DSP BlackRock Equity Savings Fund

An open-ended equity scheme with a primary investment objective of generating income through investments in fixed income securities and using arbitrage and other derivative strategies.

Summary

Type	An Open Ended Equity Scheme	Benchmark Index	A combination of 30% Nifty 500 + 70% CRISIL Liquid Fund Index
Min. investment:	- Lump sum: Rs 1,000/- and any amount thereafter -Systematic Investment Plan: Rs 500 and any amount thereafter	Plans: Options:	-Regular -Direct -Growth* -Dividend (both payout and reinvestment available) *default option
Face Value	Rs 10 per unit	Expense Ratio:	Upto 2.50%
Entry Load	Nil	Exit Load:	For exit less than or equal to 12 months from the date of allotment = 1 % After 12 month from the date of allotment = Nil.
Issue Opens	March 08, 2016	Issue Closes:	March 22, 2016

 

Investment Objective*

 

The investment objective of this fund is to generate income through investments in fixed income securities and using arbitrage and other derivative Strategies. The Scheme also intends to generate long-term capital appreciation by investing a portion of the Scheme’s assets in equity and equity related instruments.

However, there can be no assurance that the investment objective of the scheme will be realized.

*Source: Scheme Information Document

 

Is this fund for you?

Going by the investment objective, DSP BlackRock Equity Savings Fund (DBESF) under normal circumstances will deploy a predominant portion of its assets in equity & equity related instruments, including cash future arbitrage, and the remaining in debt & money market instruments. But when adequate arbitrage opportunities are not available in the cash and derivative market segment, the fund would increase exposure to debt & money market instrument, but taking care that any time exposure to equity & equity related instruments does not go below 65% of the total assets. For this reason, DBESF is classified as an equity fund, thereby offering better tax efficiency than a pure debt funds and Monthly Income Plans (MIPs).

While investing in equities, the fund aims to provide long term capital growth by investing in a well-diversified portfolio using mainly the bottom-up approach to investing. Whenever equity markets are perceived to be expensive, the fund will actively use arbitrage and cash to hedge the portfolio and generate low volatility returns. To invest in debt, DBESF intends to invest only in those debt securities that are rated investment grade by domestic credit rating agency. But it may also invest in unrated debt securities which the fund manager believes to be of equivalent quality, subject to the approval of the Board of Directors of the AMC and Trustee. DBESF may also invest a part of its debt portfolio in securities issued by State and Central Government.

Hence based on the above, the returns generated by DBESF would be alike MIPs but potentially better on a post-tax basis due to tax efficiency. The fund would be benchmarking its performance in combination of 30% Nifty 500 + 70% CRISIL Liquid Fund Index.

DBESF is suitable for investors with a low-to-moderate risk profile, have a investment horizon of around 3 years and who are looking to earn slightly better post-tax returns than MIPs aided by the tax efficiency that comes along.

 

How will the fund allocate its assets?

 

Under normal circumstances, when adequate arbitrage opportunities are available and accessible in the cash and derivative market segment, the asset allocation will be as follows:

 

Instruments	Indicative allocations (% of total assets)		Risk Profile High/Medium/Low
	Minimum	Maximum
A. Equities and equity related instruments:	65%	75%	Medium to High
A1. Of which cash-futures arbitrage*	25%	55%	Low to Medium
A2. Of which net long equity exposure^	20%	40%	High
B. Debt and money market instruments	25%	35%	Low

 

However, when adequate arbitrage opportunities are not available and accessible in the cash and derivative market segment, the asset allocation will be as follows:

 

Instruments	Indicative allocations (% of total assets)		Risk Profile High/Medium/Low
	Minimum	Maximum
C. Equities and equity related instruments:	40%	65%	Medium to High
A1. Of which cash-futures arbitrage*	0%	45%	Low to Medium
A2. Of which net long equity exposure^	20%	40%	High
D. Debt and money market instruments	35%	60%	Low

*Refers to equity exposure completely hedged with corresponding equity derivatives
^Refers to only net long equity exposures aimed to gain from potential capital appreciation and thus is a directional equity exposure which will not be hedged
*Source: Scheme Information Document  

DBESF may also take an exposure of upto 20% of its net assets in stock lending, but shall not lend more than 5% of its net assets to any counter party. Likewise, the fund could invest upto 20% of its net assets in securitized debt.

 

What investment strategies will the fund follow?

 

In the endeavour to achieve the investment objective set out, DBESF will follow the below mentioned investment strategy...

For Equity Investments:
DBESF aims to provide long term capital growth by investing in a well-diversified portfolio of equity and equity related securities. The fund manager proposes to concentrate on business and economic fundamentals driven by in-depth research techniques and employing the full potential of the research team at the AMC. For stock selection the fund would mainly adopt a bottom-up approach seeking to identify companies with long term sustainable competitive advantage (as this is one of the key factors responsible for withstanding competitive pressures and does not allow rivals to eat up any excess profits earned by a successful business). A top-down approach would also be followed for risk control by ensuring representation of companies from select sectors.

In scenarios when equity markets are attractive, DBESF would exploit opportunities with increased equity participation. But when equity markets are expensive, the fund would reduce the equity participation and actively use arbitrage and cash to hedge the portfolio and generate low volatility returns.

For Debt Investments:
DBESF will invest only in those debt securities that are rated investment grade by a domestic credit rating agency such as CRISIL, ICRA, CARE, FITCH etc. For unrated debt securities which the Fund Manager believes to be of equivalent quality, the approval of the Board of Directors of the AMC and Trustee shall be obtained prior to investment.

The debt securities could be listed, unlisted, privately placed, secured, unsecured, rated or unrated and of any maturity. The securities maybe acquired through Initial Public Offerings (IPOs), secondary market operations, private placements, rights offers or through negotiated deals. DBESF may also invest a part of the debt portfolio in securities issued by the State and the Central Government.

For arbitrage opportunities:
DBESF would carry out arbitrage strategies, which would entail taking offsetting positions in the various markets simultaneously. The arbitrage strategy can also be on account of buy-back of shares announced by a company and/or differences in prices between two exchanges/markets. In this case the arbitrage strategy will not include an offsetting derivatives transaction.

A disciplined quantitative analysis will be used while accessing arbitrage opportunities. The Investment Manager will have an effective risk monitoring and control process to ensure adherence to regulatory guidelines and limits. As arbitrage opportunities are dependent on ensuing market conditions, there will be a part of the portfolio, which will be invested in debt securities and money market securities. This component of the portfolio will provide the necessary liquidity to meet redemption needs and other liquidity requirements of the fund.

The arbitrage strategies the fund may adopt could be as under:

• Index/ Stock spot – Index/ Stock Futures;
• Index Arbitrage; and
• Corporate action / event driven strategy viz. dividend arbitrage, buy-back / open offer arbitrage, merger, portfolio hedging.

 

Fund Manager Profile

Mr Vinit Sambre – Equity portion: He has over 16 years of experience in capital markets. He is a graduate in commerce (B.Com) and is a Chartered Accountant (FCA).

Mr Marzaban Irani – Debt portion: He has over 14 years of experience in in capital markets. He is a graduate in commerce (B.Com) and holds a Post Graduate Diploma in Business Management (PGDBM)
 

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Fund Outlook

Assessing the investment objective, asset allocation and suggestive portfolio strategies, it is likely that, DBESF will invest predominantly in equity & equity related instruments at all times tapping arbitrage opportunities. As mentioned above, when equity markets are attractive, the fund would exploit opportunities with increased equity participation, but when equity markets are expensive, the fund would reduce the equity participation and actively use arbitrage and cash to hedge the portfolio and generate low volatility returns. Hence clocking long-term capital appreciation would closely linked to how well the fund manager plays the opportunities. The debt portion of the portfolio on the other hand, would be helpful in providing stability in returns and low volatility. Thus the returns potential of DBESF would be analogous to those clocked by MIPs, in fact slightly better due to the tax efficiency that comes along since it is an equity fund. But DBESF is expected to carry lower risk as against a pure equity fund.

 

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DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014  

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr. Ajit Dayal with an objective of providing value-based information / views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

‘PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Disciplinary history

There are no outstanding litigations against the Company, it subsidiaries and its Directors.

Terms and condition on which its offer research report
For the terms and condition for research report click here.

Details of associates

1. Money Simplified Services Limited;
2. PersonalFN Insurance Services India Limited ;
3. Equitymaster Agora Research Private Limited;
4. Common Sense Living Private Limited;
5. Quantum Advisors Private Limited;
6. Quantum Asset Management Company Private Limited;
7. HelpYourNGO Private Limited;
8. HelpYourNGO Foundation;
9. QIEF Management LLC, Mauritius
10. Natural Streets for Performing Arts Foundation;
11. Primary Real Estate Advisors Private Limited;
12. Rahul Goel;
13. Ajit Dayal;
14. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
 

1. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company, except QIS receives fees for providing research to Quantum Equity Fund of Fund (QEFoF) which is Fund of Fund scheme managed by QMF and our associates has financial interest in the subject company.
2. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report.
3. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront /annualized & trail), if any, for any Schemes by QMF to QIS is also at arm's length and as per prevailing market practices.
    

Disclosure with regard to receipt of Compensation

1. Neither QIS nor it's Associates have any compensation from the subject Company in the past twelve months.
2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company in the past twelve months.
3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company in the past twelve months.
4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report
    

General disclosure

1. The Research Analyst has not served as an officer, director or employee of the subject Company.
2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.
    

Subject Company means Mutual Fund Schemes

Quantum Information Services Pvt. Ltd. 101, Raheja Chambers, 213, Nariman Point, Mumbai - 400021. Tel: +91 22 6136 1200
Website : www.personalfn.com CIN: U65990MH1989PTC054667

 

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Quantum Information Services Pvt. Ltd. 101, Raheja Chambers, 213, Nariman Point, Mumbai - 400021. Tel: +91 22 6136 1200
Website : www.personalfn.com CIN: U65990MH1989PTC054667

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