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BNP Paribas Annual Sales Meet Lonavala April 18-20, 2003

Mutual Funds Sales Strategies and Current Trends Suraj Kaeley Senior Vice-President, Sales and Marketing Franklin Templeton Investments

Presentation Outline
First Principles Role of Mutual Funds in our personal lives Asset Allocation Revisited Role of Financial Advisors Top end Clients The Mutual Fund Industry Current Trends Franklin Templeton Investments BNP Paribas

April 30, 2014

Presentation Outline
Equity Markets and FT Equity Funds Sukumar CIO Equity Debt Markets and FT Debt Funds Nilesh CIO - Debt

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First Principles Role of Mutual Funds in our financial lives

Paradigm for Wealth Creation


Creating Wealth:

Is not a function of income


Is not a function of investment expertise Is really a matter of Regular Savings

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The Power of Compounding

The more you save, makes a difference


Growth Rate of 6% p.a. Amount saved per month 5,000 3,000 2,000 1,000

Total Amount Saved 1,200,000 720,000 480,000 240,000

Value after 20 years 2,278,225 1,366,935 911,290 455,645

Past performance may or may not be sustained in future


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The Power of Compounding

The sooner you start, makes a difference

Rs 1000 per month @ 6% Starting Age 25 30 35 40

Total Amount Saved 420,000 360,000 300,000 240,000

Value at the age of 60 1,380,290 979,250 679,580 455,645

Past performance may or may not be sustained in future


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The Power of Compounding

The more you earn, makes a difference


Rs 1000 p.m. Growth Rate 6% 8% 10% 12% Value after 20 years 455,645 572,660 723,990 919,860 Value after 30 years 979,255 1,417,610 2,079,290 3,080,970

Past performance may or may not be sustained in future


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Savings Habits matter much more than the markets!


If someone started saving at age 30, Rs 5000 per month and got a return of 10% on their investment the wealth at age 60 would be Rs one crore three lacs.

If someone delayed savings and started at age 40 and saved Rs 3000 per month and got a return of 8% on their investment the wealth at age 60 would be Rs Seventeen lacs.

Is it not the difference between being wealthy and not being wealthy?
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Asset Allocation Revisited

Winners Rotate

Large Stocks: S&P 500 Index Large Growth Stocks: S&P/BARRA 500 Growth Index Large Value Stocks: S&P/BARRA 500 Value Index Small Stocks: Russell 2000 Index

Small Value Stocks: Russell 2000 Value Index Small Growth Stocks: Russell 2000 Growth Index Foreign Stocks: MSCI EAFE Index Bonds: Lehman Brothers Aggregate Bond Index

Source: Standard & Poors Micropal, 12/31/01. Indices are unmanaged, and one cannot invest directly in an index. Index performance is not representative of any Franklin Templeton fund performance. Past performance cannot guarantee future results.

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Investing in the Previous Years Winners

Large Stocks: S&P 500 Index Large Growth Stocks: S&P/BARRA 500 Growth Index Large Value Stocks: S&P/BARRA 500 Value Index Small Stocks: Russell 2000 Index

Small Value Stocks: Russell 2000 Value Index Small Growth Stocks: Russell 2000 Growth Index Foreign Stocks: MSCI EAFE Index Bonds: Lehman Brothers Aggregate Bond Index

Source: Standard & Poors Micropal, 12/31/01. Indices are unmanaged, and one cannot invest directly in an index. Index performance is not representative of any Franklin Templeton fund performance. Past performance cannot guarantee future results.

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Investing in the Previous Years Winners


Should we buy high?
Invest $10,000 into the winning asset class each year over the past 20 years

$200,000 total investment

$200,000 becomes $706,680 An Average Annual Total Return of 10.93%1


1. Source: Standard & Poors Micropal, for the 20year period ended 12/31/01. Indices are unmanaged, and one cannot invest directly in an index. Average annual total return represents the average annual change in value of an investment over the period indicated. Index performance is not representative of any Franklin Templeton fund performance. April 30, 2014 Past performance cannot guarantee future results.

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Investing in the Previous Years Losers

Large Stocks: S&P 500 Index Large Growth Stocks: S&P/BARRA 500 Growth Index Large Value Stocks: S&P/BARRA 500 Value Index Small Stocks: Russell 2000 Index

Small Value Stocks: Russell 2000 Value Index Small Growth Stocks: Russell 2000 Growth Index Foreign Stocks: MSCI EAFE Index Bonds: Lehman Brothers Aggregate Bond Index

April Index 30, 2014 14 Source: Standard & Poors Micropal, 12/31/01. Indices are unmanaged, and one cannot invest directly in an index. performance is not representative of any Franklin Templeton fund performance. Past performance cannot guarantee future results.

Investing in the Previous Years Losers


Should we buy low?
Invest $10,000 into the losing asset class each year over the past 20 years
= $200,000 total investment

$200,000 becomes $664,125 An Average Annual Total Return of 10.43%1

1. Source: Standard & Poors Micropal, for the 20year period ended 12/31/01. Indices are unmanaged, and one cannot invest directly in an index. Average annual total return represents the average annual change in value of an investment over the period indicated. Index performance is not representative of any Franklin Templeton fund performance. April 30, 2014 15 Past performance cannot guarantee future results.

Asset Allocation Makes Cents

Large Stocks: S&P 500 Index Large Growth Stocks: S&P/BARRA 500 Growth Index Large Value Stocks: S&P/BARRA 500 Value Index Small Stocks: Russell 2000 Index

Small Value Stocks: Russell 2000 Value Index Small Growth Stocks: Russell 2000 Growth Index Foreign Stocks: MSCI EAFE Index Bonds: Lehman Brothers Aggregate Bond Index

Source: Standard & Poors Micropal, 12/31/01. Indices are unmanaged, and one cannot invest directly in an index. Index 30, 2014 performance is not representative of any Franklin Templeton fund performance. Past performance cannot April guarantee future 16 results.

Asset Allocation Makes Cents


Should we asset allocate?
Invest $10,000 divided evenly each year into each of the indices over the past 20 years = $200,000 total investment

$200,000 becomes $821,191 An Average Annual Total Return of 12.14%1


1. Source: Standard & Poors Micropal, for the 20year period ended 12/31/01. Indices are unmanaged, and one cannot invest directly in an index. Average annual total return represents the average annual change in value of an investment over the period indicated. Index performance is not representative of any Franklin Templeton fund performance. April 30, 2014 17 Past performance cannot guarantee future results.

Potential Benefits of Asset Allocation


Allows you to take advantage of strong returns from each years bestperforming asset classes Decreases potential risk within your portfolio by reducing your exposure within each asset class

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Suggesting the Right Allocation

Mona & Joydeep Sengupta Investment Strategy Financial Goals


Planning to purchase a house in the next ten years Creating long-term wealth for retirement / house Aggressive Growth Portfolio
Short-term 10%
Bonds 15%

Stocks 75%

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Suggesting the Right Allocation

Sheela & Shekhar Mathur with Varun (13 years old) Investment Strategy Financial Goals
Providing for children's education (5 - 8 years) Planning for childs wedding (15 - 20 years) Planning for retirement
Bonds 30%
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Balanced Portfolio
Stocks 50% Short-term 20%

Suggesting the Right Allocation

Meera & Akash Chaudary Investment Strategy Financial Goals


Planning for retirement (5 - 10 years) Conservative Portfolio
Stocks 20%
Bank Deposits 40%

Bonds 40%

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Role of Financial Advisors

Role No.1 Preventing Financial Disasters

Watch out for these traps!

1. Inadequate Diversification 2. Investing without clear objectives 3. Lack of Liquidity 4. Inadequate Insurance 5. Over-Borrowing
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1. Diversification Revisited
Investing in own business No distinction between personal wealth and business wealth Diversification implies
Spread your investments across stocks, bonds and cash Spread your investments globally Spread your investments across financial and real estate

Evaluate portfolio on a total basis . Not just by its individual components


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2. Define Objectives for investments


Investment objectives:
Capital Appreciation Regular Income Capital Preservation

Invest for real returns post inflation and taxes Set Specific financial goals

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3. Liquidity check?

For you to make money .. You need to sell . This implies someone has to buy! Figure out if there is a buyer before you buy into an investment! No investment is worth if it cannot be of help when you need it the most! Lack of liquidity can force you to sell at substantial discounts
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4. Inadequate Insurance

Most of us own insurance is it adequate? Have you covered most possible risks:
Medical Disability Accident

Assets are expensive insurance is not! If insurance is expensive it is worth bearing the risk!
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5. Are your borrowings under control?

How much should you borrow? Check the assumptions for repayments (will these hold through your borrowing period!) Borrowing to profit from stock markets can be disastrous if not fatal!

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Role No.2 Wealth Preservation

Are You Investing Strategically or Emotionally?

This hypothetical example is for illustrative purposes only, and does not represent an investment in any Franklin Templeton fund.

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Risk Return Trade-off


1 Year Rolling Return Period : Jan 1999 to March 28, 2003 Maximum, Minimum & Average of Rolling Return Risk represented by Standard deviation of monthly returns over last 1 year

Return

Risk

TGSF : Since April Jun 30, 1999 2014 FTIBF : Jan 2000

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Financial year returns (1)


Year 99 - 00 Returns SD 398.60 17.82 140.69 8.29 113.99 7.48 7.20 * 6.85 * 13.69 * 0.96 * 13.35 0.47 12.32 0.28 9.11 0.11 8.84 0.06

FIF FIBCF TIGF FTIBF TGSF TIIF TIIBA TITMA TILF

FIF FIBCF TIGF FTIBF TGSF TIIBA TIIF TILF TITMA

Year 00 - 01 Returns SD -55.23 14.69 -16.08 7.88 -12.43 7.05 -17.95 5.75 12.50 1.47 10.16 0.77 9.36 0.71 9.18 0.12 9.25 0.11

TGSF : Since April Jun 30, 1999 2014 FTIBF : Dec 1999

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Financial year returns (2)

FIF FIBCF TIGF FTIBF TGSF TIIBA TIIF TITMA TILF

Year 01 - 02 Returns SD 1.60 17.22 9.97 8.93 12.53 6.84 16.14 5.57 28.08 1.88 16.29 0.91 14.85 0.84 7.44 0.07 6.98 0.07

FIF FIBCF TIGF FTIBF TGSF TIIBA TIIF TILF TITMA

Year 02 - 03 Returns SD -10.28 9.34 2.85 5.33 -2.94 4.96 1.42 3.49 15.04 2.31 10.96 1.36 10.24 1.10 6.13 0.08 6.28 0.07

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The FT Experience in India

Key Learnings
Objective of Equity Investments: Long term Capital Growth Large Cap Diversified Equity Funds are less riskier than Sector Funds or Individual stocks Large Cap Diversified Equity Funds are less likely to be on secular downtrends than Sector Funds or Individual Stocks Limiting Equity Investments is the key to wealth preservation
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Role of Equity Funds in a client portfolio


Index vs Managed

Investment Philosophy (Growth vs Value)


Large Cap vs Mid Cap vs Small Cap Well Diversified vs Sector PMS

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While INVESTING

There is often no relationship between performance of a stock/bond/mutual fund and an investors performance

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Role No. 3 Handling Client Emotions in volatile markets!

A Volatile Market
1996 - 2001
Daily Net Fluctuations in the Dow Jones Industrial Average of 100 points or more

1996 4 Down Days


+ 2 Up Days

1997
25 Down Days + 27 Up Days

6 Days

52 Days

1998 25 Down Days


+ 37 Up Days

1999 36 Down Days


+ 52 Up Days

62 Days

88 Days

2000 53 Down Days


+ 53 Up Days

2001 50 Down Days


+ 49 Up Days

106 Days

99 Days

1. Data as of 12/31/01.

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Media Influences

Used with permission of the San Francisco Chronicle and the San Francisco Examiner, 4/99.

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Used with permission of the San Francisco Chronicle, 4/99.

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Unrealistic Expectations?
Where would you predict the Dow Jones Industrial Average (DJIA) will be in 10 years?

Avg Annual Total Return

DJIA

13% 25% 35%

34,020 93,337 201,508

5/1896

12/11

12/26

12/41

12/56

12/71

12/86

12/01

Source: Wiesenberger InvestmentView, 12/31/01. Returns include reinvested dividends. The index is unmanaged, and one cannot invest directly in an index. Past performance cannot guarantee future results.

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MF Industry Growth Trends

MARKET SHARE : TREND


Industry(Pvt.Sector)
19
17.9 17.7

Prudential
19.7

Birla

FT

Stan C

HDFC
70000

17

17.7 16.2

16.9 16.4 16.7 16.6 16.9 16.4

65000
16.6 16.7 16.0

16.4 16.2
15.7

15
15.0

15.5 14.7 15.0

60000

Market Shares

13 55000

11

10.2 9.6 9.2 9.5 9.8 9.8

10.0

50000

9
7.9 7.3 7.4 7.8 8.0 7.7

7.4 7 40956 45818 5 March'02 June'02 September'02 December '02 January'03 February'03 March'03 52949 64278 65036 61040 55938

45000

40000

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(Pvt Sector Market Size in Rs. 55938 Crores)

PRIVATE SECTOR- MARKET SHARES


( March03)
DSPML Alliance 4% 4% 3% Pru ICICI 16% Principal Tata 3% Sundaram 2%

Reliance

4%

FT 16%

Zurich 5%

Kotak 5%

7% Stan C

12% 9% Others 10% Birla HDFC

Pvt sector market = Rs. 55938 crores

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How much has the industry grown?

Quarter Apr 02 Jun 02

Growth (Rs in Crores) 4,900

Jul 02 Sep 02
Oct 02 Dec 02 Jan 03 Mar 03

7,100
11,300 (8,300)
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Recent Trends Customer Segments


Institutional Business has become a significant contributor to current growth Banks, Financial Institutions, Insurance Companies and Cash Rich Corporates SME and Mid-Size Segment is the new focus area for most distributors Retail Participation is restricted to metro cities

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Recent Trends - Products


Floating Rate Funds have seen huge growth rates in recent times Launch of Dynamic Equity and Debt Funds Launch of Institutional Plans Fixed Maturity Plans International Funds allowing participation into foreign debt / equity
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Franklin Templeton Investments BNP

Risk Factors
Risk Factors: All investments in mutual funds and securities are subject to market risks and the NAV of the scheme may go up or down depending upon the factors and forces affecting the securities market. There can be no assurance that the schemes' investment objectives will be achieved. The past performance of the mutual funds managed by the Franklin Templeton Group and its affiliates is not necessarily indicative of future performance of the schemes. The Mutual Fund is not guaranteeing or assuring any dividend or returns under the scheme. The investments made by the schemes are subject to external risks on transferring, pricing, trading volumes, settlement risk, currency risk, interest rate risk etc. of securities and hence redemptions may be delayed inordinately. Please refer to the Offer Document before investing. Statutory Details: Templeton Mutual Fund in India has been set up as a trust by Templeton International Inc. (liability restricted to the seed corpus of Rs.1 lac) with Templeton Trust Services Pvt. Ltd. as the Trustee (Trustee under the Indian Trust Act 1882) and with Templeton Asset Management (India) Pvt. Ltd. as the Investment Manager. The Fund offers NAVs, purchases and redemptions on all working days.

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Thank You