CPSE EXCHANGE TRADED. CPSE ETF July Riskometer. (An Open-ended Index Exchange Traded Scheme)

Transcription

1 CPSE ETF July 2016 Managed by Goldman Sachs Asset Management (India) Private Limited CPSE EXCHANGE TRADED Riskometer SCHEME (An Open-ended Index Exchange (CPSE Traded Scheme) ETF) (Rajiv Gandhi Equity Savings Scheme (RGESS) Qualified Scheme) Riskometer (An Open-ended Index Exchange Traded Scheme) (Rajiv Gandhi Equity Savings Scheme (RGESS) Qualified Scheme) Investors understand that their principal will be at High Risk. 0

2 Table of Contents I. Introduction to Exchange Traded Funds (ETFs) II. Development of international and India ETFs market III. Advantages of ETF IV. Disinvestment through an ETF V. CPSE Index VI. CPSE Exchange Traded Scheme Appendix 1

3 I. Introduction to Exchange Traded Funds (ETFs) 2

4 Introduction to Exchange Traded Funds (ETFs) An Exchange Traded Fund (ETF) is primarily a mutual fund scheme which is listed and traded on a stock exchange. An ETF can invest in: Equities replicating the composition and performance of an equity index (e.g. Nifty 50, Nifty Next 50 Indexes) Commodities tracking the actual price of a commodity (e.g. Gold) Money market instruments which include short-term government securities and call money 3

5 II. Development of international and India ETFs market 4

6 AUM $ Billion Growth of ETFs Internationally No. of ETFs Jun-16 AUM* No. of ETFs AUM in USD Billion. Source: ETFGI Monthly Newsletter June

7 Avg. AUM (Rs. in Crores) Growth of ETFs in India No. of ETFs Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Avg. AUM No of ETFs Dec- 10* Dec- 11* Dec- 12* Dec - 13* Dec - 14* Dec - 15** June - 16** 0 Source : Based on data collated from AMFI website i.e. * - Average AUM for the Quarter. (For other periods amount is Average AUM for Month) 6

8 III. Advantages of ETF 7

9 Familiar ground best of both worlds Like a fund Constructed to track an index Open ended mutual fund Lower expense ratio generally as compared to an active equity fund Lower turnover More transparent Index fund Like a stock Trading flexibility intraday on the exchange Real time price Put limit orders Minimum trading lot is just 1 unit Delivery into your Demat account Stocks ETF For illustration purpose only 8

10 Why invest via an ETF? Liquidity Components of an index have more liquidity ETF liquidity enhanced via direct creation and redemption Increased transparency Investors can generally see an ETF composition at any given time Transaction and management cost Increased trading flexibility Continuous pricing on the exchange throughout market hours Minimum transaction size (1 unit) Return potential Likely to capture market average return at low cost Lower expenses Benefit from lower expense ratios due to lower portfolio management, trading and operational expenses 9

11 IV. Disinvestment through an ETF 10

12 Disinvestment through an ETF - potential benefits Ability to participate in the long-term development of India, by purchasing stocks in Infrastructure and Natural Resources arena Provides small retail and HNI investors with the ability to diversify exposure across a number of Public Sector companies through a single instrument Ease and flexibility of trading given ETFs can be transacted on terminals across the country Enables large investment in blue chip Public Sector enterprises without the constraint of market liquidity on the underlying individual stock Efficient cost structure for investors given lower expense ratios than mutual funds, lower transaction costs due to low STT(Securities Transaction Tax), and eligibility under the RGESS scheme High transparency allowing investors to make informed decisions 11

13 V. CPSE Index 12

14 Nifty CPSE Index Nifty CPSE Index is constructed in order to facilitate GOI s (Government of India) initiative to dis-invest some of its stake in selected CPSEs through the ETF route. The index values are to be calculated on free float market capitalization methodology. The index has base date of 01-Jan-2009 and base value of Weights of index constituent shall be re-aligned (i.e. capped at 25%) every quarter effective 2 nd Monday of February, May, August and November. Stock selection criteria s for the Nifty CPSE Index: Included in the list of CPSEs published by the Department of Public Enterprise. Listed at National Stock Exchange of India Ltd. (NSE). Having more than 55% government holding (stake via Govt. of India or President of India) under promoter category. Companies having average free float market capitalization of more than 1,000 crore for six month period ending June 2013 are selected. Have paid dividend of not less than four per cent including bonus for the seven years immediately preceding or for at least seven out of the eight or nine years immediately preceding, are considered as eligible companies as on cut-off date i.e. 28-Jun

15 Nifty CPSE Index - Constituents Company Name AMFI Sector Weightage (%) Oil & Natural Gas Corporation Ltd Oil Coal India Ltd Minerals/Mining Indian Oil Corporation Ltd Petroleum Products GAIL (India) Ltd Gas Container Corporation of India Ltd Transportation 7.61 Bharat Electronics Ltd Industrial Capital Goods 4.83 Power Finance Corporation Ltd Finance 4.54 Rural Electrification Corporation Ltd Finance 4.24 Oil India Ltd Oil 3.09 Engineers India Ltd Construction Project 1.79 Data as on 30 th June 2016 Index will undergo review (Exclusion or replacement) in case of corporate actions such as merger, de-merger, spinoff etc. Or upon formal request received from the ETF issuer AMC Industry allocation as per AMFI classification Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. 14

16 Nifty CPSE Index Sector allocation Oil 26.84% Minerals/Mining 25.10% Petroleum Products 13.59% Gas 11.47% Finance 8.78% Transportation 7.61% Industrial Capital Goods 4.83% Construction Project 1.79% 0% 5% 10% 15% 20% 25% 30% Data as 30 th June 2016 Total allocation may not add to 100% due to rounding. Industry allocation as per AMFI classification 15

17 Nifty CPSE Index analysis Index Name P/E Ratio P/B Ratio Dividend Yield Nifty CPSE Index Nifty 50 Index Nifty Next 50 Index Nifty 100 Index Nifty 500 Index S&P BSE SENSEX Data as on 30 th June 2016 Source :

18 VI. CPSE Exchange Traded Scheme 17

19 CPSE Exchange Traded Scheme (CPSE ETF) Investment objective The investment objective of the Scheme is to provide returns that, before expenses, closely correspond to the total returns of the Securities as represented by the Nifty CPSE Index, by investing in the Securities which are constituents of the Nifty CPSE Index in the same proportion as in the Index. However the performance of the Scheme may differ from that of underlying index due to tracking error Investment pattern Instruments Indicative Allocation (% of net assets) Risk Profile Minimum Maximum Securities covered by Nifty CPSE Index 95% 100% Medium to High Money Market Instruments (with maturity not exceeding 91 days), including CBLO, cash & cash equivalents. The above stated percentages are indicative and not absolute. 0% 5% Low to Medium There is no guarantee that these objectives will be met. 18

20 CPSE Exchange Traded Scheme (CPSE ETF) Type of scheme An Open Ended Index Scheme, listed on the Exchanges in the form of an Exchange Traded Fund (ETF) tracking Nifty CPSE Index. RGESS The Scheme is in compliance with the provisions of Rajiv Gandhi Equity Savings Scheme, 2013 ( RGESS ) 19

21 CPSE ETF Scheme Features Benchmark Index Pricing Fund Manager Load Structure Nifty CPSE Index 1/100 th of Nifty CPSE Index Payal Kaipunjal For the performance of other schemes managed by the same fund manager please refer to slide 27 Entry & Exit Load : NIL* (Refer Note # 1 on slide 27) Minimum application amount (during ongoing offer period) Directly with the Mutual Fund: Create / Redeem in exchange of Portfolio Deposit and cash component in Creation Unit Size of 1 lakh units of the Scheme. On the Exchange: 1 (one) Unit and in multiples thereof. Plans Growth Listing Scheme is listed on 4th April 2014 on NSE and BSE(a) (a) The AMC reserves the right to list the Units of the Scheme on any other exchange *Please refer to Section IV(D) (Load Structure) of SID for details on Exit Loads applicable on Redemption of Units lesser than Creation Unit Size directly with the Mutual Fund. 20

22 CPSE ETF Tap structure Tap structure will allow Investors/ Unit holders to subscribe for Units of the Scheme at a predetermined discount during the ongoing offer period The maximum number of Units available for subscription during calendar quarter under the Tap Structure - Tap Issue Limit, will be announced at least 5 Working Days before the commencement of that quarter Investors can purchase units in creation unit size of 1 lakh units only in cash with the Scheme and in multiples thereof. If the Tap Issue Limit is reached at any particular time on any particular working day during the quarter, the Tap Structure shall be immediately stopped for that particular quarter. A discount of specified percentage (%) on the Tap Structure Reference Market Price of the underlying shares of Nifty CPSE Index shall be offered by GOI to the Scheme. Tap Structure Reference Market Price means the price determined based on the full day volume weighted average price on the NSE for each of the Nifty CPSE Index constituents as defined by the Portfolio Deposit portion of the Creation Unit of CPSE ETF on the day the Investor Subscribes for Units under the Tap Structure. Discount on Tap Structure Reference Market Price may not be discount to the closing market price of underlying shares of Nifty CPSE Index on the subscription day This discount would be announced at least 5 Working Days before the opening of Tap Structure for each quarter and will be published by way of notice every quarter and displayed on the Mutual Fund website ( / Investor Service Centres. Please refer to Section III(B) (Ongiong offer details) of SID for further details on Tap Structure. 21

23 CPSE ETF Mechanism during on going offer except tap structure Primary market Secondary market Seller Cash CPSE ETF Subscription/ redemption in-kind Authorized participants / financial institutions Fund Buy / sell Market making / arbitrage Stock Exchange Cash CPSE ETF Buyer For illustration purpose only 22

24 CPSE ETF Mechanism During Tap Structure Cash Cash Authorised Participant / Large Investors Goldman Sachs Mutual Fund Government of India CPSE ETF Units Basket of Stocks For illustration purpose only 23

25 Appendix 24

26 GSAM ETF Basket GS BeES GS BeES Fixed Income Equity Commodity GS Liquid BeES GS Gold BeES Domestic International GS Nifty BeES GS Junior BeES GS Bank BeES GS PSU Bank BeES GS Shariah BeES GS Infra BeES CPSE ETF GS Hang Seng BeES All GS BeES are traded on capital market segment of NSE & BSE 25

27 GS BeES Product label Name of Scheme Riskometer GS Nifty BeES GS Junior BeES GS Shariah BeES GS Gold BeES Investors understand that their principal will be at Moderately High Risk. GS Bank BeES GS PSU Bank BeES GS Hang Seng BeES GS Infra BeES Investors understand that their principal will be at High Risk. GS Liquid BeES Investors understand that their principal will be at Low Risk. 26

28 Funds managed by Fund Managers Particulars June 30, 2015 to June 30, 2016 Absolute Returns (%) PTP Returns (INR) June 30, 2014 to June 30, 2015 Absolute Returns (%) PTP Returns (INR) June 30, 2013 to June 30, 2014 Absolute Returns (%) PTP Returns (INR) CAGR Returns (%) Since Inception PTP Returns (INR) Allotment Date GS Nifty BeES Dec-01 Nifty 50 Index Nifty 50 Total Returns Index GS Junior BeES Feb-03 Nifty Next 50 Index (Benchmark) Nifty Next 50 Total Returns Index Nifty 50 Index (Additional Benchmark) GS Bank BeES May-04 Nifty Bank Index (Benchmark) Nifty Bank Total Returns Index Nifty 50 Index (Additional Benchmark) GS PSU Bank BeES Oct-07 Nifty PSU Bank Index (Benchmark) Nifty PSU Bank Total Returns Index Nifty 50 Index (Additional Benchmark) GS Hang Seng BeES Mar-10 Hang Seng Index (Benchmark) Hang Seng Total Returns Index (INR) Nifty 50 Index (Additional Benchmark) GS Gold BeES May-04 Domestic Price of Gold (Benchmark) Returns for one year are absolute. Returns for more than one year are compounded annualized. Dividends are assumed to be reinvested at the prevailing NAV. Distribution taxes are excluded while calculating the returns. Bonus declared has been adjusted. Incase, the start/end date of the concerned period is non business date (NBD), the NAV of the previous date is considered for computation of returns. Point to Point (PTP) returns in INR is based on standard investment of INR 10,000 made at the beginning of 12 month period as at the end of that period scheme represents Additional Benchmark. Additional benchmark for equity schemes - source : National Stock Exchange of India. Past performance may or may not be sustained in future and should not be used as a basis for comparison with other investments. Fund manager: Payal Kaipunjal (Incase of GS Hang Seng BeES, for debt securities) 27

29 Disclaimers For more details please refer the SID, SAI, Key Information Memorandum and Application Form which are available at the office of the AMC or can be downloaded from NSE Disclaimer : It is to be distinctly understood that the permission given by NSE should not in any way be deemed or construed that the Scheme Information Document has been cleared or approved by NSE nor does it certify the correctness or completeness of any of the contents of the Draft Scheme Information Document. The investors are advised to refer to the Scheme Information Document for the full text of the Disclaimer Clause of NSE. Information gathered & material used in this document is believed to be from reliable sources. However, Goldman Sachs Asset Management (India) Private Limited does not warrant the accuracy, reasonableness and/or completeness of any information. THIS MATERIAL DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT WOULD BE UNAUTHORIZED OR UNLAWFUL TO DO SO. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public sources. Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice. The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites. Index Benchmarks Indices are unmanaged. The figures for the index reflect the reinvestment of all income or dividends, as applicable, but do not reflect the deduction of any fees or expenses which would reduce returns. Investors cannot invest directly in indices. The indices referenced herein have been selected because they are well known, easily recognized by investors, and reflect those indices that the Investment Manager believes, in part based on industry practice, provide a suitable benchmark against which to evaluate the investment or broader market described herein. The exclusion of failed or closed hedge funds may mean that each index overstates the performance of hedge funds generally. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. 28

30 Disclaimers (cont d) Emerging markets securities may be less liquid and more volatile and are subject to a number of additional risks, including but not limited to currency fluctuations and political instability. Prospective investors should inform themselves as to any applicable legal requirements and taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. This material is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any client s account should or would be handled, as appropriate investment strategies depend upon the client s investment objectives Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. It should not be assumed that investment decisions made in the future will be profitable or will equal the performance of the securities discussed in this document. It is to be distinctly understood that the permission given by NSE/BSE should not in any way be deemed or construed that the Scheme Information Document has been cleared or approved by NSE/BSE nor does it certify the correctness or completeness of any of the contents of the Scheme Information Document. The investors are advised to refer to the Scheme Information Document for the full text of the Disclaimer Clause of NSE and Disclaimer Clause of BSE. References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark. Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur. This material is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. 29

31 Disclaimers (cont d) This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material has been prepared by GSAM and is not financial research nor a product of Goldman Sachs Global Investment Research (GIR). It was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may differ from those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and GSAM has no obligation to provide any updates or changes.. Tracking Error (TE) is one possible measurement of the dispersion of a portfolio s returns from its stated benchmark. More specifically, it is the standard deviation of such excess returns. TE figures are representations of statistical expectations falling within normal distributions of return patterns. Normal statistical distributions of returns suggests that approximately two thirds of the time the annual gross returns of the accounts will lie in a range equal to the benchmark return plus or minus the TE if the market behaves in a manner suggested by historical returns. Targeted TE therefore applies statistical probabilities (and the language of uncertainty) and so cannot be predictive of actual results. In addition, past tracking error is not indicative of future TE and there can be no assurance that the TE actually reflected in your accounts will be at levels either specified in the investment objectives or suggested by our forecasts. This material is issued in or from India by Goldman Sachs Asset Management (India) Private Limited (GSAM India) Confidentiality No part of this material may, without GSAM s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient Goldman Sachs. All rights reserved OTU Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. 30