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HSBC Capital Protection Oriented Fund – Series II (HCPOF II)
New Fund Offer: 17 March – 23 March 2015
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Equity: Look ahead
Fastest growing economy: India is one of the fastest growing economy in the world and
the growth expected accelerate in the coming quarters
Improved macro stability: India’s macro outlook has improved over the recent months
with a fall in inflation and lower current account deficit
Union Budget 2015-16: The Union Budget announced measures to revive manufacturing
& infrastructure sector and laid down a road map towards fiscal consolidation
Investments: Announcements made in the budget is likely to kick-start the capex
investments (to be led by government and the Public Sector Undertakings (PSU’s)). This
could unleash a multi-year cycle
Revival in earnings: Strong corporate earnings growth is expected to drive P/E ratings
Valuations: Indian equities valuation are currently above historical averages, but an
economic recovery is expected to drive earnings and structural reforms could trigger a
further re-rating of Indian equities
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Considerations of the Indian investor…
By tradition, the Indian investors are risk averse and inclined towards relatively safe investment options
Post the Global Financial Crisis (GFC) and its impact on world equity markets, Indian investors, seem
to have settled for lower risk investments and capital surety over higher market linked returns
Indian investors remain in sweet spot as equity markets are doing well and interest rates are starting to
come off providing opportunities in both equities and fixed income
Expected interest rate cuts and falling inflation can support a rally in the bond markets
A gradual return of capital and an enabling environment can unleash a multi-year equity cycle
However near term risks in the form of uncertain global markets, entrenched infrastructural problems
and high interest rates can delay the progress for an indefinite time
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… reflected in the investment trend
Investors prefer fixed returns instrument over market linked returns
Over the long term equity as an asset class tends to outperform other asset classes and provide
real (inflation adjusted) returns
However, equities command a very small mindshare of investors
Source : Reserve Bank of India, Currency - INR
Expected average savings for 12th Five Year Plan (2012-17)
Asset Class Performance* Asset Class Distribution : Individual
Wealth
Period : FY90 – FY14, Source : CLSA, Currency – INR
*Real Estate data not available
0 5 10 15 20
Inflation
Gold
Bank FD
G Sec
Equity
6.5
9.4
9.6
9.3
15.9
%
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However, equities are reasonably attractive
Valuations are marginally higher than historical averages, but possibility of an earnings upgrade
makes the equity markets an attractive proposition
Source:Motilal Oswal Securities Ltd data as of February 2015
Can we generate real returns while aiming at
capital protection?
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Capital Protection Oriented Fund (CPOF) – key points
Long term investment horizon
− Investors should have a long term perspective since CPOF are close ended schemes with
maturity period of 3 years
Who should invest in CPOF?
− Investors who wish to participate in the equity markets but at the same time wish to safeguard
their principal – a win-win proposition for the investor
− Investors who would stay invested for the entire tenure of the fund, since the fund is close-ended
in nature
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HSBC Capital Protection Oriented Fund – Series II – Plan I is a 1195 days close ended fund that
aims to offer capital protection and capital growth by participating into high quality debt and
exchange traded index call options.
The scheme is oriented towards capital protection & seeks to protect capital by investing a portion
of the portfolio in good quality debt securities and money market instruments
It seeks to provide capital appreciation by participating in the equity market through call options
The invested securities would mature on or before the maturity of the tranche under the scheme
The scheme is “oriented towards protection of capital” and not with “guaranteed returns”. The orientation towards
protection of the capital originates from the portfolio structure of the scheme and not from any bank guarantee, insurance
cover, etc.
Presenting HSBC Capital Protection Oriented Fund – Series II – Plan I
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Product Features
The product is oriented towards capital protection and seeks to provide an upside return through equity
participation
Major portion of the portfolio (>80%) will be invested into AAA rated bonds or equivalent which aims
towards achieving capital protection and pays for expenses
The remaining assets are invested into “over the term”* Nifty call options which creates resultant
equity participation
Expense Ratio: Upto 2% p.a.
Rated CRISIL AAA** (so), by CRISIL. Instruments with this rating are considered to have the highest
degree of safety regarding timely servicing of financial obligations and carry lowest credit risk
For further details on investment strategy, asset allocation and investment pattern please refer to the Scheme
Information Document.
*“Over the term” means, largely over the duration of the existence of the scheme.
** Refer to rating disclaimer at the end of the presentation
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Key risks associated with HCOF
The fund is oriented towards Capital Protection and not with “guaranteed returns”, however following
risks are to be considered:
Credit risk - There is a risk of default by issuers in the portfolio
Interest Rate risk - As with all debt securities, changes in interest rates may affect the NAV of the
Scheme
Liquidity risk – While the scheme will be listed , this does not necessarily guarantee liquidity and
there can be no assurance that an active secondary market for the Units will develop or be
maintained
Restructuring/rescheduling risk – Risk on account of the issuer restructuring/re-scheduling a
particular debt/money market instrument held in the portfolio which could result in the maturity of the
instrument going beyond the Maturity Date of the scheme
Derivative Exposure Risk - The Fund will have derivative exposure limited to buying call options as
per the construct of the scheme. Pricing of the option may depend on implied volatility at the time of
maturity.
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Key Features
Investment Objective To seek protection of capital by investing a portion of the portfolio in high quality debt
securities and money market instruments and also to provide capital appreciation by
investing in equities through NIFTY (Index) Call Options.
However, there is no assurance that the investment objective of the Plans under the
Scheme will be achieved. It neither assures/ guarantees any returns nor does it provide
protection of capital.
The Plans under the Scheme are “oriented towards protection of capital” and not with
“guaranteed returns”. The orientation towards protection of capital originates from the
portfolio structure of the Plans under the Scheme and not from any bank guarantee,
insurance cover etc.
Rating The proposed portfolio structure has been rated ‘CRISIL AAA (so)’ by CRISIL, a SEBI
registered credit rating agency, from the view point of assessing the degree of certainty
for achieving the objective of capital protection. The rating would be reviewed on a
quarterly basis.
Minimum Investment INR 5,000 and multiples of INR 10 thereafter during NFO period only
Fund Manager Sanjay Shah (Fixed Income) and
Amaresh Mishra (Equity)
Benchmark CRISIL MIP Blended Index
Maturity 1195 days from date of allotment
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Product Labeling
HSBC Capital Protection Oriented Fund – Series II [HCPOF] – Plan
This product is suitable for investors who are seeking*:
Capital protection and capital appreciation linked to equity market at the end of long term
Investing in high quality rated debt securities and money market instruments and
equities through NIFTY (Index) Call Options
Low risk (Blue)
* Investors should consult their financial advisers if in doubt about whether the product is
suitable for them.
Note: Risk may be represented as:
(BLUE) investors understand that their principal will be at low risk
(YELLOW) investors understand that their principal will be at medium risk
(BROWN) investors understand that their principal will be at high risk
Thank You
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Important Information
The Units of Plan II will be listed on the National Stock Exchange of India Ltd. (NSE) / any other Stock Exchange. Investors can
purchase / sell Units on a continuous basis on the Stock Exchange(s) on which the Units are listed. As the Units are listed on the
Stock Exchange, the Plan will not provide redemption facility until the date of Maturity / Final Redemption date.
NSE Disclaimer: It is to be distinctly understood that the permission given by NSE should not in any way be deemed or construed
that the Scheme Information Document has been cleared or approved by NSE nor does it certify the correctness or completeness
of any of the contents of the Scheme Information Document. The investors are advised to refer to the Scheme Information
Document for the full text of the ‘Disclaimer Clause of NSE’.
“The rating of ‘CRISIL AAA(so)’ is pronounced as ‘CRISIL Triple A (Structured Obligation)’. The assigned rating is valid only for
HSBC Capital Protection Oriented Fund - Series II (Plan I to Plan IV). Instruments with this rating are considered to have the
highest degree of safety regarding timely servicing of financial obligations. The rating is not an opinion on the stability of Scheme’s
net asset value (NAV) before its maturity date. CRISIL’s capital protection oriented scheme ratings are not recommendations to
buy, sell or hold a fund or scheme.
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Disclaimer
This document has been prepared by HSBC Asset Management (India) Private Limited (AMIN) for information purposes only and
should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information
contained in this document (including that sourced from third parties), is obtained from sources, which AMIN/ third party, believes to
be reliable but which it has not been independently verified by AMIN/ the third party. Further, AMIN/ the third party makes no
guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such
information. The information and opinions contained within the document are based upon publicly available information and rates of
taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of
AMIN only and are subject to change without any prior intimation or notice. It does not have regard to specific investment
objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek
financial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed
or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither
this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in
certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are
required to inform themselves about, and to observe, any such restrictions.
© Copyright. HSBC Asset Management (India) Private Limited 2014, ALL RIGHTS RESERVED.
HSBC Asset Management (India) Private Limited, 16, V.N. Road, Fort, Mumbai-400001 Email: hsbcmf@hsbc.co.in
Mutual fund investments are subject to market risks, read all scheme related documents
carefully.
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