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Factor Advantage
PMS
Presentation contents
Current Investment Landscape
Introducing LIC MF Factor Advantage PMS
About MSCI
Performance and Portfolio Attributes About LICMF
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Equities have always been a roller coaster ride
Source : Nse India (as of 12 Jan 2021)4
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Nift
y Sp
ot
Sub-primecrises
Eurozone Debt crisis
US Fed Taper Tantrum
BJP Wins Elections
Demonitization & US Presidency
BrexitAnnounced
Trade wars
BJP 2nd Term
Covid-19
UPA Wins elections
UPA Wins elections
While in long run equity markets tend to outperform but in short term Investor might have negative returns as well
Investors are looking for smoother ride as theirreaction pivots on the time at which they entered
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Optimism
Excitement
Thrill
Euphoria
Anxiety
Denial
Fear
Desperation
DespondencyHope
Relief
Optimism
Fear & DespairPoint of Maximum
Greed & RiskPoint of Maximum
As it is difficult to predict future and stage at one which enters, it is worthwhile to constructing a portfolio that is highon risk adjusted basis is the key.
Portfolios that ingrain this approach tend to do well in risk-off sentiment (falling markets) and does fairlywell in risk-on (rising markets). Hence this approach is suitable for new (feeling of stability) and experienced investors(diversification from conventional bottom- up high beta play as well.
Most funds in global markets (including India) are reeling with underperformance owing to heightened volatility…
Source : https://us.spindices.com/spiva/#/reports6
Current Indian PMS Landscape : better regulated albeit marred with underperformance
Residual Underperformance leaves scope for differentiated benchmark performing returns Bulk of AUM accretion was seen between in last 3 years. However, if one looks at the trailing 1/2/3-year performance, more 1/2 to 3/4th of the funds in Multicap & Large cap space
(contributing to bulk of AUM and Scheme count)failed to beat their benchmark Largest part of AUM and Clients were/are part of multicap funds, which has seen greatest degree of underperformance Alpha generation still possible in Mid and Small cap space.
Different DPMS performance in trailing 1/2/3 years Horizon
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Source : PMS Bazaar, January 2021 (Data as of 31 Dec 2020)
Type of Fund 1 year 2 year 3 year
Multicap 55% 7% 29%
Large Cap 44% 45% 22%
Mid Cap 80% 89% 63%
Small & Mid Cap 75% 63% 29%
Small Cap 86% 100% 80%
% of Funds Outperforming
Risk-adjusted portfolio with mix of passive & active addresses key concerns of Investors…
Most of the PMS products have high management fees and exit fees structures
Hig
h Co
st
High commonality (Herd Mentality Bias)in most portfolios
Majority of the schemes have failed to outperform the benchmark.
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Current Investment Landscape
Introducing LIC MF Factor Advantage PMS
About MSCI
Performance and Portfolio Attributes About LICMF
Introducing LIC MF Factor Advantage PMS
9
Introducing LICMF Factor Advantage PMS
Mix of passive and active structure
Competitive Costing
Strategy has a mix of passive & active
Unique BlendAs quality stocks are spread across
Market capitalization
Multicap Approach
Endeavors to limit the downside risk
Superior Risk Management
Disciplined investing to reduce sudden shocks
Rule Based Approach
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LICMF Factor Advantage PMS : Process
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03
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Stock selection framework(factor based) is applied onstocks universe
Portfolio is rebalanced basedon rebalancing mechanism &fundamentals/marketconditions
Shortlisted stocks are analyzed basedon Fundamentals, ESG and market conditions to decide final portfolio
Eligible stock universe isdecided based upon marketcapitalization (liquidity)constraints
Factors looked in stage 1
Captures excess returns to stocks with lower than average volatility, beta, and/or distinctive risk
(Lower risk stocks)
Low Volatility
Reflects excess returns to stocks with stronger past performance.
(Rising stocks)
Momentum
Measures company growth prospects using historical earnings, sales and
predicted earnings(Measure of change in sales and
earnings)
Growth
Captures excess returns to stocks that are characterized by low debt, stable earnings growth, and other “quality” metrics. (sound balance sheet stocks)
Quality
Captures excess returns to stocks that have low prices
relative to their fundamental value
(Relatively inexpensive stocks)
Value
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Factors looked in stage 2
Environment , Social & Governance parameters.
ESGRoE, RoCE, RoA, GPM,NPM &OPMS
Profitability
Ensuring the sectors selected are in sync with economic undercurrent
Top-down approachShare of mind, opposite to market share.
It is a characteristic all valued brands have
Business Moats
Ensuring no heavy concentration at stock level
Concentration risk
Based on the above factors the stock list & weights are further narrowed to a 18-25 model portfolioAnd the same is benchmarked against MSCI RW 25 Index ( & NSE200 as secondary benchmark)
Robust & scientific process
of portfolio construction1. Investment
framework driven process
2. MSCI uses its state of art platform & technology to filter
produce stock list
4. FM based on the selection framework and market conditions creates model portfolio
3. Investment Committee andFund management team createsstock portfolio based on top-down/ bottom-up approachacross market capitalization
5. Onboarded clients are allotted strategy opted for based on current market conditions
6. Portfolio is rebalanced atpre-defined intervals and clientis regularly updated on hisportfolio
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Scientific portfolio creation & Institutionalized FM Framework
Source: MSCI. Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or theresults to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of suchdata. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect,special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted withoutMSCI's express written consent.
Current Investment Landscape
Introducing LIC MF Factor Advantage PMS
About MSCI
Performance and Portfolio Attributes About LICMF
Performance and Portfolio Attributes
15
Note : This is only for illustrative purpose based on back tested data (by normalizing to 100) after charging 1.5% fees. It shouldn’t the solely relied for investment decision. For actual product performance, TWRR post expenses will considered. Source : MSCI, NSE Website. Data as of 31th Dec 2020
Generating higher risk adjusted returns across cycles
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MSCI Risk Nifty 50 Nifty 200 Nifty 500 Midcap 100
Strong episodes of Risk-on/Risk-off brings out product superiority
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LIC MF Factor AdvantageNifty 50Nifty 200Nifty 500Midcap 100
100
150
200
250
300
350
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LIC MF Factor Advantage PMS
Nifty 50
Nifty 200
Nifty 500
Midcap 100
2008 : endured 9-month precipitous decline 2009 : from nadir of Mar-09 strong recovery participation
2010-11 : resilience in Euro debt crises 2012-2017 : strong participation in risk-on sentiment
17Note : This is only for illustrative purpose based on back tested data (by normalizing to 100) after charging 1.5% fees. It shouldn’t the solely relied for investment decision. For actual product performance, TWRR post expenses will considered. Source : MSCI, NSE Website.
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MSCI RW 25Nifty 50Nifty 200Nifty 500Midcap 100
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MSCI RW 25Nifty 50Nifty 200Nifty 500
2020 is the perfect example of dexterity of PMS
2020 : Covid-20 meltdown tested the risk-based approach
2020 : Inability to participate in sharp recovery
2020 : Bigger picture exemplifies benefit of Risk Adjusted approach doing well in complete cycle
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Note : This is only for illustrative purpose based on back tested data (by normalizing to 100) after charging 1.5% fees. It shouldn’t the solely relied for investment decision. For actual product performance, TWRR post expenses will considered. Source : MSCI, NSE Website.Data as of 31st Dec 2020
95
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125
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155
170
185
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MSCI RW 25Nifty 50Nifty 200Nifty 500Midcap 100
6065707580859095
100105110115
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MSCI RW 25Nifty 50Nifty 200Nifty 500Midcap 100
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MSCI RW 25 Nifty 50 Nifty 200
Nifty 500 Midcap 100
LIC MF Factor Advantage PMS Performance trend
YoY performance brings out the stability
..in risk-on the PMS participates strongly, in risk-offs it falls lesser
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Note : This is only for illustrative purpose based on back tested data (by normalizing to 100) ) after charging 1.5% fees. It shouldn’t the solely relied for investment decision. For actual product performance, TWRR post expenses will considered. Source : MSCI, NSE Website. Data as of 31st Dec 2020
MSCI RW 25 Nifty 50 Nifty 200 Nifty 500 Midcap 100
CY 2008 -30% -39% -41% -42% -43%
CY 2009 77% 71% 81% 83% 95%
CY 2010 26% 18% 14% 14% 19%
CY 2011 -15% -25% -27% -27% -31%
CY 2012 16% 28% 32% 32% 39%
CY 2013 4% 7% 4% 4% -5%
CY 2014 46% 31% 36% 38% 56%
CY 2015 9% -4% -2% -1% 6%
CY 2016 5% 3% 4% 4% 7%
CY 2017 35% 29% 33% 36% 47%
CY 2018 7% 3% -1% -3% -15%
CY 2019 5% 12% 9% 8% -4%
CY 2020 12% 15% 16% 17% 22%
-50%
-30%
-10%
10%
30%
50%
70%
90%
CY20
08
CY 2
009
CY 2
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CY 2
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CY 2
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CY 2
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CY 2
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CY 2
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CY 2
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CY 2
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CY 2
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CY 2
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MSCI RW 25 Nifty 50 Nifty 200 Nifty 500 Midcap 100
LICMF Factor Advantage PMS : Statistical Attributes
Lower Standard Deviation ensures stability Correlation is at reasonable levels
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1 Yr
3 Yr
5 Yr
Nifty 50 Nifty 200 Nifty 500 Midcap 100
Maximum Drawdown as visible is lowest Lower beta aided limit of drawdown
0.30
0.40
0.50
0.60
0.70
0.80
1 Yr
3 Yr
5 Yr
Nifty 50
Nifty 200
Nifty 500
Midcap 100
10%
15%
20%
25%
30%1
Yr
3 Yr
5 Yr
LIC MF Factor Advantage Nifty 50Nifty 200 Nifty 500Midcap 100
20
-75%
-50%
-25%
0%
Since Inception 2011-2015 2016-2020 (Oct)
LIC MF Factor AdvantageNifty 50Nifty 200Nifty 500Midcap 100
Note : This is only for illustrative purpose based on back tested data (by normalizing to 100) ) after charging 1.5% fees. It shouldn’t the solely relied for investment decision. For actual product performance, TWRR post expenses will considered. Source : MSCI, NSE Website.
LICMF Factor Advantage PMS : Portfolio Insights
Higher weight to structural compounders Top portfolio holdings : a diversified mix
A Multicap framework ensures capturing winners across M-Cap
21Note : This is only for illustrative purpose based on back tested data (by normalizing to 100) excluding fees & charges. It shouldn’t the solely relied for investment decision. For actual product performance, TWRR post expenses will considered. Source : MSCI, NSE Website. Data as of 12th Jan 2021
8
3812
9
9
7 4
Auto
Consumer Goods
Chemicals
Financials
IT
Pharma
Power
05
1015202530354045
Nifty 50 Nifty Jr Nifty Midcap100
Nifty Midcap100-150
43.2
14.9 17.0
22.9
Top 10 stocks WeightsHDFC Bank 9.2TCS 8.7Gillette India Ltd 7.8Sanofi India Ltd 7.5Hindustan Unilever Ltd 5.8Tata Chemicals Ltd 5.0MRF Ltd 4.5Asian Paints Ltd 4.5Marico Ltd 4.4Schaeffler India Ltd 4.4
• Well diversified across market capitalization• Stock specific capping (to avoid
concentration risk)• Higher weight to growth over value stocks• Beta of portfolio is 0.72 (lower than all the
Broad market Nifty Indices)
Key Insights
LICMF Factor Advantage Fundamental Attributes
Key Fundamental Attributes Key Index Comparison
22Note : This is only for illustrative purpose based on back tested data (by normalizing to 100) excluding fees & charges. It shouldn’t the solely relied for investment decision. For actual product performance, TWRR post expenses will considered. Source : MSCI, NSE Website. Data as of 12th Jan 2021
Price to Earnings
31.39
Price to Book
4.65
Dividend Yield 1.55
RoE
26.39
Fundamentals LIC MF FA Nifty 50 Nifty Jr Nse 200
Price to Earnings 31.39 39.72 40.24 45.91
Dividend Yield 1.55 1.09 1.08 1.14
Price to Book 4.65 4.1 4.18 3.98
RoE 26.39
Highlights
• Lowest P/E portfolio amongst key indices (above)• Highest dividend yield• High RoE of 26.39• High Price to Book (owing to Consumer staples)
Current Investment Landscape
Introducing LIC MF Factor Advantage PMS
About MSCI
Performance and Portfolio Attributes About LICMF
About LICMF
23
About Management“To be a trusted partner in wealth creation”
Shri. M. R. Kumar Nominee Director
Shri. Siddhartha Mohanty Nominee Director
Shri. Kailash Kumar Bang Independent Director
Shri. Satish K. Kamat Independent Director
Shri. Sanjay A. Muthal Independent Director
Shri. Vijay Sharma Independent Director
Smt. Neera Saxena Nominee Director
Shri. Raghunandan Maluste Independent Director
Shri. Dinesh Pangtey Whole Time Director & Chief Executive Officer
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LICMF Factor Advantage PMS
Azeem Ahmad (Head PMS & Principal officer)
He is spearheading the PMS vertical at LIC AMC.
In his last assignment, he was the Fund Manager, PMS (Discretionary &Non-discretionary portfolios) at ICICI Securities. He has over 19 years ofexperience, the last 12 years being with ICICI Securities.
He has expertise in the areas of portfolio management, fundamentalresearch, global macro, equity, FX and derivatives research & productdevelopment.
He also held roles including Chief Macro Strategist, Derivatives Strategistat ICICI direct retail Research team.
By Qualification, he is an MBA (Finance) from SP Jain and an AssociateCompany Secretary (ACS).
OURTEAM
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OURTEAM
Experienced team with lot of vigourand passion to deliver best strategy based on client needs
Saket KumarFund Management & OpsTotal 13 Years' experience.Worked as Assist to DebtFund Manager, as an EquityDealer and assist to HybridFund Manager. EducationalBackground-CFA-MFA(ICFAI), MBA, B.Com. UnderHead PMS guidance he willbe assisting FundManagement & operations.
Shreya RakaOps & Communications
Bachelor of Commerce inAccounting and Finance(BAF) & Master ofCommerce (M.com). In herlast assignment, she workedwith ICICI Prudential AssetManagement Co. Ltd – PMSOperation Team. More than2 years of experience in PMS
Sanjay ChavanOperations & Onboarding
Completed 26 years ofservice in LIC of INDIA.Worked in diff departmentslike Micro Insurance, HRdept, Audit Dept, Branchesof LIC etc. EducationalQualification is B.S.C(Chem), PGDMM, FIII.
Nikita Torka (Compliance Officer) Experience – 5 years of experience in handling Compliances of Mutual fund. By Education Qualification she is BFM, CS, M.Com and MBL. Scope of work in PMS – Compliance with SEBI PMS Regulations and any other applicable laws
26
Current Investment Landscape
Introducing LIC MF Factor Advantage PMS
About MSCI
Performance and Portfolio Attributes About LICMF
About MSCI
27
accuracy rate in index production1
99.7%equity indexes calculatedin real time
12,500+equity indexes calculated daily (over 12,000 custom indexes)
230,000+
equity ETFs based on MSCI3
1,300+
in assets under management are benchmarked to MSCI indexes2
$13.1trillionActive clients
7,800+
MSCI Index: A Market Leader
1 Accuracy rate is calculated based on the number of corrected data points in comparison to the total number of data points processed over a one-month period. Corrected data points are identifiedthrough internal quality control procedures or through client feedback. Index corrections are subject to a 50bp correction method. Monthly figures are averages for the period Jul 2019 – Jun 2020 )2 Assets under management (AUM) as of December 31, 2019, reported on March 31, 2020 using data from eVestment for active institutional funds and Morningstar for active retail funds. Equity ETF valueswere based on data from Refinitiv and MSCI. In addition, AUM includes passive assets using available internal data. AUM includes notional open interest in futures and options using internal data fromMSCI. Active retail funds include open-ended funds, closed-ended funds and insurance product funds. Active institutional AUM includes separate/segregated AUM, pooled/commingled AUM and mutual fundinstitutional AUM. AUM includes equity and multi-asset classes. AUM includes the MSCI only portion of hybrid/blended benchmarks from Morningstar and excludes feeder funds and funds of funds. Forfunds where the AUM was not reported as of December 31, 2019, the previous period AUM was utilized as an estimate. MSCI does not guarantee the accuracy of third-party data.3 This data is as of March 31, 2020.
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LIC MF Factor Advantage is powered by MSCI
• Performance attribution services• Risk Analytics• Global market information • Indexes
Global leader in Real Estate investment tools
In over 32 markets worldwide
Coverage spanning $2 trillion of private real estate assets
• ESG Issuer & Fund Ratings• ESG Screening & Controversies
• ESG Governance Metrics• Climate Solutions• Climate Value at Risk• Sustainable Impact
World’s largest provider of ESG data, research and indexes2
Over 1,500 ESG equity and fixed income indices use MSCI ESG Research ratings and data2
• MSCI ACWI Index• MSCI World Index• MSCI Emerging Markets Index
• Factor Indexes• ESG and Climate Indexes• Thematic Indexes
1300+ ETFs are based on MSCI indexes, more than any other index provider1
230,000+ indexes calculated daily
12,000+ in real time
• Risk Management• Asset Allocation• Fixed Income Analytics• Multi-asset Class Factor Models
MSCI Global Risk and Performance Engine runs up to 1 trillion calculations/day
2 million time series
70+ million client positions
50+ global FI markets
Private Real Estate
ESG & Climate ResearchIndexes Analytics
Years in Business50
Global Locations35
Employees3,500+
Active Clients7,800+
MSCI at a Glance
29Source: MSCI. Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or theresults to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of suchdata. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect,special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted withoutMSCI's express written consent.
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Key Product Details
Investment Objective To deliver long term capital appreciation by Investing in Equity assets by selection based on multiple factors and fundamentals to deliver risk adjusted return
Description of Securities Listed Equity and Mutual Funds.
Basis of Selection of type of security Selection of stocks & allocation of weights is based upon risk weighted methodology and other fundamental aspects
Allocation of portfolio across types of securities 80-100% Listed Equity and 0-20% in Mutual Fund, Cash and Cash Equivalents
Appropriate Benchmark to compare performance MSCI India Domestic IMI Risk Weighted Top 25 Capped Index.
Basis for choice of benchmarkMarket -cap agnostic in stock selection approach. MSCI India Domestic IMI RW Top 25 Index is constructed from selection of stocks from large/mid/small cap stocks based on riskweighted methodology.
Minimum investment
The minimum value of Funds/investments which will be accepted towards initial corpus under Risk Weighted Investment Approach would be decided by the Portfolio Manager fromtime to time and the minimum sum will not be less than any amount as may be stipulated by the Regulations from time to time. The uninvested amounts forming part of the Client'sAssets may be at the discretion of the Portfolio Manager held in cash or deployed in liquid fund schemes, exchange traded index funds, debt-oriented schemes of mutual funds, giltschemes, bank deposits and other short-term avenues for investment.
Indicative tenure or investment horizon Investment horizon of 3 years and above
Risk Associated with the investment approach The investment is based on risk weighted methodology and hence concentration and selection of a sector or stock is dependent on the strategy.
Redemptions / Partial withdrawalsPartial withdrawal shall be allowed only to such extent that portfolio value after recovery of fees, charges, and payment of withdrawal amount is not less than the minimuminvestment specified in the Minimum investment clause in this schedule
Use of derivativesThe Portfolio Manager might transact in derivatives in case it deems it necessary to protect the value of client's portfolios in periods of market instability. If the client does not wantthe Portfolio Manager to use derivatives at all in his/her portfolio, then, he/she can mention Derivatives as a negative security on account opening form and the Portfolio Managerwould be barred from using derivatives in the client's portfolio
Change in allocation of portfolio: Subject to regulation, the asset allocation pattern indicated above may change from time to time, keeping in view the market conditions, market opportunities, applicable regulations, political and economic factors. It must be clearly understood that the percentages stated above are only indicative and not absolute and that vary substantially, depending on the perception of investment manager. The intention being always to seek to protect the interest investors. Such changes in the investment pattern will be for short term and defensive considerations.
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Disclaimer
General Disclaimer: All returns are in percentage. Performance disclosure is at aggregate portfolio level and the portfolio information (i.e. market cap, sector allocations,etc.) is at model client’s level. Securities investments are subject to market risks and there is no assurance or guarantee that the objective of the investments will beachieved. Past performance of the portfolio manager does not indicate its future performance. Performance related information provided herein is not verified by SEBI.Detailed Disclaimer: This document is issued by LIC MF Asset Management Ltd. (Portfolio Managers). This document is produced for information purposes only and nota complete disclosure of every material fact and terms and conditions. It does not constitute a prospectus or disclosure document or an offer or solicitation to buy anysecurities or other investment. All opinions, figures, charts/graphs, estimates and data included in this document is subject to change without notice. It should not beconstrued as investment advice to any party. The statements contained herein may include statements of future expectations and other forward-looking statements thatare based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differmaterially from those expressed or implied in such statements. Investors shall be fully responsible/ liable for any decision taken on the basis of this document. Clientsunder Portfolio Management Services are not being offered any guaranteed/assured returns. The name of the strategies do not in any manner indicate their prospectsor return. The investments may not be suited to all categories of investors. The material is based upon information that we consider reliable, but we do not representthat it is accurate or complete, and it should not be relied upon as such. Neither LIC MF Asset Management Ltd. nor any person connected with it, accepts any liability,losses and/ or damages arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.Opinions, if any, expressed are our opinions as of the date of appearing on this material only. While we endeavor to update it on a reasonable basis, there may beregulatory, compliance, or other reasons that prevent us from doing so. The Portfolio Manager is not responsible for any loss or shortfall resulting from the operation ofthe strategy. The recipient shall understand that the statements cannot disclose all the risks and characteristics. The recipient is requested to take into consideration allthe risk factors including their financial condition, suitability to risk-return, etc. As with any investment in securities, the value of the portfolio under management mayfluctuate depending on the various factors and forces affecting the capital market. Disclosure Document shall be obtained and read carefully before executing the PMSagreement. For tax consequences, each investor is advised to consult his / her own professional tax advisor. This document is not for public distribution and has beenfurnished solely for information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are requiredto observe these restrictions. Distribution Restrictions – This material should not be circulated in countries where restrictions exist on soliciting business from potentialclients residing in such countries. Recipients of this material should inform themselves about and observe any such restrictions.
LIC Mutual Fund Asset Management LimitedIndustrial Assurance Building, 4th Floor,
Opp.Churchgate Station, Mumbai – 400020CIN: U67190MH1994PLC077858
