fidelity wealth builder fund nfo presentation
TRANSCRIPT
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
1/35
FIDELITY INTERNATIONAL
Fidelity Wealth Builder Fund
January 2009
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
2/35
FIDELITY INTERNATIONAL
2
Where are we ?
Last year has seen unprecedented volatility in equity market
BSE Sensex has reached 2006 levels
Economic growth is slowing
Inflation is easing
Central banks across the globe taking measures to provide growth stimulus
Sharp rally in Government bonds
Oil down approx 70%* from all time high in July 2008
* As on 31st December 2008
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
3/35
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
4/35
FIDELITY INTERNATIONAL
4
You get recessions, you have stock market declines.
If you don't understand that's going to happen, then
you're not ready, you won't do well in the markets
Peter Lynch
Peter Lynch was the portfolio manager of the Fidelity Magellan Fund from May 1977 to May 1990.The Fund had $14 billion in assets when Peter Lynch retired in 1990. He is currently a ResearchConsultant with Fidelity Investments, USA.
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
5/35
FIDELITY INTERNATIONAL
5
Markowitz and Modern Portfolio Theory
Investors should look at risk as well as return
Investors can construct portfolios which optimise the level of risk for
any expected level of return
Harry
Markowitz
1952
What should investors be doing?
Stick to basic principles of investing
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
6/35
FIDELITY INTERNATIONAL
6
Portfolio structuring
Why seek portfolio balance?
Risk & Return
The principle of diversification
The six facets of a diversified portfolio
Asset allocation
Investment styleGeographic location
Market cap bias Sector exposure
Security specific risk
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
7/35
FIDELITY INTERNATIONAL
7
The case for asset allocation
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
8/35
FIDELITY INTERNATIONAL
8
Importance of asset allocation
Asset allocation is regarded as one of the important decisions an investor makes:
91.5% of investment return variability is driven by asset allocation decisions
8.5% of investment return variability is attributed to security selection and markettiming
Impactonvaria
bility
ofreturn
Asset allocation Security selection
91.5%
8.5%
Source: Brinson, Hood, and Beebower Determinants of Portfolio Performance II an update Financial Analysts Journal, May/June 1991
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
9/35
FIDELITY INTERNATIONAL
9
Asset classes may not move in the same direction
Performance of equities, debt and cash is based on BSE Sensex, NSE G-Sec Composite Index and NSE T-Bill Index respectively. Performance of
composite is calculated as average of equities, debt and cash. CAGR for composite is based on assumption that composite is rebalanced at the end ofevery calendar year.
Effective portfolio diversification can be achieved through
combination of asset classes
Equities Debt Cash Composite
2001 2002 2003 2004 2005 2006 2007 2008
22.46% 15.68% 72.89% 13.08% 42.33% 46.70% 47.15% 20.78%
8.98% 8.55% 29.43% 4.86% 17.19% 17.87% 20.10% 7.73%
4.52% 6.45% 9.95% 4.64% 5.78% 6.14% 7.87% -7.98%
-17.87% 3.52% 5.45% -3.15% 3.47% 0.76% 5.29% -52.45%
Source: ICRA MFIE
8 year CAGR
Equity: 11.71% Cash: 6.62%
Debt: 9.06% Composite: 11.27%
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
10/35
FIDELITY INTERNATIONAL
10
Asset allocation can reduce downside risk
For portfolios invested in debt and equity. Assuming 8% return on debt component
Portfolioeq
uity
exposure
If equities go down by
15%
30%
50%
10% 20% 30%
5.30%
2.60%
-1.00%
3.80%
-0.40%
-6.00%
2.30%
-3.40%
-11.00%
For illustrative purpose only
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
11/35
FIDELITY INTERNATIONAL
11
Asset allocation in current environment
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
12/35
FIDELITY INTERNATIONAL
12
Asset allocation and economic cycle
Inflation rises
Inflation falls
Growthmovesabov
etrend
Growth
m
ovesbelow
trend
Overheat
StagflationReflation
Recovery
The Investment ClockThe InvestmentClock is an assetallocation tool
which can be usedto identify whichasset classes andequity sectorsshould perform
well as theeconomy movesthrough the fourphases of its
cycles.
We are in the
bond friendly
Reflation
phase
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
13/35
FIDELITY INTERNATIONAL
13
Moderating growth & lower inflation favour bonds
GDP Growth (%)
4.45.8
3.8
8.57.5
9.4 9.6 9.0
6.8
5.5
0
2
4
6
8
10
12
01 02 03 04 05 06 07 08 09E 10E
-2
0
2
4
6
8
10
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-080
2
4
6
8
10
12
14
IIP Growth (%) WPI Growth (%) - RHS
IIP Vs. Inflation
Source: Bloomberg, Citibank, E= Citibank estimate
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
14/35
FIDELITY INTERNATIONAL
14
Attractive corporate bond spreads
3 yr G-Sec Vs 3-yr AAA
0
2
4
6
8
10
12
14
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08
3 yr G-sec 3-yr AAA
Source: Bloomberg, as on 31 December 2008
5 yr G-Sec Vs 5 yr AAA
0
2
4
6
8
10
12
14
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08
5 yr G-sec 5-yr AAA
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
15/35
FIDELITY INTERNATIONAL
15
Equities
And have been volatile in the recent months
010203040506070
8090
Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08
India VIX Index
have fallen sharply
0
5000
10000
15000
20000
25000
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
20873
9647
-54%
BSE Sensex: 01 Jan 2001 to 31 Dec 2008
Dec-08
Source: Bloomberg, as on 31 December 2008
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
16/35
FIDELITY INTERNATIONAL
16
But equities also tend to bounce back after such crisis
1992 stock market crash
Time to recover: 842 days
0
1000
2000
3000
4000
5000
22-Apr-92 12-Aug-94
-54.41%
2000 Tech Meltdown
0
1000
2000
3000
4000
5000
6000
7000
11-Feb-00 2-Jan-04
-56.18%
Time to recover: 1421 days
Source: ICRA MFIE. Past performance may or may not be sustained in the future
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
17/35
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
18/35
FIDELITY INTERNATIONAL
18
To summarise
Moderating economic growth
Lower inflation
Wider corporate bond spreads
softening interest rate scenario
Equities have fallen sharply
Valuations looking attractive
Risk of missing recovery in equities
Bonds likely to outperform
Equities cannot be ignored
Need to have the right asset mix between bonds and equities
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
19/35
FIDELITY INTERNATIONAL
19
Lets have a look at performance of
various asset allocation portfolios in
similar market situation in the past
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
20/35
FIDELITY INTERNATIONAL
20
Performance of various asset allocations 2001 to 2008
600
1,100
1,600
2,100
2,600
3,100
3,600
4,100
4,600
5,100
5,600
Dec-00
Mar-01
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Equity Bonds 15% equity 30% equity 50% equity
Performance of equities and bonds is based on BSE Sensex and NSE G-Sec Composite Index respectively. Portfoliosreset to original allocation at monthly intervals.
Source: ICRA MFIE. Past performance may or may not be sustained in the future.
For illustrative purpose only.
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
21/35
FIDELITY INTERNATIONAL
21
Choosing the right portfolio mix
Efficient Frontier - Two Asset Classes - 2001 to 2008
6%
7%
8%
9%
10%
11%
12%
13%
0% 4% 8% 12% 16% 20% 24% 28%Annualised Std deviation
CAGR
100% equity, 0% debt 95% equity, 5% debt 90% equity, 10% debt85% equity, 15% debt 80% equity, 20% debt 75% equity, 25% debt70% equity, 30% debt 65% equity, 35% debt 60% equity, 40% debt55% equity, 45% debt 50% equity, 50% debt 45% equity, 55% debt40% equity, 60% debt 35% equity, 65% debt 30% equity, 70% debt25% equity, 75% debt 20% equity, 80% debt 15% equity, 85% debt10% equity, 90% debt 5% equity, 95% debt 0% equity, 100% debt
Most efficient allocation
(Highest risk-adjusted return)
Return (CAGR)
Risk
Sharpe ratio
Equity Bonds 15%Equity 30% Equity 50% Equity
11.71%
26.39%
0.14
9.06%
6.83%
0.16
9.95%
7.42%
0.26
10.68%
9.74%
0.27
11.38%
14.03%
0.24
Performance of equities and bonds is based on BSE Sensex and NSE G-Sec Composite Index respectively. Portfolios reset to original allocation at
monthly intervals. Risk free rate used: 8%. Risk is represented by annualised standard deviation of monthly returns of the portfolios.
Source: ICRA MFIE. Past performance may or may not be sustained in the future.
For illustrative purpose only.
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
22/35
FIDELITY INTERNATIONAL
22
In short
Bonds outperformed equities from 2001 to Mid 2003
Equities outperformed bonds from mid 2003 onwards
However, HYBRID PORTFOLIOS with 15-50% exposure to equities HAVE
DELIVERED THE BEST RISK-ADJUSTED RETURN over the period
analysed
Its difficult to make a timely shift from one asset class to another
The best strategy is to opt for an asset allocation which delivers
maximum return at desired risk level
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
23/35
FIDELITY INTERNATIONAL
23
Introducing
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
24/35
FIDELITY INTERNATIONAL
24
Product structure
An open ended fund-of-funds scheme
Provides a choice of three plans:
Plan A : around 15% of net assets in equity schemes, rest in debt schemes
Plan B : around 30% of net assets in equity schemes, rest in debt schemes
Plan C : around 50% of net assets in equity schemes, rest in debt schemes
Will predominantly invest in Fidelitys domestic funds
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
25/35
FIDELITY INTERNATIONAL
25
Investment approach
Traditional stock-picking fund Bottom-up approach
Asset allocation funds Top-down approach
The two approaches complement each other
Asset allocation funds invest in stock-picking products
Source: FIL.
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
26/35
FIDELITY INTERNATIONAL
26
Investment Process
ASSET ALLOCATION FUND SELECTION
Fund Manager
Plans with pre-set assetallocation Advice on plan selection:
To be provided by Advisers
Market Beta: Taken care ofby right mix of asset classes
Strategic & TacticalAllocation
Alpha generation: Stock-pickingby portfolio managers ofunderlying funds to generatealpha
Key inputs: Continuous PMinteractions over a long period
of time. A broad range of otherinputs, includingmacroeconomic factors, marketvaluation, chart analysis, riskadjusted returns, fund flows andinvestor sentiment
Source: FIL.
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
27/35
FIDELITY INTERNATIONAL
27
Product Positioning
Suitable for relatively risk-averse investors looking to participate in equities to benefit
from potential recovery
Can help in capitalising on the existing opportunities in equities and bonds
Combines top-down and bottom-up approach Combination of alpha and beta
strategies
Combines best of Fidelitys funds in one fund
Varying styles of underlying funds gives diversification benefit including style
diversification
Investors can easily shift from one plan to another without any load
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
28/35
FIDELITY INTERNATIONAL
28
Why invest in Fidelity Wealth Builder Fund?
Disciplined Asset Allocation
Asset allocation key driver of variability of investment returns
Portfolio diversification and downside protection
Low cost product
No entry load
Load free switches between plans
Benefit of lower expense ratios in the underlying funds
Simple, easy to understand product
Pre-set asset allocation
Advisers can help choose the right plan based on investors risk profile and return expectations
Equity exposure for an investor can be increased or decreased by load free switches between
plans
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
29/35
FIDELITY INTERNATIONAL
29
Why invest in Fidelity Wealth Builder Fund? (contd.)
Portfolios invested in debt and equity products with track record
Economic cycle is in favour of bonds
Advantage of investing in quality bond portfolios
Positioned to benefit from a controlled exposure to equities as and when market recovers
Investment in equity portfolios that have gained ground in difficult times
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
30/35
FIDELITY INTERNATIONAL
30
Key Fund Facts
Benchmark
Load structure
Minimum investment
Dividend Frequency
Systematic Plan
Plan A: 85% Crisil Composite Bond Fund Index & 15% BSE 200
Plan B: 70% Crisil Composite Bond Fund Index & 30% BSE 200
Plan C: 50% Crisil Composite Bond Fund Index & 50% BSE 200
Entry load NIL
Exit load 1% if redeemed within 12 months from the date of
allotment
Rs.5000
Plan A and Plan B: Quarterly, Plan C: At the discretion of theTrustees
Available now (Auto-debit facility at NFO)
Minimum amount of each instalment Rs 500
Minimum aggregate amount Rs 5000 Minimum 6 instalments
D t t b
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
31/35
FIDELITY INTERNATIONAL
31
Dates to remember
New Fund Offer opens on:
New Fund Offer closes on:
Scheme re-opens for
continuous sale and
re-purchase:
January 14, 2009
February 5, 2009
March 2, 2009
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
32/35
FIDELITY INTERNATIONAL
32
Performance track record Equity funds
FEF Bm FISSF Bm FIOF Bm FIGF Bm
-49.94 -56.36
NA
-42.81
NA
-39.98
-51.06
NA
-21.46
-45.80
NA
-22.76
1 year -50.24 -56.36 -52.02 -56.36
3 years 3.59 -0.84 NA NA
Since inception* 13.95 8.34 -4.38 -3.91
Equity Funds CAGR (%) as on 31-12-2008
As per SEBI standards for performance reporting, the since inception return is calculated on NAV of Rs. 10/- invested
at inception. For this purpose, the inception date is deemed to be the date of allotment, i.e. 16-May-05 for FEF, 22-
May-06 for FISSF, 28-May-07 for FIOF and 23-Oct-07 for FIGF. Past performance may or may not be sustained in the
future. Source: ICRA MFIE, Fidelity
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
33/35
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
34/35
FIDELITY INTERNATIONAL
34
Thank You
-
8/14/2019 Fidelity Wealth Builder Fund NFO Presentation
35/35