TAMCO Portfolio Management TM SHARIAH STRATEGY (A Shariah Compliant PMS Strategy) Presented By R. K. GUPTA MD & PO 1 Taurus Asset Management Company Ltd 4/13/2015 EMERGENCE OF SHARIAH INVESTMENT T Muslims represent nearly a quarter of the world’s population. T Islamic Finance & Investment as an industry is evolving and developing. T Investor base for Shariah investment is becoming large and product base is also improving. T Market for Shariah compliant products is growing resulting particularly, equity assets of Shariah Compliant investors are increasing T Therefore, demand for securities / products / schemes that meet Shariah principles is growing. T Shariah compliant indices are being launched in an effort to attract more investors from India and abroad. T Such indices attract those investors who want to buy stocks without violating Islamic investment guidelines. T In India also, such indices have been launched. 2 4/13/2015 OPPORTUNITIES OF SHARIAH INVESTMENT TThe global Islamic asset management business ranges between $30 billion to $50 billion, which is a drop in the ocean compared with the multi-trillion dollar conventional fund business. (Source: arabnews.com) TChanging political situation in America and European countries and falling GDPs of Europe and North America have forced rich Islamic investors from the Gulf countries to look for investment opportunities in South East Asian countries, including India) TIslamic finance in India, home to the world’s second-largest Muslim population after Indonesia, is still in its infancy. TEfforts should help channel socially-conscious investor’s savings of more than $1 trillion in the coming years, including from the cashrich Gulf (Source: gulfnews.com) 3 4/13/2015 GLOBAL ISLAMIC INVESTMENTS TThe Dow Jones and FTSE have already established global Islamic indices. TThe Dow Jones Composite Islamic Index with 2440 compliant companies and over 70 country Islamic indices as of today enjoys wide spread marketing acceptance. TThe FTSE/SGX Asia Shariah 100 index provides more opportunities for Islamic investors to invest in Asian market. TThe S&P BRIC Shariah Index is designed to capture the largest and mostly liquid stocks in Brazil, Russia, India and China that meet the criteria of Shariah law. TIn India, there are two Shariah Compliant Indices: T By NSE – S&P CNX 500 Shariah T By BSE – TASIS Shariah - 50 4 4/13/2015 GLOBAL ISLAMIC INVESTMENTS TNon Islamic investors have began to show more interest in Islamic products. TA new Islamic Asset class showing immense potential in private equities. TThere are more than 130 Islamic Equity Funds managed by some of the world’s top Fund Managers viz. Citibank, Deutsche Bank, HSBC, Merrill Lynch, UBS etc. TThese Funds have brought modern Fund Management techniques and the world creation of inter price system to the door step of Muslim investors. 5 4/13/2015 CHOICE OF SHARIAH COMPLIANT INVESTMENTS MURABAHA IJARA • ‘Cost plus financing’ • Funds acquire & own assets • Fund buys goods & sells to 3rd party at given price • Profit from rental income through leasing • Price = Cost + Profit margin(Pred decided) • Leased item to be used in Halal manner COMMODITIES • Buying & selling of Halal commodities • Istina’a – Buyer pays upfront at time of contract • Bay al-salam – Forward contract where Delivery Price=Spot price–Discount owing to credit risk • Fund responsible for management of assets EQUITY • Investment in common shares of companies in Halal business • Companies also screened on basis of Shariah Compliant Accounting principles 6 4/13/2015 SHARIAH COMPLIANCE INDIA SCENARIO TShariah compliant investment in India is a recent concept to attract Muslim investors, in particular. TEquity based Shariah investment is the most popular product in India. TIndia has the second highest Muslim population in the world. TAwareness has reached Muslims who are now ready to join the main-stream. TNumber of Shariah-compliant stocks in India are much higher than many Muslim countries, thus providing large stock universe for investment by Islamic investors. TOut of 6,000 BSE listed companies, approximately4,200 are Shariah compliant. The market capitalization of these stocks accounts for approximately 61% of the total market capitalization of companies listed on BSE (Source: islamicequity.co.in) 7 4/13/2015 A STEP FORWARD TTAMCO has taken another step in this direction by offering “TM Shariah Strategy” under its Portfolio Management Services. TAs such Indian Muslims have got another avenue to park their investible income in “TM Shariah Strategy”, a Shariah Compliant PMS product. TMultigain, a leading Advisory & Broking Group in the area of financial services has entered into an arrangement with TAMCO as a sole marketing partner to market a specialized PMS product – TM Shariah Strategy, a Shariah Compliant PMS Strategy. 8 4/13/2015 WHY SHARIAH INVESTMENT TDespite such huge and fledging stock market in India, parts of Muslim population have not been able to participate TDifferent aspects of their lives, including investments, are governed by Shariah Laws TOpening an avenue for the inclusion of Muslims at large in the Great Indian Growth story TShariah Investment is not essentially only for Muslim population but for every person who has values and ethics. TTM Shariah strategy is TAMCO’s unique socially responsible approach for the benefit of interested HNI’s. TTAMCO already has a Shariah compliant mutual fund scheme in the market by the name of Taurus Ethical Fund for the benefit of retail investors at large. 9 4/13/2015 WHY SHARIAH INVESTMENT The Shariah 50 has outperformed the SENSEX by nearly 25% and the BSE 500 by over 30% over BSE’s back-test horizon - 1st Jan 08 to 22nd Dec 10. (Source: BSE) 10 4/13/2015 SHARIAH PMS VS CONVENTIONAL PMS Returns BSE TASIS Shariah 50 Sensex BSE 500 YTD (Jan-Dec 22, 2010) 18.16% 14.61% 13.77% 1 Yr (23-Dec-09 to 22-Dec-10) 21.59% 19.91% 18.20% 2 Yrs (23-Dec-08 to 22-Dec-10) 132.67% 101.60% 112.13% Since start date (01-Jan-08) 22.77% -1.40% -10.12% Volatility (Annualized since 01-Jan-08) BSE TASIS Shariah 50 28.01% Sensex 34.41% BSE 500 32.97% Over the back testing period, annualized volatility for the Shariah 50 was also less than both SENSEX and the BSE 500 by nearly 5 percentage points. (Source: BSE) 11 4/13/2015 WHY SHARIAH INVESTMENT TFrom the graphs and return figures, it is pretty evident that Shariah 50 has been consistently able to outperform the Sensex as well as BSE-500. TSimilar study was done on Indonesian stock market between Jakarta Islamic Index and Jakarta Composite Index concluding that Islamic index is more resilient towards crisis compare to conventional stock index. (Source: Dept. of Islamic Economic, Airlangga University, Indonesia) TVarious empirical studies have suggested that the Shariah screening process automatically reduces the risk of investment which is inline with the nature of Islamic value of small uncertainty (Gharar shaghir) 12 4/13/2015 SHARIAH PMS VS CONVENTIONAL PMS Shariah PMS Conventional PMS Hedging using derivatives not allowed Hedging is allowed Cash settled futures is prohibited Cash settled in future is allowed Investment in banks, insurance and any company conducting non-Shariah business is not allowed Investment in banks, insurance companies, etc. is allowed Investment can’t be made in Interest bearing instruments & securities. Free cash to be kept in current account therefore returns could be affected Investment can be made in bonds, CP, CD, and other interest bearing instruments to reduce volatility Shariah Audit to confirm that Shariah principles are followed in making investments. No special audit Copy of Shariah Compliant Audit provided to investors. No specific compliance audit provided to 13 investors 4/13/2015 SHARIAH INVESTMENT IDENTIFICATION TPMS would apply fundamental, technical & logical analysis on the list to identify investment worthy stocks. TNo investment would be made in T/Z category (illiquid) shares. TTAMCO’s Shariah-compliant list will be reviewed by TASIS monthly to check for its conformity to the Shariah principles. TIn case any stock is removed from Shariah list and fund has an investment in that stock, it will be given appropriate time to sell that stock from the portfolio. So there won’t be any distress selling. TFree cash can be invested in gold ETFs only 14 4/13/2015 PORTFOLIO BUILDING PROCESS Bottom-up/ Topdown approach Shariah Universe Liquidity Analysis Fundamental Analysis Market behavior & Trend analysis Logical Analysis Technical Analysis Shariah Compliant Portfolio Information & News analysis 15 4/13/2015 TM SHARIAH STRATEGY HIGHLIGHTS TA Shariah Compliant PMS Strategy TMinimum Investment Rs.5 lacs TIndividuals, Sole Proprietorship Firms, Partnership Firms Company/Body Corporates, Trusts Association of Pensions NRIs/FIIs (subject to RBI approval) can invest. TInvestment can be made only by cheque / draft or through listed stocks. TIndependent SEBI registered Custodian. TPersonalized services both by TAMCO Relationship Manager & officials of Multigain. TRegular reporting. TFacility of Tracking the Portfolio with User I.D & password. TChoice of Discretionary and Non-Discretionary Portfolio. 16 TRegular communication from TAMCO – PMS. 4/13/2015 NORMS FOR SHARIAH COMPLIANCE In terms of the present Shariah law, funds of the TM Shariah Strategy will not be invested in the following areas: T Fixed interest instruments T Derivatives including but not limited to options, futures and contracts for difference. T Banking and finance companies. T Manufacture or distribution of alcohol products. T Gambling and entertainment. T The production, packaging or any other activities related to Pork or Pork products or other non-halal meats. T Sugar companies due to their heavy focus on molasses which are used for production of alcohol. T Equities or other securities issued by companies whose activities relate in any way to the production or distribution of pornographic material. T Investment trusts, unit trusts and other collective investment schemes that do not adhere to Islamic Shariah investment principles. 17 4/13/2015 SHARIAH COMPLIANCE BY TASIS TThe monitoring and reviewing of Shariah Compliance of TM Shariah Strategy is done by Taqwaa Advisory & Shariah Investment Solutions (P) Ltd (TASIS). TThe portfolio of this strategy is to be monitored every month by TASIS officials to conform its Shariah compliance. TTASIS (Taqwaa Advisory & Shariah Investment Solutions) is India’s premiere Shariah Advisory Firm which provides the services of stock screening, product structuring, Shariah Monitoring and Shariah Certification in India. TIt is a well known body for Shariah Advisory in India following are its feats: •TASIS has become India’s first institution to become a member of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) •BSE and TASIS Launch Shariah-Compliant Index to Promote Financial Inclusion in India. •GIC (Re), a Government of India owned company, appoints TASIS for Shariah advisory. TFor more details, visit www.tasis.in 18 4/13/2015 THE INDEX BSE TASIS SHARIAH 50 TLaunched by BSE and Taqwaa Advisory and Shariah Investment Solutions (TASIS) in December 2010 TThis Index consists of 50 largest and most liquid Shariah compliant stocks within the BSE500. TTASIS employs strict financial screening norms which are more conservative than its peers. TFirst Shariah compliant equity index which is publically disseminated on a real-time basis. TThe index constituent weights are capped at 8%. 19 4/13/2015 ABOUT TAMCO TSEBI approved Asset Management Company since 1993 TAt present, Investment Manager for various schemes of Taurus Mutual Fund. TThe present AUM of Taurus Mutual Fund is about Rs.2800 Crs. TTaurus Mutual Fund is also managing a Shariah compliant scheme called Taurus Ethical Fund, India’s first such scheme approved by SEBI. TIn the second Venture, TAMCO has started Portfolio Management Services (PMS) after getting licence from SEBI. TThis is a Board run Company whose operations are also being monitored by Board of Trustees comprising of eminent personality. 20 4/13/2015 SERVICES OFFERED BY TAMCO-PMS At present, TAMCO PMS is offering following Investment strategies under Discretionary Portfolio Management Services: T Alpha Generator Strategy T Focused PSU Strategy T Wealth Building Strategy T Arbitrage strategy T TM Shariah Strategy For more details visit www.tamcopms.com 21 4/13/2015 ABOUT MULTIGAIN T “Multigain is an integrated financial services group, offering a wide range of services to different clients, segments of the economy, includes EPF Trusts, Corporate, high net-worth individuals and retail investors. Provide all financial solutions under one umbrella.” T Multigain is an ISO ISO 9001:2008 certified company working since 1994, having its own branches in Moradabad, Mumbai, Noida , Lucknow & in 15 different states with more than 100 employees, 100 plus Franchisees & more than 300 Advisors across PAN India. T Multigain has Membership with BSE, NSE, MCX’SX, USE, NSEL, MCX, NCDEX, NMCE, ACE, ICEX and CDSL. T Multigain started working early in the area of Shariah finance and launched Multigain Shariah Investment Services (MSIS) in 2009 22 4/13/2015 MULTIGAIN SHARIAH INVESTMENT SERVICES PVT. LTD. T Multigain Shariah Investment Services Pvt. Ltd. (MSIS) was launched in 2009 by its parent company Multigain group. It is an independent vertical whose operations are separate from Multigain’s financial services. T Multigain is India’s 1 st Shariah Compliant Commodity Broker in National Spot Exchange Ltd. T MSIS is India’s Largest Integrated Platform of Distributing & Broking of Shariah Base Investment Products & Services. T The objective of Multigain Shariah Investment Services is to give an opportunity to those investors who want to invest in accordance to the Shariah principles in ethically correct sectors. T Shariah Investment Solutions: Equity Trading Spot Commodity Trading Portfolio Management Service Mutual Fund & ETF 23 4/13/2015 PMS VS INDIVIDUAL TRADING PMS Individual Trading Professional Management of Portfolio involving overall fundamental, technical & logical analysis No professional Management of Portfolio Focus and exclusivity of investment service Lack of focus and exclusive time for investment decisions Access to large amount of market information and news with enough time margin to capitalize on it Most of the news and information available only from public domain which has lost effectiveness Benefit of price averaging available Averaging difficult on account of one time buying rather than accumulation Diversification benefits available owing to pooling of fund Diversification lacking owing to limited funds Higher reward to risk ratio Lower reward to risk ratio Proper accounting & reporting, easier for deducing tax Cumbersome accounting of profit & loss. liability Regular monitoring of portfolio on account of focused Regular monitoring of investment difficult due to nature of service paucity of time Advisory service also available No investment advice available. Investment mostly based 24 on news available from various sources 4/13/2015 PMS VS MUTUAL FUND PMS Mutual Fund Personalized investment objective depending on ticket size of investment & other factors Common investment objective for all investors irrespective of ticket size of investment Personalized service & customized portfolio solutions No personalized & customized service Daily tracking of individual portfolio available for investor Portfolio details available only on monthly basis No SEBI restrictions in terms of portfolio structure thus providing greater flexibility for profit maximization SEBI structure applicable on fund’s portfolio Profit sharing option available No such option available 25 4/13/2015 WHY TAMCO PMS Broker backed PMS TAMCO PMS DP Service provider Mostly their own therefore compromise on quality of service can’t be ruled out Outside agency which is a SEBI approved custodian Propriety trade More interested so returns can be affected Concept doesn’t exist Access to research reps Reps of other research houses mostly not access Reps of all research houses available Trading style Own terminals used so unnecessary churning & high broking rates may increase cost Independent brokers empanelled with competitive brokerage agreements Staff No separate team for PMS operations thus lacking focus Independent dedicated team for entire gamut of PMS operations Service quality PMS one of the activity along with secondary market transactions therefore less personalized Separate teams for PMS & Mutual Fund therefore more personalized service Portfolio disclosure Normally not disclosed on regular basis Viewing facility available online on regular basis 26 4/13/2015 THE JOINT VENTURE TTAMCO and Multigain have entered into an arrangement whereby; T TAMCO will be responsible for the Fund Management, Back office & Accounting as per the SEBI’s guidelines. T Multigain will be responsible for marketing of TM Shariah Strategy through various channels, sub-brokers etc. both in India and abroad. T TASIS will be responsible for the Shariah compliance of TM Shariah Strategy TRole and responsibility of the identities are well defined. 27 4/13/2015 FOR ANY QUERY/INFORMATION, CONTACT US At TAMCO Taurus Asset Management Co. Ltd. UGF, Kanchenjunga Building, 18, Barakhamba Road, New Delhi 110 001 45382222, 23717593, 23738664 Fax : 23738664, E-mail : queries@tamcopms.com C M Mathur Mudita (Relationship Manager) Ph(Direct): 011-45382204 Ph(Direct): 011-45382203 Mobile: 9810264642 Mobile: 9899687551 email: mudita@tamcopms.com email: mathur@tamcopms.com At Multigain Multigain Commodities Services (P) Ltd. H-50, Lajpat Nagar Moradabad 244 001 (0591) 2490400, 2490500 28 Mobile: +91-9917400021/+91-9837037174 E-mail :jasem@multigain.in/pms@multigain.in 4/13/2015 RISK DISCLOSURE TInvestments in Securities are subject to market and other risks and there is no assurance or guarantee that the objective of any of the portfolio will be achieved. TInvestors in the PMS Product are not being offered any guaranteed/assured returns. TPast performance does not indicate the future performance of the portfolios of the Portfolio Manager. TThe names of the portfolio strategies do not in any manner indicate their prospects or return. TThe material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should be relied upon as such. TNeither Taurus Asset Management Co. Ltd. nor any person connected with it, accepts any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice. TDisclosure Document shall be obtained and read carefully before executing the PMS agreement and any time thereafter. TFor tax consequences, each investor is advised to consult his/her own professional tax advisor. TThis presentation is not for public distribution and has been furnished solely for information and must not be reproduced or redistributed to any other person. Person into whose possession this document may come are required to observe these restrictions. No part of this material may be duplicated in any form and/or redistributed with Taurus Asset Management Co. Ltd.’s prior written consent. TDistribution Restrictions – This material should not be circulated in countries where restrictions exist on soliciting business from potential clients residing in same countries. 29 4/13/2015 30 4/13/2015