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Pramerica Dynamic Monthly Income Fund
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Monthly Income is not assured and is subject to availability of distributable surplus
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While inflation is on an uproar, the prices of essential items like sugar vegetables,
oil and the like are soaring to new highs. In this scenario have our fixed returns
investments been able to help us? While fixed returns are now around 8-9% (and lesser
if you deduct taxes), prices have been rising faster. So what you could buy in Rs.10
a year back, costs a lot more now! Inflation has been eating into our purchasing
power.
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Fixed return investments are considered as the safe form of investing. While, fixed
return investments yield reasonable return on our investments, do they protect our
purchasing power? Fixed returns are fixed, but prices keep rising and at an alarming
rate!
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Monthly Income Funds is a product that invests predominantly in debt and a small
portion in equities, that can provide inflation beating returns by combining the
stability of debt and the compounding power of equity.
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Parameter
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Fixed Return Investments
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Monthly Income Funds (MIF)
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Purchasing Power Protection
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Moderate
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High
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Tax Efficiency
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Low
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High
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Indexation Benefit
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Not Available
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Available
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Liquidity
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Available but with penal interest
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Available (subject to exit load)
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Presenting Pramerica Dynamic Monthly Income Fund, Powered by Pramerica DART©
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Pramerica Mutual Fund presents "Pramerica Dynamic Monthly
Income Fund", an open ended Income scheme, which will have a robust portfolio
comprising of 70 to 95% in Fixed Income Securities and 5% to 30% in Equities.
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The asset mix between debt and equities in the scheme will be powered by using "Pramerica Dynamic Asset Rebalancing Tool" (Pramerica
DART©) a proprietary tool developed and managed by Pramerica Asset Managers
Pvt. Ltd. to determine an optimum asset allocation mix between debt and equity,
within the overall asset allocation of the Scheme, by taking into account key factors
that have an impact on the market. When the markets are looking expensive, Pramerica
DART© is designed to book profits and when the markets are cheap, increase the exposure
to equities and thus reduce the impact of market volatility.
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Thus Pramerica Dynamic Monthly Income Fund
is a combination of fundamentals led asset allocation and active fund management,
targeting generation of regular returns, with the help of
Pramerica DART©.
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Has DART© been able achieve this?
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We back tested the DART© based on SENSEX data from January 1, 2001 to February 10,
2011 during which the stock markets have gone through cycles of bear and bull market
runs. The results during these periods have been illustrated below:
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We further created a simulated portfolio based on Pramerica DART© and also other
Monthly Income Fund like structures with varying levels of equity exposures, and
compared them during different market cycles. the results from Pramerica DART© Simulated
Portfolio are very compelling!
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DART© Simulated Portfolio
v/s Other Monthly Income Fund like structures
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Back-Testing of DART© Simulated Portfolio
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We further, tested DART© on a simulated portfolio with the CRISIL MIP Index. Following
were the results.
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Why invest in Pramerica Dynamic Monthly Income Fund?
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Pramerica Dynamic Monthly Income Fund is being launched at an opportune time when
it can reap benefits of three distinct advantages.
- Fixed income markets are in a sweet spot
- With recent rate hikes by the RBI, the interest rates have potentially peaked. (The
actual peak might be another 25-50 bps away).
- Fixed income securities are available at high coupon rates, current one year yield
for bank certificate of deposits is around 10% plus
- Equity markets are fairly valued
- Post recent corrections, the equity markets are trading at attractive valuations.
- With Sensex at about 18,000 levels, the one year forward earnings estimates at `1200 per share (March 2012), the markets
are trading at a forward P/E of 15, which is substantially below the long term average
of around 18 P/E.
- Even if, for any reason, the markets were to fall 1500 odd points, the P/E will
still be quite attractive at around 13. Given this situation, the chances of getting
better returns is much higher.
- The Power of Pramerica DART©
And to top it all, Pramerica Dynamic Monthly Income Fund is powered by Pramerica
DART© which will indicate the asset allocation to position the fund at an optimal
debt/equity allocation ratio, giving the investor the best of both the worlds!
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Advantage of investing in Pramerica Dynamic Monthly Income Fund
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Currently, bank certificates of deposits are available at attractive yields of around
10% plus. Looking at the current economic scenario, interest rates are expected
to peak around March 2011. If you invest in a one year certificate of deposit in
March 2011 it will mature in 2012. It is expected that the interest rates may go
down in 2012, which means you may have to hunt for another attractive investment
option. Also, once the certificate of deposit matures, the holding period for capital
gains starts all over again, making it a tax inefficient instrument.
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In case of Pramerica Dynamic Monthly Income Fund, as the portfolio will be constructed
in March 2011, when interest rates are expected to be at attractive levels, even
if the interest rates go down in 2012 or remain stable, it may still generate capital
appreciation. With interest rates expected to be on the lower side in 2012, it is
expected that the inflation outlook also will be better and the GDP growth momentum
stronger. This means that equity markets could be perform well, generating handsome
returns on the equity portion too! Also, by staying invested longer you can take
the benefit of indexation and reduce your tax liability.
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If on the other hand, interest rates go up, then Pramerica Dynamic Monthly Income
Fund can easily reinvest and reprice itself and start earning higher returns, which
is not possible if you had invested in a certificate of deposit or other fixed return
instruments.
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Important Information
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Name of the Scheme: Pramerica Dynamic Monthly
Income Fund. Scheme Classification: An open ended Income
Scheme. Investment Objective: The objective of Scheme is
to generate regular returns through investment in Debt and Money Market Instruments
and to generate capital appreciation by investing in equity and equity related instruments.
Monthly Income is not assured & is subject to availability of distributable surplus.
However, there is no assurance that the investment objective of the Scheme will
be realized and the Scheme does not assure or guarantee any returns.Asset
Allocation: Fixed Income Securities – 70 to 95% ; Equity and Equity
related instruments - 5% to 30% Terms of issue and sale and redemption of
units: The scheme offers sale and redemption facility at NAV based
prices on all business days during the ongoing offer. NAV of the Scheme will be
calculated and disclosed at the close of every Business Day. Load Structure:
Entry Load: Not Applicable, Exit Load:
@ 2%, If the Units are Redeemed / Switched-out on or before 365 days of allotment;
@ 1%, If the Units are Redeemed / Switched-out after 365 days, but on or before
730 days of allotment; NIL, If the Units are Redeemed / Switched-out after 730 days
of allotment.Recurring Expenses: Recurring expenses including
the investment management and advisory fee that can be charged to the Scheme shall
be subject to a percentage limit of average weekly net assets @ 2.25% for the first
100 crore; @ 2.00%, next Rs. 300 crore; @1.75 % on the next Rs. 300 Crores; and
@ 1.50% on the balance. Copy of SID/SAI and Key Information Memorandum (KIM) can
be obtained from any of our Investor Services Centers as well as from our website.
www.pramericamf.com
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Risk Factors
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All mutual funds and securities investments are subject
to market risks and there can be no assurance that the objectives of the Schemes
will be achieved and the NAV of the funds may go up or down depending upon the factors
and forces affecting the securities markets. Pramerica Dynamic Monthly Income Fund
is only the name of the scheme and does not in any manner indicate either the quality
of the Scheme, its future prospects and returns. This document has been
prepared on the basis of publicly available information, internally developed data
and other third party sources believed to be reliable. However, no assurances are
provided regarding the reliability of such information. There can be no assurance
that any forecast made herein will be actually realized. Performance of the Sponsor
has no bearing on the expected performance of the mutual fund or any of its schemes.
Past performance of the Sponsor and their Affiliates/AMC/Mutual Fund & its Scheme(s)
does not indicate the future performance of the Scheme(s) and may not necessarily
provide a basis of comparison with other investments. Investment in Mutual Fund
Units involves investment risks such as trading volumes, settlement risk, liquidity
risk, default risk including the possible loss of principal. As the price / value
/ interest rates of the securities in which the scheme invests fluctuate, the value
of your investment in the Scheme may go up or down. Investors are not being offered
any guaranteed / assured returns under any scheme of Pramerica Mutual Fund. FOR SCHEME-SPECIFIC RISK FACTORS & TAX IMPLICATIONS, PLEASE
REFER TO THE SCHEME INFORMATION DOCUMENTS
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Statutory Details: Pramerica Mutual Fund
is set up as a Trust under the Indian Trusts Act, 1882 and registered with SEBI.
Sponsor: Prudential Financial, Inc. (PFI)
of the United States of America [liability restricted to initial contribution of
Rs. 1 Lac towards the corpus of the Mutual Fund]. [Pramerica is the brand name used
by PFI and its affiliates in select countries outside the United States. Prudential
Financial, Inc. of the United States is not affiliated in any manner with Prudential
plc, a company incorporated in the United Kingdom] Trustee:
Pramerica Trustees Private Limited. Investment Manager:
Pramerica Asset Managers Private Limited.
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS. PLEASE READ ALL SCHEME RELATED
DOCUMENTS CAREFULLY.
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