Helping you to achieve your financial goals

Transcription

1 Indian fund guide Not for distribution in Hong Kong or Singapore. Helping you to achieve your financial goals

2 Our research 1 suggests that most Indian expatriates have three key financial goals; the purchase of a property, retirement planning and paying for their children s education. Whatever your own financial planning needs both during your time as an expatriate and also should you return to live in India we believe that you need to be committed to saving for the long term and also carefully consider how you invest your money. Property, gold and cash deposits have traditionally been popular investments among Indian expatriates. However, we believe the key to successful investing is to create a diversified investment portfolio. So it is important that you do not overlook the long-term growth potential of both fixed interest and equity-based investments. Our investment plans offer a wide selection of investment funds that could help you to achieve your individual goals. In this guide we highlight our Indian funds that are available for you to invest in. There are six funds investing in Indian equities, which aim to benefit from India s rapid economic growth story, and a fund that invests in both Indian government and corporate bonds, which could potentially bring stability to your investment portfolio. Alternatively, there is a mixed fund that invests in both equities and bonds, which may appeal to those investors looking for a more balanced approach. Three of the funds are managed by Mumbai-based HDFC Asset Management, which is a 60:40 joint venture between HDFC Limited and Standard Life Investments Limited. HDFC is India s largest fund group with more than $26 billion 2 under management. Over the following pages you can learn more about investing in funds, find out whether cash, gold or Indian equities have delivered the best return over the last 20 years and discover the extraordinary growth prospects offered by medium-sized companies. Also, two leading fund managers share their views on the outlook for Indian equities. Finally, you will find profiles for each of our Indian funds. 01 Page Page Page Page Page 07 Investing in funds Successful investing Outlook for India The fund range A bright future Philip Cernik Chief Marketing Officer, Middle East and Africa 1 Source: Friends Provident International Source: HDFC Asset Management as at 31 December Friends Provident International Indian fund guide

3 01 Investing in funds When you invest in a fund, your money is pooled together with the money of many individual investors. Funds provide the benefit of instant diversification because, depending on the fund s investment objective and risk profile, they can invest in different companies, asset classes or countries. This reduces the effect that any one investment can have on fund performance. All of the investment decisions are made by a team of investment experts, who will make sure that their fund is properly diversified. Equity funds Equities are generally more volatile than other assets but as the chart below clearly demonstrates they offer investors the possibility of higher returns over the long term. This is something you need to consider when deciding which funds to invest in to help ensure that your investments generate the growth required to achieve your financial goals. Indian equities have outperformed both gold and cash over the last 20 years Percentage growth (%) The chart below shows that medium-sized Indian companies have outperformed their larger counterparts by more than 500% since January Since 2001 medium-sized Indian companies have outperformed their larger counterparts /01/2001 Time period 31/07/2015 Percentage growth (%) /07/1995 Time period 31/07/2015 Indian equities (represented by CNX Nifty Index) 314% Gold (represented by Morningstar Gold Commodity Index) 69% Cash (represented by India OE Liquid) 185% Medium-sized Indian companies (represented by CNX Midcap Index 3 ) - 1,059% Large Indian companies (represented by CNX Nifty Index 4 ) - 514% Source: Lipper, cumulative return in USD Bond funds Bond funds can invest in bonds issued by governments and/ or companies, namely government and corporate bonds, in return for a fixed rate of interest. In this way, they aim to generate a steady return and income while preserving capital. This feature of bond funds could help to bring stability to your investment portfolio. Although all funds carry some risk, bond funds tend to be less risky than equity funds. It s important that you achieve a balance between risk and potential reward that you are comfortable with. Source: Morningstar Direct, cumulative return in USD Equity funds that invest in medium-sized companies can be more volatile than funds investing in larger companies. However, they do tend to offer the prospect of superior returns because of the greater growth potential of the companies that they invest in. 3 The CNX Midcap Index covers 100 medium sized Indian companies including Bank of India and Sun TV Network. 4 CNX Nifty Index includes the 50 largest companies in India with household names such as TATA steel and WIPRO. 3

4 02 Successful investing Regardless of where you are living currently, there are some key points to consider when thinking about investing. Don t try to predict the market It s very difficult to predict financial market movements and to get the exact timing of when to invest or disinvest just right. This is because financial markets rise and fall in unanticipated spurts, making it easy to mistime and potentially lose out on any future gains. It makes sense that investors who are patient and who invest for the long term are much better placed to participate in the financial markets best performing days. Missing just a few key days can have a dramatic effect on the value of your investment portfolio. Maintaining a diversified investment portfolio with the help of a financial adviser is an excellent way to shelter your portfolio from periods of volatility. This is likely to be a much more effective approach than trying to predict the direction of the financial markets. Making regular contributions Contributing a fixed amount on a regular basis can be an effective way of helping you to achieve your financial goals, and it may also reduce the negative impact that volatility can have on your investment portfolio. Whenever you make a contribution, you buy units in a fund. A unit is a stake in a fund. The number of units you buy depends on the price of the units at the time of purchase. So, for a fixed contribution, the lower the unit price for the fund, the more units will be purchased. When the unit price for the fund rises, fewer units will be purchased. Contributing on a regular basis means that you are able to take advantage of what is known as unit cost averaging. The table opposite, where USD 1,000 is invested each month into a hypothetical fund, demonstrates this approach in practice. Amount invested (USD) Value at month 6 = USD 6, (6,875 units x unit price of USD 1.00) Fund unit price (USD) Despite the unit price being the same at the end of the period as at the beginning, the investment is showing a profit of USD due to unit cost averaging. Review your portfolio regularly Units acquired Month 1 1, , Month 2 1, , Month 3 1, , Month 4 1, , Month 5 1, Month 6 1, , Total 6, , Whichever of our funds you decide to invest in, it is very important that with the help of a financial adviser you review your investment portfolio on a regular basis. This is to ensure that it continues to reflect your attitude to risk and remains on track to meet your financial goals. 4 Friends Provident International Indian fund guide

5 03 The outlook for India remains positive Over the last couple of years, we have seen a systematic addressal of the macro economic issues facing India and we think India is now well positioned to experience a major turnaround. GDP growth continues to remain at relatively high levels and is expected to be 7.8% in FY17. There has been significant improvement in Fiscal Deficit, Current Account Deficit and Inflation (supported by continued lower commodities and oil prices). Consequently, the policy rates are on a downward trajectory. The Market Cap to GDP ratio at nearly 50% is lower than the historical average of nearly 75% over the last decade. Further, EBITDA margins are near cyclical lows and should improve over medium term. We thus feel that there is merit in increasing allocation to Indian equities. HDFC Asset Management, April 2016 India is less vulnerable to external events than most; its economy is driven by its huge domestic market, rather than hitched to the fortunes of economic giants like China. Although times are still challenging, low commodity and energy prices, along with sensible policies, should keep inflation at bay. And its economic growth rate is among the best in Asia. The government s commitment to fiscal restraint in its budget should leave room for the central bank to cut interest rates again. This is positive for both growth prospects and investor sentiment. India remains one of our investment destinations of choice, given the abundance of world-class companies. Hugh Young, fund manager of the Aberdeen Global Indian Equity Fund, March 2016 The views expressed above are those of the fund manager and are not the views of Friends Provident International. 5

6 04 The fund range There are eight funds available via our fund range that invest in India: six equity-based funds, a fund that invests in bonds, and also a mixed fund that invests in both equities and bonds. Equity funds HDFC (EIFF) Equity Fund The underlying fund, which has been managed by the highly experienced fund manager Prashant Jain since 2003, is positioned to benefit from the rapid economic growth in India. Prashant focuses on large, growing and good quality companies, and avoids unsustainable or very expensive businesses. The fund is well diversified across all sectors with exposure to the leading companies in the information technology, consumer, healthcare, energy and telecommunications industries. Prashant is Executive Director and Chief Investment Officer of HDFC Asset Management. He has more than 21 years of experience in fund management and research in the investment industry. HDFC (EIFF) Mid Cap Opportunities Fund Managed by Chirag Setalvad, the underlying fund invests in medium-sized companies that offer compelling long-term growth prospects. Supported by an able and well-resourced investment team, Chirag focuses on quality and companies which are equipped with robust balance sheets. The fund manager will also invest in smaller companies provided the business offers strong growth potential. Though the fund offers the potential of higher returns than a fund investing predominantly in large companies, small and medium-sized companies can be more volatile than their larger counterparts. JP Morgan India Fund JP Morgan s specialist Asia-Pacific investment arm, which has been operating in the region for more than 40 years, is responsible for managing the fund. Rajendra Nair, an investment manager and an Indian country specialist, has been involved in the management of the fund since By investing in carefully selected Indian equities, the investment team aims to provide access to India s impressive demographic growth potential. The investment team uses a proven investment process which has been specifically developed to identify opportunities in Asia. Reliance Emergent India Fund Sunil Singhania is the fund s lead manager and boasts more than 21 years of investment experience. The aim of the investment process is to seek both value and growth stocks in all sectors and industries across the Indian equity market. Sunil and his investment team focus on investing in companies with a competitive advantage, scalability and a strong management team. The stocks chosen for investment are reviewed independently by a quantitative analyst team to ensure they meet the investment criteria. As well as analysis, company meetings play an important role in the investment process. HSBC Indian Equity Fund Hong Kong-based Indian equity specialist Sanjiv Duggal has spent over 17 years in one market, on one fund, the HSBC Indian Equity Fund. The fund aims to provide capital growth by investing in a mix of medium and larger companies in India. It also holds shares in companies from outside India, but which carry out most of their business in the country. Sanjiv combines his views on the outlook for the Indian economy with bottom-up stock picking. This means that he analyses both the economic backdrop and company fundamentals. Aberdeen Global Indian Equity Fund The fund is managed by a team of equity fund managers, headed up by Hugh Young. With more than 30 years experience of investing in Asia, Aberdeen has been running dedicated Indian portfolios since The fund aims to achieve long-term capital growth by investing in equity-related investments that are registered in India or derive their income from India. The investment team employs a proven process based on first-hand research to identify the most attractive opportunities in the Indian equity universe. 6 Friends Provident International Indian fund guide 6

7 Mixed funds HDFC (EIFF) Prudence Fund Prashant Jain has managed the underlying fund, which invests mainly in equities but also holds 25% in fixed income assets, since June The equity portion of the fund is focused on good quality, larger companies, while the fixed income segment is comprised mainly of government bonds, but also highly rated corporate bonds. Prashant has positioned the fund to take advantage of the growth of the Indian economy by investing in growth companies, such as good quality technology stocks. Financial services are another area of the Indian stock market which Prashant likes and roughly 25% of the fund is invested in this sector. The HDFC funds cannot be directly accessed outside India, so our funds will invest in what are known as feeder funds. These feeder funds, the Emergent India Focus Funds, invest in the underlying HDFC funds. For more information on the funds, please refer to the fund factsheets on our website. Funds that invest in individual countries may be more volatile and carry more risk than those spread across several countries. Please note that securities held within a fund may not be denominated in the currency of that fund and, as a result, fund prices may rise and fall purely on account of exchange-rate fluctuations. You may get back less than you have paid in. Bond funds Invesco India Bond Fund The fund will invest primarily in bonds issued and/or guaranteed by the Indian government or by Indian companies. The highly experienced fund management team comprising Ken Hu, chief investment officer Invesco Asia Pacific, and fund manager Jackson Leung, both of Invesco Hong Kong Limited, benefit from the regular input of Religare Invesco Asset Management India. Religare provides non-binding investment advice, including knowledge of the local market both in terms of the Indian economy and credit analysis. The aim of the team is to take advantage of the attractive yields on offer in the Indian fixed income market. 05 A bright future With an improving economic environment, rising levels of disposable income, a wide range of high quality companies and the possibility of having the largest labour force in the world by , the future looks bright for India. With these factors in mind, India may finally be able to cement its position as one of the world s dominant economic powers. Investing in India successfully is not about following the latest political or economic twists and turns it s about our fund managers discovering companies of different sizes that can thrive. For patient, long-term investors, we firmly believe that India represents an attractive investment opportunity. 5 Source: MD Speech: Seizing India s Moment, 16/03/2015 7

8 Visit our website to learn more about our range of flexible savings, investment and protection plans. Speak to your financial adviser today to see how we could help you secure your investment goals. About Friends Provident International We are a leading financial services provider, with a reputation of trust, commitment and integrity, offering financial solutions to customers throughout their lives. Friends Provident International has over 35 years of international experience and is part of the Aviva group which has a heritage that dates back over 300 years. This document is for information only. It does not constitute as investment advice or an offer to provide any product or service by Friends Provident International and other companies within the Aviva group. Please seek professional advice, taking into account your personal circumstances, before making investment decisions. We can accept no liability for loss of any kind incurred as a result of reliance on the information or opinions provided in this document. Friends Provident International Limited: Registered and Head Office: Royal Court, Castletown, Isle of Man, British Isles, IM9 1RA. Telephone: +44(0) Fax: +44(0) Website: Incorporated company limited by shares. Registered in the Isle of Man, number Authorised by the Isle of Man Financial Services Authority. Provider of life assurance and investment products. Authorised by the Insurance Authority of Hong Kong to conduct long-term insurance business in Hong Kong. Registered in the United Arab Emirates as an insurance company (Registration No. 76). Registered with the Ministry of Economy as a foreign company (Registration No. 2013): Registration date 18 April Authorised by the United Arab Emirates Insurance Authority to conduct life assurance and funds accumulation operations. Registered in Singapore No. T06FC6835J. Licensed by the Monetary Authority of Singapore to conduct life insurance business in Singapore. Friends Provident International is a registered trade mark of the Aviva group. XP SA NRI FUNDS (49963)