Background To The Dff

Background to the DFF

Investors are scared of ….. The Downside

Risk in Equities

The

Risk

of Market Volatility

The

Risk

of Market Timing

The

Risk

of Wrong Advice

Need for an investment avenue that aims to provide stable positive returns & capital appreciation

Fund with embedded advice 

Unique fund – Dynamic Floor Fund embedded investment advice in a single fund from experts  aims for stable returns & capital appreciation in real terms (i.e. inflation +5%-6% over rolling three years)  assumes equities are the key driver of real returns and so aims to maximize equity exposure, but more importantly books profits along the way  shields the savings for your children / for your retirement from shorter term market volatility by aiming to protect 90% of NAV 1 year out (rolling basis) 

Fund with embedded advice 

Benefits to you : Peace of mind that you’ll meet your children’s milestones / your long term needs like retirement by comfortably outpacing the cost of living and booking profits along the way  Hassle free in that it you don’t need to worry about switching across asset classes to try time the markets … you won’t need to depend on the advice of others and worry that they might get it wrong!  Flexibility to change course …profit booking means that … should you need the funds earlier than expected, you don’t need to wait 10-20 years for a maturity guarantee! 

Smarter avenues for Growth Dynamic Floor Fund 

Specialized investing with…     

In-built investment advice from experts Inflation protected returns & capital appreciation Shields investment from shorter term market volatility Books profit along the way Protects 90% of NAV 1 year out (rolling basis)

180 160

Nifty

Profit booking

140

DFF NAV

120

Floor

100

Crisil Liquid

80

N

ov -0 N 6 ov -0 D 6 ec -0 Ja 6 n0 Ja 7 n0 Fe 7 b0 Fe 7 b0 M 7 ar -0 Ap 7 r0 Ap 7 r0 M 7 ay M 07 ay -0 Ju 7 n0 Ju 7 n0 Ju 7 l-0 7 Ju lAu 07 g0 Au 7 g0 Se 7 p0 O 7 ct -0 O 7 ct -0 N 7 ov -0 N 7 ov -0 D 7 ec -0 7

*One year annualized returns as on Nov 30th, 2007. Past performance is not indicative of future returns. Delivered

In-built dynamic asset allocation to allow for profit booking and capital appreciation

26% * returns

Ja

t0

1 n0 Ap 2 r0 Ju 2 l -0 Oc 2 t0 Ja 2 n0 Ap 3 r0 Ju 3 l -0 Oc 3 t0 Ja 3 n0 Ap 4 r04 Ju l-0 Oc 4 t0 Ja 4 n0 Ap 5 r05 Ju l-0 Oc 5 t0 Ja 5 n0 Ap 6 r06 Ju l-0 6

Oc

Long term benefits 500 Call Index

400 I bex Nifty

Balance

Lower interest rates, lower inflation, higher real economic growth

300

200

100

-

Risk and return … the efficient frontier

increasing expected return =>

Dynamic Floor Fund Aggressive Growth Bonds

Balanced

Gilt

Increasing volatility => Decreasing inflation risk =>

The Dynamic Floor Fund Solution

Investment Objective To generate stable, real returns over the medium to longer term, with limited downside over the short term - targeting a gross return of WPI + 6% over rolling three years.

Investment Strategy Strategic allocation to maximize equity exposure Active asset management to provide ‘alpha’ (including credit) Proprietary risk management model to control downside

Dynamic Floor Protection Principle of the dynamic risk model … A first in India

100

Time 90

Dynamic adjustment …..

DFF Asset Allocation Ranges

Maximum %

Minimum %

Equities

75%

0%

Bonds & Gilts

100%

0%

Cash & Floating Rate Instruments

100%

0%

Average equity exposure range over past 5 years between 45% and 50% (modeling ignores alpha from stock picks and credit/interest rate calls)

Logic behind the risk model

Equity Market Movements Rising Markets Sideways Markets Falling Markets Interest Rate Movements Rising Interest Rates Constant Interest Rates Declining Interest Rates

Equity Exposure

Debt Exposure

Increase Little change Decrease

Decrease Little change Increase

Increase Little change Decrease

Increase Little change No change

Trade-off between raising equity exposure and raising the floor

DFF model over last 10 years

Profit booking The comfort of a floor

DFF Performance Personality Equity Market Performance

Likely overall Performance

Likely Performance relative to equities

positive Underperform

Likely Performance Relative to cash

Rampant bull

Strong (real)

Outperform

Gently rising

Positive (real)

Outperform

Outperform

Flat

Positive

Outperform

Outperform

Gradually falling

Mild positive or Outperform negative

Mildly underperform

Rapidly tumbling

Negative Outperform (subject to floor)

Underperform

Note the above is indicative only. Actual performance could deviate. Note also that in volatile circumstances, where markets are tumbling and running concurrently, additional underperformance may arise due to the impact of increased trading costs (brokerage and impact)

Dynamic hedging & maturity guarantees Maturity Guarantees 



 

Apply at a point in time far in the future (10, 15, 20 yrs) & not on surrender or part withdrawal Are fixed in notional terms, often close to return of gross premiums Don’t track inflation Leaves the booking of profits and market timing decisions to the client or adviser

DIY

Dynamic Floor Protection  Not an explicit guarantee but a rigourous, quantitative means of ensuring 90% of principal is protected 1yr out  Profit booking ensures the floor is periodically raised. As the NAV grows in real terms, so the floor moves with it  Liquidity is dramatically enhanced … unexpected withdrawals come off a much more stable NAV. Protection is at most 12 mths away.  The stresses of unpredictable subjective market timing calls are removed.

Thank You Mr. Kirang Gandhi Mob. No. -9271267305,9766319919 Web site: www.kgandhi.anindia.com [email protected]