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Tata Balanced Advantage Fund - NFO Presentation
Tata Balanced Advantage Fund - NFO Presentation
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2
THE MARKET PSYCHOLOGY MATRIX
High
Complacency Uncertainty
(High P/E & Low (High P/E & High
Volatility) Volatility)
Market P/E
Disinterested
Fear
Market
(Low P/E & High
(Low P/E & Low Volatility)
Volatility)
High
Low
Market Volatility
3
THE MARKET PSYCHOLOGY MATRIX AT PLAY
Uncertain Market
(High PE-High Volatility)
Dec 2007 – Jun 2008
70
10900
Disinterested Market
(Low PE - Low Volatility) 60
Fearful Market Nov 12 – May 2013
8900 (Low PE - High Volatility)
June 11 – July 2012 50
6900
40
Complacent Market
(High PE-Low Volatility)
Dec17 - Jan18
4900
30
2900 20
900 10
Jan-07 Dec-07 Nov-08 Oct-09 Sep-10 Aug-11 Jul-12 Jun-13 May-14 Apr-15 Mar-16 Feb-17 Jan-18 Dec-18
Nifty 50 Nifty P/E India VIX
Source: Bloomberg
4
DYNAMIC ASSET ALLOCATION MATTERS
* Crisil Liquid Fund Index taken as representative of arbitrage returns due to non-availability of arbitrage index through the period of analysis 5
NEED FOR DISCIPLINE
20,000 12000
NIFTY 50
10,000 8000
5,000 6000
0 4000
-5,000 2000
-10,000 0
Jan-16
Jan-10
Jan-12
Jan-14
Jan-18
Sep-16
Sep-10
May-11
Sep-12
May-13
Sep-14
May-15
May-17
Sep-18
Nifty 50 Equity Net Sales (₹ crores)
Ideal investment scenario is to buy low and sell high, however in reality investors have struggled to
make that happen. Further, investors often observe that their investment returns have been much
lower than fund returns as they get swayed by emotions!
Hedged
Equity Equity/ Debt TBAF
Arbitrage
8
ASSET ALLOCATION STRATEGIES
PE + PB PE based PE Plus
Model Model Model
9
PE + PB BASED APPROACH
PE Ratio:
▪ A valuation ratio of a company's current share price compared to its earnings per share. Also
sometimes known as "price multiple" or earnings multiple."
▪ It tells us how much investor is willing to pay per rupee of earnings.
P/B Ratio:
▪ Price-to-book value ratio (P/BV) is calculated by dividing the stock price to its book value per
share.
▪ A stock is termed as undervalued if it has a lower P/B ratio. A low P/B ratio may also mean a
company has some problems with its fundamentals.
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PE BASED APPROACH
Sometimes PE model does not capture other dynamics in the market viz.
▪ Correlation with the global markets (40-60%)
▪ Market Momentum, and
▪ Volatility
Tata Mutual Fund Model - model allowing 10% variation to the basic PE based equity
allocation; driven by:
▪ Correlation to select global markets (relevant to Indian equities)
▪ Implied volumes (to identify extremes – fear vs. complacency)
▪ Momentum indicators (price based indicators to avoid early entry/exits in a directional
market)
Tata Balanced Advantage Fund would make use of various alternative models
depending upon Macro, Fundamental factors and Fund Manager outlook to determine
the unhedged equity allocation
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APPROACH TO ASSET ALLOCATION
Allocation Approach
Valuations Low
Market Valuations High
Valuation Lower
based Equity
Higher
Exposure
Equity
Exposure
TATA
Market Trend Use of Moving averages to look at the
based trend confirmation signals
BALANCED
ADVANTAGE
FUND
Source: Bloomberg and Internal Research. Tata Balanced Advantage Fund would make use of various alternative models depending upon Macro,
Fundamental factors and Fund Manager outlook to determine the unhedged equity allocation. For calculation of returns for equity portion returns
of Nifty 50 are considered and non-equity portion returns have been assumed at annualized 6%. Past performance may or may not be sustained in
future. Above table is for illustration purpose only and may change depending on market scenario.
#The allocation to equity is average of weekly allocation for the year . *Return period from 04/06/2006 to 18/11/2018. 14
BALANCED FUND VS BALANCED ADVANTAGE
FUND
Balanced
Fund Balanced
Advantage Fund
15
EQUITY SAVINGS FUND VS BALANCED
ADVANTAGE FUND
Equity
Savings Fund Balanced
Advantage Fund
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RISK-RETURN MATRIX
HIGH
Equity
RISK
Balanced Funds
Balanced Funds
Equity Advantage
Savings Funds
Debt Funds
Funds
LOW
RETURNS HIGH
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WHY
TATA BALANCED ADVANTAGE FUND?
INVESTMENT WITH DISCIPLINE
The basic goal of the strategy is to be able to maneuver the investment allocation as per
prevailing market conditions to make money work harder. Discipline to overcome
emotional market reaction.
PE ratio being one of the basic parameters, fund manager shall consider
other factors to shift asset allocation of the fund
Above graph is for illustration purpose only and may change depending on market scenario. 19
EFFICIENT ALLOCATION BETWEEN ASSETS
Hedge
Regular Income Equity /
Arbitrage
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FUND FACTS
Entry Load: N.A.; Exit Load: 1% of the applicable NAV, if redeemed on or before
Load Structure
expiry of 365 days from the date of allotment.
Plans & Options Regular & Direct Plans with Growth & Dividend Options
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RISK FACTOR