNITED (A joint Yenture between Set 8IAMUNDI)
Small money grows big overtime if the investment is systematically staggeredover a period of time, vis-It-vis one time investment
800,000,000
700,000,000
600,000,000
500,000,000
400,000,000
300,000,000 ~
1200,000,000
100,000,000
•••68.17 Crores
o"'14.08 crores
,--'---'--1- ---,-,--,- r --I '-I --,-I -,-- 1 -r- r---, r--, ,-----I- --r- .,
1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930
-8% Growth -12% Growth -16% Growth
Total amount invested in 30 years Is 3.6 crores
Assumptions: Rs.1,OO,OOOinvested every month in Instruments giving 8% p.a, 12% p.a & 16% p.a compo~ returns
0... !!,I!1'~DlSBr FUNDS MANAGEMENT PRIVATE UHITED (A joint venture between sa! •• AMUNOI) &
Price Volatility
Short term volatility does not effect long term goal and wealth creation plan.
Staggered investment is a strategic and disciplined approach to investing.
25000
5000
20000
15000
10000
o +---~--~--~----r---~---r--~--~----~--~---r--~----~--~--~--~--~----1995 1996 1997 1998 1999 2000 2001 20022003 2004 2005 2006 2007 2008 2009 2010 2011 2012
581 FUNDS MANAGEMENT PRIYATE UMITEO (A joint venture between SBt I. AMUN01).~D.!
Market Timing
No need of market timing as a staggered investment strategy removes emotion out of investing.
Staggered purchases more units when the prices are low and less units when the prices are high.
This cost averaging takes care of market timing for you.
23000 121000 i
9000
Rs. 1,00,000/-buys 4.92 units
of Sensex19000
17000~x
15000
13000 .
11000 Rs. 1,00,000/-buys 6.82 units
of Sense x7000
5000 +----,.---....,------r---,-. ,.----- - -~-1 ,----_ .._,Rs.1,00,000/-
buys 11.62 unitsA~r - 09 J~I_~se8c!~~Jan- 07 Apr - 07 Jul- 07 Oct - 07 Jan- 08 Apr - 08 Jul - 08 Oct . 08 Jan - 09
S8I FUNDS MANAGEMENT PRIVATE UHITEO (A joint venture between S6t a AMUNOI).)!!'!!'!1o.!
Performance of EPFO Investment as on NAV dated December 31,2015
Scheme name I ETF Cost (Rs. in era) NAV based Valuation I Profit! Loss (%)(Rs••n era)
Nifty 959.2 - 955.06 -0.43%CBT-EPF-11-V-DM L Sensex 312.49 310.02 -0.79%
Total ~271.69 1265.08 -0.520/.
Nifty 2025.97 2019.26 -0.33%CBT-EPF-05-V-DM l Sensex 660.47 656.09 -0.66%
Total ~686.44 2675.35 -0.41%
Total Portfolio I I 3,958.13 I 3,940.43 I -0.45%
Point to Point returns from Aug 05, 2015 to Dee 31, 2015
S81- ETF Nifty 50 -6.9487%Nifty 50 TRI -7.0289%Difference 0.0802%
S81- ETF SENSEX -7.1978%S&P 8SE SENSEX TRI -7.1783% ..'
Difference -0.0195%
Tracking error* from Aug 05,2015 to Dee 31,2015
ETF Annualized
SBI - ETF Nifty 50 0.0422%
SB. - ElF SENSEX 0.0975%------
Investing in a staggered manner; has resulted in a reasonable rupee cost averaging, hence, remaining fairlyresilient against the market volatility
Source: Intemal Calculations* tracking error for SBI- ETF Nifty 50 & SBI- ETF SENSEX is calculated since inception of EPFOs investment and for is for period ending 31" Dee 2015
0--SBI FUNDS_ ~OIllllU •• _ft' Pft_S8r FUNDS HANAGEHENT PRIYATE UNITED (A joint venture between S81 a AMUNDI) ~
-It
~Ic:z.e-
Passive Allocation
• 581- ETFNifty: current investment• 581- ETFSENSEX: current investment• 581- Nifty Next 50
Smart Beta
• 581Enhanced Index fund - Maximum sharpe• 581Enhanced Index fund - Minimum variance
Actively managed
• 581Magnum Equity fund• 581Blue Chip Fund
S8! FUNDS MANAGEMENT PRIYATE LIMITED (A joint venture between S8t •. AMUNOI).~D,!
S81- Enhanced Index -Maximum Sharpe ratio
Benchmark: NIFTY 50Inception date: Awaiting approval fromregulatorFund Positioning: Weights stocks withinNifty 50 to achieve the maximum possiblerisk-adjusted portfolio performance
6.25
S81 - Enhanced Index - MinimumVarianceBenchmark: NIFTY 50Inception date: Awaiting approval fromregulatorFund Positioning: Minimises the portfoliovolatility based on correlation & volatilities in theIndex constituents
21.55 14.53
6.69
Source: Internal Calculations, One year returns are absolute, returns for period above one year are CAGRBack tested data .)!!J~...D,!
S8l FUNDS MANAGEMENT PRIYATE UNITED (A joint venture between S8t 81 AMUNOI)
SBI Magnum Equity Fund SBI Magnum Blue chip FundBenchmark: CNX NIFTYInception date: Jan 91Fund Positioning:- Pure large cap fund - invests 90-100% ofits assets in large cap stocks.
Key Parameters (as on 31st Dec 2015):- Assets under management: 1281.27Crores
Benchmark: S&P BSE 100Inception date: Feb 2006Fund Positioning:- Pre-dominantly large cap fund withup to 20% in mid cap stocks '
Key Parameters (as on 31st Dee 2015):-Assets under management: 3634.32 Crores
4.78 4.29
16.1
5.35
10.09
5.31
15.1315.47
10.12 10.84 13.093.01
Source: MF/E
SBI FUNDS MANAGEMENT PRIVATE LtP'lITED (A joint venture bet¥fun· SSI • AMUNOl).!!..~f1D,!
·Established in 1987: A leading asset manager in India
ostate Bank of India Amundl
A$$IfNAW4lIItII..,.
AUMUSD 14. 81 bn
"----- ..0-.581 FUNDS..~ MANAGENaltMLm
63GA, 37% ExtensiveProductRange
• INR 1,00,055 Cr in AAUM as on end December 2015 across different schemes.
• Investment team of 33 professionals with strong track record
• Broad customer base with tV 41 Lacs folios
S8l FUNDS HANAGEI'IENT PRIYATE UP1ITED (A joint YentuNl between SSt &. AMUNOI)Source: S81 Funds Management Private Limited1 USD = INR 62.59 as at March 31, 2015
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[ - Gr~u-pAc:I~~ntage I I Process I r -- Expertise ILRisk Management I
• 28 years of experience in assetmanagement with a strongparentage
• Leverage on strengths of bothstakeholders to achievequalitatively superior business
• Extensive Distribution networkand Strong Relationships withdomestic and internationalinvestors
• Structured and disciplinedprocesses to ensure effectiveexecution of strategies
• Rigorous investment templatesin place for each strategy
• Flexibility to tailor solutions andadvisory assignments
• Proven expertise inmanaging strategies acrossasset classes
• In-depth understanding ofbusinesses and stronglinkages with companymanagements and sell sideanalysts
• Strong in-house researchprovides depth and breadthof coverage resulting insuperior stock selection
• One of the leading riskmanagement capabilitiesin Jndia: six memberindependent team
• Risk management alignedto international standards
• Emphasis on coherence inrisk monitoring &transparency in reporting
O)!!I.a!.'!.D!S81 fUNDS MANAGEMENT PRIVATE LIMITED (A joint venture between set &. AMUNOI)
Thank You
.)!!I.a-..~D!.S8t FUNDS MANAGEMENT PRIYATE U •••rn:O (A joint venture between saE a AMUNDl)
any mutual fund
or implementation of an
estimates included here
Management Private
it, accepts any liability arising
and take their own
ts carefully
BI and AMUNDI)I .
I
~D·S8.FUN".AllIN.• _If pn.
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C~~ --!» •••-e~0 --~0) :::s
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For Internal Use Only - Not For External Distribution
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Key messages _CRISILRESEARCH
• High inflation caps real returns from fixed income instruments •••
• Equity aligns with long-term investment horizon of retirement funds •••.
• Globally, pension funds have average 30% exposure to equities •••
• Allocation between Sensex and Nifty ETFs
• Comparison of investment options under equity •••.
• Need for higher allocation in equity •••
••• ji!i
J.fII2-<3
=::Ji.f
--_ .._--_._--_._--------------------------------------------
High inflation caps real returns from fixed incomeinstruments
-C81511..-RESEARCH
• EPFO's investments are primarily in debt instrumentsSince 1990, average retail inflation has been 7.250/0, resulting in real return of 3%
Real returns were, in fact, negative during high-inflation periods
EPFO·declared interest rate versus CPllnfiation rate14%
12% I ~ x ~
10%
8%
6%
4%
2%
0% ~----------.------------r----------_,------------r_----------~----~----~1990 2002 2006 2010 20141994 1998
-o-Retail inflation rate -EPFO declared interest rate
~
iI.f~Ib8!J.f
••
•• ---------,--~--------~~.,-.---.-- ---+.-_. -.--------- .••-.
Equity aligns with long-term investment horizon _CRISII...RESEARCH
I •..- ~ ~.. I. i i J ;- n; i i ) i·'. j ). .,. i i i j i j. -10%
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~. ~.-~/~ ~ ~ ~ ~ ~# # # # # # # # # # # # ~-.# # s # ##~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~-s ~ ~ ~, -s ~ ~ ~ -s ~ ~ ~ -s ~ ~ ~ ~ ~ ~
-sensex index -GDP growth(%) (RHS)
35000
30000
25000!D.CD> 20000J!><CD",CCD 15000UJwtnOJ11. 100000/5tn
5000
0
20%
-~-.s~
I!
i ~i!iQii11.EQ
~C)
•..0IL()ZI~c0I:::IiiES..5•..0IL
15%
10%
••••••••••••••.......,..I •••••• •~......... :
.............. .••
:"••••••,.5%....•••••••• : ~ 0%
•• •••••
-5%
• Long-term trend for equity investments is positive despite market cycles
• Equity markets map GDP growth
~-.-----.-----
India's long-term attractiveness remalnsIntact _CRISII...RESEARCH
GDP (%, yOY)7.3
6.4
2012 to2014
Source: IMF
2015
India
7.6 7.6
6.2
4.9 5.0 .
6.8
4.0 i:eis~!.fiIbc5~
2012 to 20152014
China
2.0 2.1
1.4 I I___1__ ..._ •...2016 to 2012 to2020 2014
2015 2016 to 2012 to 20152020 2014
i
2016 to '2020
Emerging market and developingeconomies
Advancedeconomies
iiES.5.f
• One of the fastest growing economies with increasing discretionary spending
• Vibrant domestic demand: 59% of GDP is dependent on domestic economy
• Over 50% of India's population is aged below 25 - a large number in a high-spending age group
Volatility reduces over longer investment horizons _CHISILRESEARCH
• Equity (S&P SSE Sensex) has given average 15% return since inceptionA
The risk of loss decreases as the investment horizon increases, as seen below
c 5%0~i 4%'g
'E3%CII
'gCS
2%tn
1%
0%10 years
'ii~ 7%e~ 6%CII~
9% Volatility of S&P BSE Sensex reduced over long term
c
~1bI.f~Ibs!j.f
8%
15 years 20 years 30 years25 years
"CAGR 20-year rolling return since 1979
No negative returns over 15 year period _(81511...RESEARCH
• Sensex has not given negative return in any 15 year period93% of times returns are more than 10%
• Sensex has generated 10% plus returns 4 out of 5 times in 10 year periods
Distribution of 15 year returns70%
60% -i""
50%
40%
30%
20%
10%o ~v ~ :x>s _nO~ f f f 0
Distribution of 10 year returns33%35%
30%
25%
20%
15%10% -I "..,.
5%
0%-5~~ ·..fI§\I;)~\I;)~\I;) ~\o..f8\I;)"(i5\o.~'f!.~\I;)~\I;)-.~\O
J,. ,0 ,0 '" -c ~ t); .~ -s ~ ~0\0 0\0 ,0 ,0 ,0 ,0 ,0 ,0 ....0 '1" ~ <Jg\0~\O <8\0 ~\o ~\O ~\o ,~\O, "''' ~ ~J ~ ~J
57%
o<Jg\O..........<3\0."$\0. ~\o i),,~\O.....n;,~\O'\~ ....0 ....0 ....0 ....0 ....0~\ ,2\0 ~\O <8\0 ~\o r:s\0
~J "" " ~ .,;:
• Risk-adjusted return increases with widening of investment horizon
Iii
~.eIIb8!~~.e
..__ ._--.._.__ .__ .,_.- ,,-----._.'----------_._._------------_._-
Equities integral to global retirement industry _CRISII...RESEARCH
• A preferred investment class around the world ...
Equity exposure of pension funds (in %)70605040
30
20
10
0:g I VI cu cu E .~
c: cu cuS ~
"0 cu c: :s~
cu 0 Q. :cg "0 E.•... c: C) Q) cu oen U'I cu :::!! -" 0:::J o c: 0"0 ~ 52 0;S c: o
"0~'c .m::l 'c C)
:::> c:0::r:
• ... equities help spruce up returns significantlyAverage real return of select DECO countries was 3.9% in the five years to 2014,compared with 0.11% for Indian PFs
.~ ~ C 'C.Q c:
'1: e! .mIII :( 'a;
:5 Q) s::::J ~
....0en c.m
VIVI::::J0:::
c~jc
j.f~Ibc5~~~.fSelect non-OECD countries
Average median age: 32.8 yearsSelect OECD countries
Average median age: 38.8 yearsMedian age of theworld: 35 years
*Source: aECD Global Pension Statistics, CIA 2013; A Category includes loans, land and buildings, unallocated insurance contracts, hedgefunds, private equity funds, structured products, other mutual funds (i.e. not invested in cash, bills, bonds, or shares) and other investments,world average indicates average equity exposure among countries depicted in the above graphs
Case study - California Public Employees' Retirement _CRISII...System (CaIPERS) RESEARCH
• USA's largest public pension fundEstablished as "State Employees' Retirement System" in 1932
- Pension fund serves more than 17.2 lakh members
- Total fund market value as of November 2, 2015 is $295.6 billion (Rs 19.32 lakh cr*)
• 620/0 of assets in equities, 200/0 in fixed income and 11% in real assets
• A time-weighted return of 18.4% in FY14- Strong returns in global equity and real assets bolster performance of fund
Ii!liii
I&iIbco~~J!.E.f
* Rs/USD rate of 65.4793 ** Trust level includes absolute return strategy; multi-asset class; overlay, transition and plan level
Case study - The Ontario Teachers' Pension PlanBoard (OTPP)
_(8IStl...RESEARCH
• Defined-benefit pensions for school teachers of the Canadian province ofOntario- On January 1, 1990, Ontario government created OTPP as an independent organisation'
- Pension fund serves more than 3.11 lakh members
$154.5 billion in net assets as on December 31,2014 (Rs 9.78 lakh cr*)
10.2% average rate of return since 1990
• .45% of assets in equities, 43% in fixed income and 23% in real assets
iEf
Jaf~Ibc5!iii
jaf
**money market asset class provides funding for investments in other asset classes* RslUSD rate of 63.3315
Allocation between Sensex and Nifty ETFs _CRISII...RESEARCH
• . Equity allocation by EPFO is being managed passively
i • EPFO currently invests 5% of incremental flow into equity through ETFs- S81 ETF Nifty 50 :'75%
- S81 ETF SENSEX : 25%
• Sensex and Nifty have varying performance across timeframes- Difference in performance is as high as 6.78% in FY-2010.
Return during the financial yearIndex
FY-06 FY-07 FY-08 FY-10 FY-11 FY-15FY-09 FY-12 FY-13 FY-14
~. : .... .Nifty 50 67.15%
bsolute difference 6.58%
...-
c~
IoI&~I~coI::>~Jl.5
&
Comparison of investment options under equity _t81SII...RESEARCH
Direct equity• Alpha generation throu~h active fund • Requires infrastructure and
• Risk-adjusted return,management dedicated investment &
(through selection of • Company and sector• Cost of fund management could be research, and risk
portfolio concentrationlower than expense charged by equity management teams
manager/managers) • Liquidity riskmutual funds
c.2:;:eisiiE
!..0u,15zI~
• Returns close to underlying c0
• Equity expertise of not required as index with no potential to • Assets under aExchange traded
;:)
fund is managed passively generate alpha managementiiE
funds I Index funds• Tracks the performance of market • Compulsory exposure to • Tracking error ~..
(SensexlNifty) 0
index sectors or stocks with negativeu,
outlook
• Professional active management can generate alphaCRISIL- AMFI Equity Fund Performance Index outperformed Sensex INifty by 9.75-10.18% annually since April 1, 2001 ••
CRISIL- AMFI Equity Fund Performance Index has never given negative return for any5 year period since April t, 1997
-CRISIL.RESEARCH
Need for higher allocation in equity (1/2) _CRISILRESEARCH
• Investment between 50/0 and 15% allowed in equity
• Minimal impact of equity on overall potential return with 5~15%exposure
• Globally, average 30% is the allocation to equity by pension funds ~- With 15% incremental allocation to equityoverall allocation to equity will reach 30% by
2060 (in line with global average) .
• Other models for allocating funds to equity .- Life cycle option - based on age of investor
- Choice of allocation to equity left to investor. \
in equity
nt
r and previous yearc x in 75:25 ratio j0~~i!f c~ ~! !~If
her by 0.78%~
~u,'0zI I.
b bc0 c
0~. higher than actual I;:)'ii
~ES S.E .E~0 ~u. 0u,
•••
PRESENTATIONslTO EPFO ON··INVESTMENT IN SHARES
Rama Koteswara Rao18th January 2016
I
New Delhi.
-.---~------ - ------_.Cell : 93939 21515
,1'-1
"'-A. RAMAKOTE~~!~~~. r.
· AGENDA
• Characteristics of Shares
• Role of Shares in Long Term Investments.• Implementation of Share Investment in EPFO
• Recommendations
CHARACTERISTICS OF SHARES• Shares represent OWNERSHIP of the Company
- Shares are not money lent to the Comp-any• Shares are LONG TERM investments
- Accounting Basics:Companies are a "Going Concern"- No Terminal (Maturity Date) for Shares
• No Guarantee of Fixed Return (e.g. Interest on Bonds orDividend on Preference Shares)- Dividend Payments depend on company performance
• As SharehoJde s, we are LASTin the line for Cash Flow of thecompany after: Employees (Salaries), Banks (Interest) andGovernment ( axes)
• 501 what Shar holders are entitled to?CAPITAL GAINS B MEANS OF SHARE PRICEAPPRECIATION IFTHE COMPANY P RFORMS WELL AND GROWS WITH TIME
SHARES AS LONG TERM· INVESTMENTSENSEXRETURNS,Starting, 31st December YEAR,Ending 31st December 2015--. • Dividends add about 1..2% to the return
• Years.of Negative Returns2015: -5.1% China Crisis2011: -24.6% Emerging Market crisls2008: -52.4% Global Financial crisis2001: -17.9% USRecession2000: -20.7% .COM Bubble Burst1998: -16.5% Asian Financial Crisis1996: -0.9% Political uncertalntv1995: -20.8% Stock Market scam1987: -15.7% Drought1986: -0.5% Weak Economy
HOLDINGPERIOD
Peri '""
As can be seen, with long holdingperiod, Share Market.has givensignificantly more return than FixedIncome investment such asGovernment Securities or Debentures
Implementation of Share Investmentin EPFO
• Share Investments should initially form a,smallportion of the overalJinvestment
• It should be gradually increa·sedwith time• 'It should be increased in weak market periods
This helps to acquire shares at low price
• EPFO must adopt a LONG TERM Jnvestrnentapproach to Share Investments
I'
INVESTMENTS IN• Negative sectors & High -Debt companiesshould be avoided .
. • Selective stocks with focusonsustainabJegrowth should be considered.
• Support and resistance levels of each tradesession should be considered beforeinvestment
• Hedging mechanism for the existing stock'should be followed to reduce Jossthrough calloption mechanism.
I
• Dependence on single source for investmentsis undesirable.Differentsources for bear/bullmarket operations of investment should befollowed.
• The "KEY ROLE " played by fund managershould be evaluated.
•
,.,.:fI .1.••••••
~
,fi ",, .
"
MODEL INVESTMEN,T SUCCEfi~STORY. ,~,
~ In August 2015, LIC of India, subscribed for Indian Oil Corporation FPO and got allotment atRs. 387 per share. ,', "
~ The present market price is Rs. 435 despite the down fall of the market.,.
~ LIC has got 12.5% appreciation in five months i.e. annualized ~O%.
~ Both LIC and EPF are similar long term investors wi~ sirrjil,.arresources.
> Investment thro ETF/SIP are detrimental to such subscnPtF:...
~ Disinvestment of coal India is on the anvil and good investrient opportunity.:. :
~ LIC may be looked at as a suitable mentor for EPF equity .participation.
~.
i1 ..~