Kotak Pioneer Fund Future belongs to those Companies that Pioneer and Adapt to Change - Kotak Mutual Fund
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Kotak Pioneer Fund
(An open ended equity scheme investing in pioneering innovation theme)
Future belongs to those Companies that Pioneer and
Adapt to Change
NFO Opens on: October 9, 2019 and NFO Closes on: October 23, 2019
1
Who Pioneers Are As We Believe?
Question the Status Quo
(Challengers)
Courage to Travel
Untrodden Path
(Risk Takers)
Out of the Box Thinking
(Innovators)
Mindset of Continuous
Innovation
(Relentless)
Future Ready Business
(Sustainable)
Disclaimer: All product and company names are trademarks or registered trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by
them. Logos displayed on this presentation are the trademarks of their respective owners, and constitute neither an endorsement nor a recommendation of those organizations. In
addition, such use of logos of third-party organizations is not intended to imply, directly or indirectly, that those organizations endorse or have any affiliation with this presentation. The
above is does not represent or indicate the prospective fund portfolio. The fund manager reserves the prerogative to alter/modify the investment approach according to the evolving
2
environment while keeping the sanctity of the investment objective
What Pioneering Companies Do
Extend the Growth Profile & Longevity of Company
Improve Customer Stickiness
Enhances the Moat – Strengthens Competitive Advantage
Be One Step into the future – Wow the Market
Gravitating to Winner Takes All markets
Disclaimer: The above is the view based on the studied estimation by the fund manager. The fund manager reserves the prerogative to alter/modify the investment approach according to
the evolving environment while keeping the sanctity of the investment objective 3
Finding Pioneers In India
No of Listed & traded stocks in India:
Stage 1
~4000
No of stocks with market cap of >Rs 1400
Stage 2
cr: 642 Process for other
Diversified Equity
No. of stocks under research coverage: Funds
Stage 3 327 (85% of India’s M-cap)
Companies with innovations mindset,
material new product launches, new
Stage 4 processes to maintain cost advantage, new
revenue stream
Stage 5 Picking Core Ideas Kotak Pioneer Fund
Selection Portfolio Stock Ideas based on BMV*
Disclaimer: As on 30th August 2019. Source: Bloomberg. Stock evaluation Business 4
Features of Pioneer Universe in India
Dynamic Universe Presently of Around 120 Companies
Cumulative Market Cap Of Pioneer Universe – US $550bn, Approx. 30% Of Overall Indian Market Cap
A Multi-cap oriented Approach to Investing with Diversification across Sectors
Access to Relatively New Economy Businesses
Good Mix Of Large, Mid And Small Caps In Universe
Data Source: Bloomberg, IISL, AMFI. Data as on 31st Aug 19 5
Case Studies
–
We have Marveled at Them Do their Thing
6
Case Study 1 : Pioneer Different Business Model
Sector : Financial Services, Market Cap : Large
Status Quo Challenging Status Quo Transformation
• Since 2008, profits rose
• Before 2007, this • Competition focused on manifold
company was largely a corporates out of NPA • Sustained Growth and
captive financier for fears superior RoE led to high
its group and barely • This firm decided to use stock performance with it
profitable. Then it technology to serve growing by multiple times
change the business retail segment in five years
model • Credit bureau services
• Company focused on were extensively used
diversifying its book, and in-house analytical
identifying untapped models developed to
segments uncatered provide early warning
due to high costs alerts
Source: Internal Research. “This case study is only to illustrate the concept of ‘Pioneer’ in our economy and is not a forward looking outlook on the specific company or sector. Please read the
Scheme Information Document carefully for asset allocation & investment strategy”. Past performance may or may not be sustained in future. As of Aug 19 7
Case Study 2 – Pioneer The Agri-Chem Innovation Outsourcing to
Global Majors
Sector : Agri-Chem, Market Cap : Mid
Status Quo Challenging the Status Quo
• Started out as agri-chem • Entered into global supplies of innovator molecules in 2011.
company bringing global Company’s product emerge vital to a Japanese innovator,
with this product’s global sales rising 13x in 4 years Transformation
products to India, without
focus on genericising them. • Company continues to grow
This won the trust of global • Subsequently, the company has developed newer molecules significantly due to its
innovators for global markets to companies like DuPont, BASF, FMC etc, pioneering approach of
and has supplied small quantities of a blockbuster molecule focusing on innovative
• Focus on patented molecules in FY19. molecules.
in domestic market showcases
the company’s approach as • Scale up of this molecule can potentially be as large as • Sales grew up by multiple
pioneering current export business of US$250mn times and PAT increased
manifold over ten years
• Company has also ventured into other molecules as well as
pharma API
Source: Internal Research. “This case study is only to illustrate the concept of ‘Pioneer’ in our economy and is not a forward looking outlook on the specific company or sector. 8
Please read the Scheme Information Document carefully for asset allocation & investment strategy”. Past performance may or may not be sustained in future.
Case Study 3 – Pioneer Through the Business Model
Sector : Outsourcing, Market Cap : Large
Status quo Challenging the Status quo Transformation
• Started out as single • Over the last 10 years, profits
product company • Now, largest suppliers of equipment have gone up more
catering to Indian clients. going into a car globally, further significantly
diversifying into aviation and railways
• Pursue inorganic opportunities. • Global Clients ask this company
Focuses on futuristic technologies like to take over their other
Electric Vehicles, electronics, light- bankrupt suppliers
weighting etc
Source: Internal Research. “This case study is only to illustrate the concept of ‘Pioneer’ in our economy and is not a forward looking outlook on the specific company or sector. Please
read the Scheme Information Document carefully for asset allocation & investment strategy”. Past performance may or may not be sustained in future. 9
Case Study 4 : Pioneer Through Cost / Value
Sector : Materials, Market Cap : Small
Challenging the Status quo Transformation
• Focused on new technology to lower cost • The sales and profits grew by
• Introduced branding at higher end manifold over the last 10 years (in an
• Low cost ensured price competitiveness, while environment where commodity
Status quo continuously premiumizing at upper end prices have fallen), even as RoE have
remained high
• Present in a commodity
which has significant
unorganized and fragmented
players
Source: Internal Research. “This case study is only to illustrate the concept of ‘Pioneer’ in our economy and is not a forward looking outlook on the specific company or sector. Please read the
Scheme Information Document carefully for asset allocation & investment strategy”. Past performance may or may not be sustained in future. 10Case Study 5 – Pioneer Product
Sector : Materials, Market Cap : Midcap
Status quo Challenging the Status quo Transformation
• Focused on cement industry • Focused on investing in mining space, • Company is debt free and has
with a new product which was where requirements of product were more emerged as one of largest players
focused on improving efficiency diverse and scale was 10x the cement in global high chrome segment
• Became market leader in India, industry requirement. • Company is debt free, with RoE
company throwing up cash • Mining industry was primarily using forged remaining high over last decade
flows but without avenues to media while this company was into high • Profits have gone up significantly
invest chrome media, which was more expensive in the last decade, despite
but more productive subdued commodity prices
• Starting from tertiary grinding, company
has now products across all mine ores and
across primary, secondary and tertiary
Source: Internal Research. “This case study is only to illustrate the concept of ‘Pioneer’ in our economy and is not a forward looking outlook on the specific company or sector. Please
read the Scheme Information Document carefully for asset allocation & investment strategy”. Past performance may or may not be sustained in future. 11Few More Examples Of Indian Pioneers
Concept Sectors Pioneering Innovation Challenging status quo
New Product Automobiles Clutchless cars challenging the geared cars
Business Model Challenger Property Joint Developer Model challenging traditional land-banking
Novel Process to reduce cost Aviation Low cost challenging full service airlines
Novel Process to reduce cost Building Materials Medium Density Fibre challenging Plywood
Novel Process to reduce cost Retailing Everyday low Pricing challenging big box upscale retailing
Business Model Challenger Infrastructure Dedicated Freight Corridor challenging traditional freight
Business Model Challenger Media Over the Top Media challenging Traditional Media
Pioneer in Asset Reconstruction companies challenging
New Product Financials
traditional corporate banks
Source: Internal Research. “This list is only to illustrate the examples of ‘Challenger’ as a concept in our economy and is not a forward looking outlook on any specific company or sector.
Please read the Scheme Information Document carefully for asset allocation & investment strategy”.
12Painting On A Global Canvas
- Unleashing the full potential of global
innovators
13Advantages of Investing in A Global Fund With Similar Theme
Hedge Against
Exposure to Top Implicit Exposure to Geographical
Domestic Business
Pioneering Ideas Dollar Asset Class Diversification
Cycle
T
o
p
P
i
o
n
e
e
s
Disclaimer: All product and company names are trademarks or registered trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by
them. Logos displayed on this presentation are the trademarks of their respective owners, and constitute neither an endorsement nor a recommendation of those organizations. In
addition, such use of logos of third-party organizations is not intended to imply, directly or indirectly, that those organizations endorse or have any affiliation with this presentation. The
above is does not represent or indicate the prospective fund portfolio. The fund manager reserves the prerogative to alter/modify the investment approach according to the evolving
14
environment while keeping the sanctity of the investment objectiveGlobal Example Of Company Ahead On The Innovation Curve –
A Growth So Fast, Sensex looks like a liquid fund index
2500
Share Price of E-Tailing MNC Announced that it will take
2000
Sensex over a supermarket in a deal
of $13.7bn
A Video & Music service
launched, which now boasts
1500 more than 90 million subscribers Launched a service
to create original TV
Launched Web Introduced the an e- content such as The
Services, which now reader. It now Grand Tour and Mr
Launched a web-based powers sites such as
1000 controls around 80% Robot
Marketplace, letting Netflix, Airbnb and
of all ebook sales
third-party sellers list the Guardian
items for sale
500
0
May-97
Mar-98
Dec-98
Oct-99
Jul-00
May-01
Feb-02
Dec-02
Sep-03
Jul-04
Apr-05
Feb-06
Nov-06
Sep-07
Jun-08
Apr-09
Jan-10
Nov-10
Aug-11
Jun-12
Apr-13
Jan-14
Nov-14
Aug-15
Jun-16
Mar-17
Jan-18
Oct-18
Aug-19
Source : Bloomberg. The case study is only to illustrate the theme idea and is not a recommendation to buy, sell or hold the stock. It is also not an indication that the performance of all the
stocks in the portfolio was similar to that of the stock disclosed herein. The portfolio construction is the purview of the Fund Manager and may change from time to time. All Stock & Index
Prices rebased to 100 at the point of beginning. Data as of Aug 19. 15Global Example Of Company Ahead On The Innovation Curve
4000
Launch of
3500 smart Watches
Share Price of Global Electronics Giant Touch enabled
3000 First Launch ID system
Sensex of a path - Mobile
breaking Launch of payment
2500
smart phone virtual system
2000 assistance
Launch of
Branded Hand-
laptop
held music player Branded
1500
Branded Online Hand- held
Desktop Music Store Tab
1000 Publishing/Laser
Writer
500 OS Launch
0
Nov-82
Feb-84
May-85
Sep-86
Dec-87
Mar-89
Jun-90
Sep-91
Jan-93
Apr-94
Jul-95
Oct-96
Jan-98
May-99
Aug-00
Nov-01
Feb-03
May-04
Sep-05
Dec-06
Mar-08
Jun-09
Oct-10
Jan-12
Apr-13
Jul-14
Oct-15
Feb-17
May-18
Aug-19
Source : Bloomberg. The case study is only to illustrate the theme idea and is not a recommendation to buy, sell or hold the stock. It is also not an indication that
the performance of all the stocks in the portfolio was similar to that of the stock disclosed herein. The portfolio construction is the purview of the Fund Manager
and may change from time to time. All Stock & Index Prices rebased to 100 at the point of beginning. Data as of Aug 19 16Why Kotak Pioneer Fund?
17Our Response To The Opportunity – Kotak Pioneer Fund
Kotak Pioneer Fund
Multicap Fund to invest in pioneers &
innovators across fields
Research Tap Global Pioneers
Find Pioneers with distinct Invest a portion in overseas
competitive long term pioneers and innovators
advantage Pioneer in DNA
The ability to sustain
and maintain long
term advantage at
profit 18Pioneer Fund –Understanding The Fund
Fund Structure ‘Pioneer’ Concept for the Fund
Concept is that companies fostering pioneering
80-100% in pioneering innovations theme innovations challenge the business status quo
Upto 20% in other than pioneering innovations theme
Focus on growth oriented / High impact companies The Pioneering initiative of such companies creates
competitive advantage which proves to be difficult for
the competitors to surmount, meet or replicate.
Access to Global Ideas
The fund seeks to invest in such companies, that utilize
technological and/or procedural ability to operate and
Upto 35% may be invested in overseas create large value for customers, government, society
funds/etfs/securities investing in similar theme access to
global techs
Process Oriented Fund Management
The fund is from the Kotak Mutual Fund stable and
has structured investment processes
19Historical Benchmark Performance of the Fund
Price Performance Since 2013 5 Year Rolling Return Since Inception
350 30.00%
Normalised to 100
300 25.00%
250 20.00%
200
15.00%
150
10.00% Composite Benchmark Nifty 50 TRI
100
Fund Benchmark Nifty 50 TRI 5.00%
50
0.00%
0
Dec-17
Mar-18
May-18
Aug-18
Oct-18
Jan-19
Mar-19
Jun-19
Aug-19
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
May-18
Sep-18
Jan-19
May-19
Data Source: Bloomberg. The Portfolio is a simulation based on 85:15 allocation
between IISL KOTAK INDIA PIONEERING INNOVATIONS Index* (brief
methodology explained in slide 27) and MSCI ACWI Global Information 5 Year Rolling Return Benchmark Index
Technology Index TRI in INR Terms. The above is only a test of concept and is not a Performance (CAGR) Performance Nifty 50 TRI
guarantee of future return. The Pioneer index is a rule based index provided by
Maximum 24.9% 18.7%
IISL based on the broad criterion provided by Kotak. Within the ambit of those
rules, the IISL has constructed to benchmark as an independent third party Minimum 10.2% 8.0%
service provide. This is an illustration to highlight the functioning of the model. Average 18.9% 13.2%
The performance is gross of expenses. Past performance is no guarantee for
future return. Mutual Fund investments are subject to market risks, read all
scheme related documents carefully. Data as on 31st Aug 19. The Index number
are Total Returns Index. 20Kotak India Pioneering Innovations Index – Features
Sector Allocation of Index Market Cap Allocation of Index
Media & 81.8
ENERGY INDUSTRIALS Logistics Entertainment…
5% 5% 3%
Real Estate
Diversified 1%
8%
Retailing
9%
Auto
21%
Consumer
Durables 18.2
10%
Pharma /
Chemicals Financials
13% 19%
Large Cap Mid Cap
• The Total market cap of the index is at around Rs 35 Lakh Cr
• The index constituents are primarily from the private sector
Data Source: Bloomberg, IISL, AMFI. Data as of 30th Aug 21Strategies To Optimise Risk-Adjusted Performance
The theme is diversified across sectors & stocks to achieve risk mitigation
Companies in theme generally have proven track record of multiple revenue Streams
Companies in this theme generally tend to have low debt exposure, leaving them
less vulnerable to financial leverage issues or interest rate cycles(^)
The fund provides diversification across geographies as well
Disclaimer: (^): The above is a generally observed trend although variances are also available
22Fund Features & Risk Factors
23Key Features
Name of the Scheme Kotak Pioneer Fund
Type of scheme An open ended equity scheme investing in pioneering innovations theme
The investment objective of the scheme is to generate capital appreciation from a
diversified portfolio of equity, equity related instruments and units of global
mutual funds which invests into such companies that utilize new forms of
production, technology, distribution or processes which are likely to challenge
Investment Objective
existing markets or value networks, or displace established market leaders, or
bring in novel products and/or business models.
However, there can be no assurance that the investment objective of the Scheme
will be realized.
85% IISL KOTAK INDIA PIONEERING INNOVATIONS INDEX + 15% MSCI ACWI
INFORMATION TECHNOLOGY INDEX TRI. The values of the customised benchmark
Benchmark so calculated, shall be disclosed at least on a quarterly basis on our website.
The Trustees reserves right to change benchmark in future for measuring
performance of the scheme.
Fund Manager Mr. Harish Krishnan
24Key Features
Minimum Investment size:
Initial Purchase (Non- SIP) - Rs. 5000/- and in multiples of Rs. 1 for purchases, and
Re 0.01 for switches.
Minimum amount for
Additional Purchase (Non- SIP) - Rs. 1000/- and in multiples of Rs. 1 for purchases, and
purchase/redemption/switches
Re 0.01 for switches.
(Direct Plan &Regular plan)
Minimum Redemption Size:
In Rupees - Rs. 1000/-
In Units - 100 units
A) Regular Plan B) Direct Plan
Available Plans/Options Options: Dividend Payout, Dividend Reinvestment & Growth (applicable for all plans)
SIP Rs. 1000/- (Subject to a minimum of 6 SIP installments of Rs. 1000/- each)
Systematic Investment Plan Facility (‘FSIP’) Facility
FSIP - is a facility wherein an investor can opt to invest variable amount in the scheme
based on P/E (price-to-earnings ratio) level of Nifty. This facility allows investors to take
Flex SIP
advantage of market movements by investing higher amounts when the markets are
low, and by investing a variable amount (within the limits defined by the investor)
when the markets are higher.
25Risks to the Investment Approach
• While it is tempting to view investment in such companies as having faster growth there are certain market
conditions when such investment styles are likely to under-perform.
• These businesses are typically faster growing companies, with market ascribing higher valuation multiples in
cognizance of this growth. While we expect in the medium-to-long term that faster growing businesses will continue
to find market acceptance, market conditions which typically favor value style significantly may cause under-
performance due to this approach
• Most of the old economy companies in India have significant linkages to government policies. Any perception or
change in government policies that is likely to benefit this old economy companies may cause market sentiment to
shift favourably to such companies, from time to time
• “Pioneering Innovations” focused approach typically has high representation to emerging technologies and
correspondingly lower representation to companies that operate in old economy sectors like metals, thermal power,
corporate banking, traditional FMCG, traditional IT Services etc. Phases where such sectors benefit (either due to
massive risk off or significant change in government policy to revive sectors like metals, thermal power, PSU banks
etc) may witness under-performance for such an approach
26IISL Kotak India Pioneering Innovations Index Methodology
IISL is a subsidiary of National Stock Exchange (NSE)
The stocks selection is based on the Full Market Cap of 6 months average data ended January 2018. The index is calculated based
on free-float market capitalization method.
Index Methodology:
Stock Selection universe: NSE listed stocks shortlisted and shared by Kotak AMC are considered as universe for selection at the
time of review. The review is based on January 31, 2018 end on 6 months average data (aligned with Broad market indices
reconstitution cycle). Stocks should have listing history of at-least 3 months
Stock selection criteria: Top 50 stocks based on 6 months average Full Mcap out of the eligible universe are included in the index.
The same static 50 stock portfolio is back-tested since January 01, 2013. Out of the 50 static portfolio, the stocks which are listed
post January 2013 are included in the index after fulfilling the eligibility criteria of having at-least 3 months of listing history
Capping Limits: Weight of index constituents are capped every quarter on the basis of following criteria as shared by Kotak AMC.
Sectors are capped at 25%. Individual stocks are capped at 8%. Weight of sectors and stocks may drift between the two
rebalancing periods due to the movement in stock prices.
Reconstitution
Ad-hoc reconstitution and rebalancing of the index will be initiated in case any of the index constituents undergoes suspension or
delisting or scheme of arrangement
27Riskometer
This product is suitable for investors who are
seeking*
Long term capital growth
Investment in equity and equity related
securities of companies operating with
pioneering innovations theme without any
market capitalisation and sector bias.
*Investors should consult their financial advisors if in doubt about
whether the product is suitable for them
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
28Disclaimers and Risk Factors
All reasonable care has been taken to ensure that the information contained herein is not misleading or untrue at the time
of publication. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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