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Kotak Focused Equity Fund

NFO Opens: 25th June 2019, Closes 9th July 2019

(An open-ended equity scheme investing in maximum 30 stocks in large-cap, mid-cap and small-cap category)

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Why Kotak Mutual Fund?

Source: One of the fastest growing AMCs as per % growth of QAAUM, Source : AMFI . For Asset wise and geography wise disclosure please refer slide 19. Month end AUMhas been given for May 2019. All other data is Quarterly Average AUM

One of the fastest growing AMCs in India

33,07941,214

58,495

92,216

124,688

149,824162,573

Mar'2014 Mar'2015 Mar'2016 Mar'2017 Mar'2018 Mar'2019 May'2019

AUM Rs in Crs

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Select Focus On Sectors As A Theme Worked…

Source: Amfi, The above given graph is only to inform the benefit of being focused on selection of sectors for Kotak Standard Multicap Fund which is observed in the AUM movement of Fund. There is no similarity between Kotak Standard Multi Cap Fund and Kotak Focused Equity Fund. This should not be in any way be considered as an assurance of strategy to be adopted for Kotak Focused Equity Fund. Kotak Focused Equity Fund will driven by its strategy mentioned in SID. Past Performance is no guarantee of future returns.

Risk adjusted performance and diligent investment process has helped the growth

Kotak Standard Multicap Fund has grown over the years Consistently

329 405 2,450

4,219

9,323

17,853

25,531

Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 May-19

AUM(IN RS CRS)

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…Select Focus On Stocks Is An Interesting Theme

AspectsKotak Standard Multicap

FundKotak Focused Equity

Fund

Sector Focus High Moderate

Stock Focus Diversified Concentrated

Market cap Approach Multicap Multicap

Portfolio Approach Top Down & Bottom-up Bottom Up & Top Down

Focus on Liquidity High High

Disclaimer: The above given graph is only to inform the benefit of being focused on selection of sectors for Kotak Standard Multicap Fund which is observed in the AUM movement of Fund. There is no similarity between Kotak Standard Multi Cap Fund and Kotak Focused Equity Fund. This should not be in any way considered as an assurance of strategy to be adopted for Kotak Focused Equity Fund. Kotak Focused Equity Fund will be driven by its strategy mentioned in SID. Past Performance is no guarantee of future returns.

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Risk Mitigation vs Over Diversification

Source: An Introduction To Risk And Return Concepts And Evidence by Franco Modigliani and Gerald A. Pogue 646-73 March 1973

After a certain point diversification does not significantly reduce unsystematic risk

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Performance Varies Across Sectors As Well As Within Same Sectors. - Focus on winners & aim to weed out losers

Large variance between Best & Worst Performers of Nifty 200 in the last 1 yearSource: Bloomberg. As on 31st May 2019. This is only to illustrate variance in performance. This is not to be construed as a model portfolio. The actual portfolio will not have any necessary similarity with the above mentioned stocks and their performances.

‘Few Star Players’ is Still Better than a Lot of Mediocrity

Right Conviction In Stocks Works Across Market Cap In The Long Term

Source: Bloomberg. Stock performance data as of 31st May 2019. Top performing stocks based on 10 year performance. Above Data is to only to show case the power of equity in a best case scenario. This is not to be construed as a model portfolio. The actual portfolio will not have any necessary similarity with the above mentioned stocks and their performances.

Market Cap Select List of Top Stock Performers Over 10 Year PeriodMay-19 Value of Rs 1 Lakh invested in June-

2009 (in Rs Lakhs)Large cap BAJAJ FINANCE LTD 280

Large cap Eicher Motors Ltd 74Mid cap Atul Ltd 72

Mid cap Balkrishna Industries Ltd 26

Large cap Page Industries Ltd 50

Mid cap Hatsun Agro Product Ltd 55Mid cap Natco Pharma Ltd 34Mid cap Cholamandalam Investment & Finance Company Ltd 27

Mid cap Aarti Industries Ltd 56Large cap IndusInd Bank Ltd 24

Mid cap Whirlpool of India Ltd 27

Large cap Havells India Ltd 30

Mid cap Supreme Industries Ltd 30Mid cap WABCO India Ltd 33

Large cap Bajaj Finserv Ltd 23Mid cap TVS Motor Company Ltd 25

Large cap Aurobindo Pharma Ltd 18

Focused Investing in Equities Over Long Term Has Wealth Creation Potential

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Kotak Focused Equity Fund –Process, Risk Management & Investment Themes

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Stock Selection: High Quality Companies At Reasonable Valuations

Stage 1 No of Listed & traded stocks in India: ~3000

Stage 2 No of stocks with market cap of >Rs1400 cr: 653

Stage 3 No. of stocks under research coverage: 327 (85% of India’s M-cap)

Stage 4 45-70 diversified ideas

Top Stock Ideas: ~25-30

Stage 5 Distilling Gold from Ore

Common Process for Kotak Equity Funds

Kotak Focused Equity

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Distilling Gold From Ore – The Process

• Seeking Business with strong Moats & with long term viability

• Seeking businesses where ROCE (Return on Capital Employed) > Cost of Capital

Sustainable Business

Capital Efficiency

• Business Vision/Ambition and its execution are in sync

• Seeking reasonable values for businesses based on growth expectation and inherent value

• Prefer long term compounding ideas rather than short term tactical or event based trades

Managerial Capability

Growth At Reasonable Valuation (GARP)

Long Term Investment Fit

• Diligent protection of minority shareholder interestGood Corporate Governance

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Macro Overlay To Idea Selection

Cyclical / non-cyclical

Private / State-owned

Growth / Value

Global / Local

Consumption / Investment Driven

Urban / Rural

Commodity producer / Users

Various approaches to Idea selection

Idea Selection

Valuation FilterReforms Dependent / Independent

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Risk Management In A Concentrated Strategy

• Optimum management of stock weights in the portfolio based on• Risk Reward Ratio• Liquidity

• Generally no cash call will be taken. Fund will endeavour to maintain upto 7.5% of the portfolio for liquidity needs and portfolio modifications*

Optimum Weights

• Manage Liquidity to minimize impact cost of portfolio turnover as well as fundflows

Cash Allocation

• Select use of derivatives for optimizing impact cost and overcoming entry / exit limitations, if any

Liquidity

Optimize Impact Cost

Disclaimer: *The above provided limit is based upon the fund manager discretion and assessment of the necessary conditions to pursue the investment objective. These limits may change based on fund manager’s constant appraisal of the market and business conditions and due to the evolving internal and regulatory investment framework

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The Key Is To Minimize Risk Of Loss And Maximize Your Winners. But How?

• Rigorous selection process to identify potential winnersBegin Well

• Risk / Reward based selection to limit downsideDownside Awareness

• Regular monitoring & attribution analysisConstant Review

Hypothetical example Stock A Stock B

Expected Upside Potential 20% 20%

Expected Downside Risk -10% -8%

Our preference

• Fund will stop accepting flows If Fund Manager believes it has reached optimum size Fund Capacity

• The CIO Equity will act as a sounding Board for the Fund ManagerIdea Validity

Focus On Current Investment Themes

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• Banks, Life Insurance Companies, capital market plays, Asset management companies

Financialisation of savings

• Capital goods, construction, cement, industrials, corporate banks, power utilities, auto, chemicals, consumer durables

Capex recovery cycle and make in India

• Consumer companies (FMCG+ Durables); rural focused companies, retail

Consumerism and demographics

• Gas, capital goods, renewable power

Clean-Green India

• Information technology, pharmaceuticals

Export recovery

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Salient Features Of Kotak Focused Equity Fund

Leveraging On Research CapabilitiesStock picking through the BMV

model- ‘Business, Management

and Valuation’

Concentrated Portfolio:25-30 high growth and good

quality businesses with sustainable

and scalable earnings potential

over the long term

Suitable For Long Term Investors

Those looking to benefit from

the structural growth

opportunity in Indian equities

Multi-Cap Portfolio StrategyEnsuring stocks picks without

market cap bias

Bottom Up Approach To Stock PickingWith a top down thematic overlay.

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Investors with ability to withstand higher volatility

Long term & patient investors

Suitability Of Kotak Focused Equity Fund

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Allocation through SIP is more suitable

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Key Features

Details Particulars

TypeAn open ended equity scheme investing in maximum 30 stocks in large-cap, mid-cap

and small-cap category

Benchmark Nifty 200 TRI

NFO Open On: June 25, 2019

NFO Closes On: July 9, 2019

Name of Fund Manager: Ms. Shibani Kurian & Mr. Harish Krishnan

Load Structure :Entry Load: Nil

Exit Load: 1% if redeemed / switched out within 1 year from the date of allotment

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Disclaimers & Disclosures

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AUM Disclosure

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An open ended equity scheme investing in maximum 30 stocks in large-cap, mid-cap and small-cap category

Kotak Focused Equity Fund Riskometer

Kotak Standard Multicap Fund Riskometer

Disclaimer & Risk Factors

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

The information contained in this (document) is extracted from different public sources. All reasonable care has been taken to ensure that the information contained herein is not misleading or untrue at the time of publication. This is for the information of the person to whom it is provided without any liability whatsoever on the part of Kotak Mahindra Asset Management Co Ltd or any associated companies or any employee. Investors should consult their financial advisors if in doubt about whether the product is suitable for them before investing.

These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.

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