Asset Allocation for Investors - Pre COVID & Post COVID

1. Asset Allocation for Investors – Pre COVID & Post COVID Should it Change or should I stick to one that I am following Speaker: Chirag Mehta, Senior Fund Manager, Alternative Investments May 7, 2021

2. Covid-19: Second Wave or Tsunami

3. As cases surged in Wave 2, Europe Increased Testing over 7 months – India in month 3, needs more Testing 3,000,000 2,150,991 2,500,000 2,000,000 1,094,007 930,340 1,500,000 740,747 1,000,000 334,950 203,608 190,092 189,411 142,820 117,763 500,000 - India France Italy Switzerland UK Day 1 of Second Wave As of Date (April 2021) Note: We have considered Day 1 of second wave for European Nations as 01stOct 2021 and for India as 01stFeb 2021 Source : www.ourworldindata.org

4. Fewer test may result in lower “Total Cases / Million” 90,000 81,216 80,000 74,701 70,000 65,852 65,187 60,000 50,000 40,000 30,000 20,000 12,290 9,082 7,802 6,817 6,220 10,000 5,250 - India France Italy Switzerland UK Day 1 of Second Wave As of Date (April 2021) Note: We have considered Day 1 of second wave for European Nations as 01stOct 2021 and for India as 01stFeb 2021 Source : www.ourworldindata.org

5. Lower cases reported will see lower “Total Deaths / Million” due to COVID 2,500 1,983 2,000 1,881 1,523 1,500 1,223 1,000 623 594 470 500 240 146 112 - India France Italy Switzerland UK Day 1 of Second Wave As of Date (April 2021) Note: We have considered Day 1 of second wave for European Nations as 01stOct 2021 and for India as 01stFeb 2021 Source : www.ourworldindata.org

6. Vaccine Rollout – A Slow Start

7. FIXED INCOME

8. RBI has been one of the Largest Buyers of Government Bonds in the Last Three Years 10 year Government Bond 3 year Government Bond RBI's Bond Purchases 6,000 7.0% 5,000 6.5% 4,000 6.0% 3,000 INR Billion 5.5% 2,000 1,000 5.0% - 4.5% -1,000 4.0% -2,000 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Gross Purchase Net Purchase Data as of April 2021 Source: RBI, Quantum Research Past Performance may or may not be sustained in future.

9. Though Accommodative for now, Inflation Risk making Policy Choices Difficult 8.0% 6.0% 4.0% 2.0% CORE CPI Repo Rate Data as of March 2021 Source – MOSPI, Bloomberg, Quantum Research Past Performance may or may not be sustained in future.

10. Outlook – Volatility Ahead 10 year government bond 1 year government bond 10.0% 8.0% 6.0% 4.0% 2.0% Data as of March 2021 Past Performance may or may not be sustained in future.

11. EQUITY

12. India will be a Large Part of The Global Economy: You Cannot Ignore It Source: Quantum, Angus Maddison, University of Groningen

13. India’s Continued Reforms will Make India the Next China World India China India average 6.1% China average 9.2% 14.0% 12.3% 11.6% 12.0% 9.9% 9.6% 9.5% 10.0% 8.8% 8.7% 8.5% 7.8% 8.0% 7.1% 7.1% 6.7% 6.5% 6.1% 5.9% 5.8% 6.0% 5.4% 5.3% 5.2% 4.9% 4.0% 3.9% 3.7% 3.5% 4.0% 3.4% 3.3% 3.2% 2.9% 2.3% 2.2% 2.0% 0.0% Jan 80 - Oct 84 Congress Nov 84 - Dec 89 Congress Jan 90 - Jun 91 Janata Dal* July 91 - May 96 Congress Jun 96 - Mar 98 DF* Real GDP Growth Apr 98 - Apr 99 BJP* Jun 99 - May 04 NDA* Jun 04 - May 09 UPA* Jun 09 - May 14 UPA* Jun 14 - Dec 20 NDA** Source: Worldbank, RBI and www.parliamentofindia.nic.in as of December 2020. Please note that data used for World GDP for 2020 is a median Estimate since World Bank data is not yet available and India GDP data is governments second advance estimate released at the end of September.

14. Investments drive Growth Income Opportunities 16.0 14.0 China GDP China Capital India GDP India Capital 14.0 12.0 12.0 10.0 10.0 8.0 8.0 6.0 6.0 4.0 4.0 2.0 2.0 % growth % growth 0.0 0.0 Source: TED Database, As on July 2020.

15. These Opportunities Draw Investors & Investments Cumulative Foreign Direct Investments (FDI) USD Billion Cumulative Foreign Portfolio Inflows (FPI) into Equity and Debt, USD Billion 3,500.0 1,000.0 China India China India 3,000.0 800.0 2,500.0 600.0 2,000.0 1,500.0 400.0 1,000.0 200.0 500.0 0.0 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: World Bank

16. India’s Economic Growth Reflected in Corporate Earnings Source: % change in INR, CLSA and Bloomberg Finance L.P., as of January 31, 2021. CY 21 and CY 22 are estimate numbers.

17. Based on Historical Data: A simple Equity Market Return Assumption Indian Equity Market Return Assumptions & Expectations GDP Growth, real +6.5% + Inflation +5.0% = GDP Growth, nominal +11.5% If GDP Growth = Revenue Growth (Revenues of Typical Companies) +11.5% Profit Growth of Typical Companies +11.5% Companies, listed and in an Index > Typical Company +13.5% In Long-term Equity Return should Reflect Corporate Earnings Source: RBI, CMIE, Quantum Estimates

18. Spiking PER Overstates Valuation Given The June Quarter’s Gap Down Source: Bloomberg Finance L.P., as March, 2021 Past Performance may or may not be sustained in future.

19. Covid-19: Lockdown déjà vu ‘This Time is Different’ How is Corporate India Placed ? The lockdowns are lesser stringent and more localized this time Corporate Balance-Sheet are better. The focus has been on debt reduction and liquidity Last one year has been all about cost control and business continuity Pvt. Banks & NBFC’s have raised capital and are best capitalized in last 10 years As Global Recovery is intact, export companies and commodity producers are comfortably placed

20. Corporate India: Listed Companies Are Faring Better Data as on February 2021 Data as on March 2021

21. Smaller Companies are Losing Market Share Sales Growth Fixed Assets 30% 30% 20% 20% 10% 10% 0% -10% 0% -20% -10% -30% -20% -40% -50% -30% -60% -40% Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Top 3 Deciles Bottom 3 Deciles Top 3 Deciles Bottom 3 Deciles CMIE- Economic Outlook, Data as on December 2020

22. GOLD

23. Has Gold Finally Bottomed? Both the dollar and bond yields have started to climb down from their multi-month peaks reached in March 10-Year US Treasury Yield US Dollar US 10 YEAR REAL TREASUR Y YIELD US 10 YEAR NOMINAL TREASURY YIELD 0.93 -1.08 JAN 2021 1.65 -0.76 APRIL 2021 72 BASIS POINTS 32 BASIS POINTS CHANGE IN 3 MONTHS Data as of 30hApril 2021 Source: Investing.com

24. Negative Rates make Holding Gold more Attractive Lack of yield on fiat currencies supports gold 2250 12 2000 10 1750 8 1500 6 1250 4 USD % 1000 2 750 0 500 -2 250 -4 0 -6 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Gold price US Real interest rate Data as of April 2021 Source: Bloomberg Past Performance may or may not be sustained in future.

25. In A Bid to Boost the Pandemic Stricken Economy, Governments have Run Up their Debts to Unsustainable Levels Global debt levels soar to second World War levels Data as of December 2020; Median debt-to-GDP ratio of country grouping based on G20 advanced and G20 emerging economies; Data as on: December 2020. Sources: Financial Times, IMF historical debt database

26. Central Banks on A Printing Spree to Buy Government Debt Relentless money printing by central banks undermines confidence in fiat currencies, benefitting gold $ Trillion 60 10 55 9 50 8 45 7 40 6 35 % to GDP 5 30 4 25 3 20 2 15 1 10 0 5 0 US -FED JAPAN - BOJ EU -ECB CHINA - PBOC Data as of March 2021 Source: Bloomberg

27. Gold is a Monetary Asset – Gold has kept up with money supply growth 1600 1400 US Money Supply M2 Gold prices 1200 1000 800 600 400 200 Rebased = 100 0 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Data as of December 2020 Source: Fred Past performance may or may not sustained in future

28. Rising Deficits & Debt in the US are Making the Dollar Vulnerable Weakness and falling confidence in the dollar tends to strengthen gold Data as of September 2020 Source: fred.stlouisfed.org Data as of December 2020 Source: fred.stlouisfed.org

29. Higher Inflation is on its Way Gold will be a preferred asset as it generally moves in line with inflation and has potential to preserve purchasing power 24% Data as of December 2020 Sources: Louis Fed, lynalden.com Data as of March 2021 Source: Bloomberg

30. ASSET ALLOCATION

31. “BLACK SWAN” OR BLACK CROW? 26 years, 17 dislocations – maybe 4 unexpected • 1994: the Harshad Mehta scam, • 1995: the Mexico tequila crisis and the collapse of Emerging Markets, • 1997; the Asian crisis and the collapse of Emerging Markets, • 1998: the bankruptcy of Russia and hedge fund Long Term Capital Management, • 2000: the collapse of the tech bubble, • 2001: 9/11 and the bankruptcy of Unit Trust of India, • 2003: SARS, the Iraq war • 2008: the bankruptcy of Lehman, the Global Financial Crisis • 2013: Bernanke's twist led to India's collapse • 2016: Demonetization and the Great Indian Economic Slowdown • 2018: bankruptcy of IL&FS • 2019: Cooperative banks and developers going bust, • 2020: YES Bank, COVID-19

32. 32 Rule 1: Embrace Market Cycles There have been years when equity markets had a brilliant run, years when only bonds were dependable, and years when gold shined the brightest, and these periods did not typically overlap 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021* Sense x 2% Sense x 49% Sense x 49% Gold 26% Sense x 83% Gold 23% Gold 32% Sense x 28% Sense x 11% Sense x 32% Bonds 9% Bonds 13% Sense x 30% Gold 8% Gold 16% Gold 28% Sense x 7% Sense x 14% Sense x 17% Gold 20% Gold 16% Bonds 9% Gold 24% Sense x 19% Bonds 7% Gold 12% Bonds 4% Bonds 14% Sensex -4% Gold 11% Gold 5% Bonds 0.3% Sense x -52% Sense x -24% Bonds 4% Bonds 4% Bonds 5% Bonds 9% Gold -5% Gold -8% Gold -7% Sense x 3% Bonds 5% Bonds 6% Bonds 11% Bonds 12% Gold -5% Bonds 7% Past performance may or may not sustained in future The chart ranks the best to worst performing indexes per calendar year from top to bottom *Data as of April 2021 Imagine someone holding an all equity portfolio in 2008, or holding none in the equity rally that followed? Past performance may or may not be sustained in future. Based on S&P BSE Sensex; Domestic Gold prices and CRISIL Composite Bond Fund Index Source: Bloomberg

33. 33 Portfolio Impact of Diversification If you compound your money at 12% per year you are better off than an investor who makes 25% in one year and loses 20% in the next Risk-Return Equity +Debt +Gold * Equity + Debt ** Equity Debt Gold 11.05% 11.00% 12.53% 7.24% 11.41% CAGR 9.41% 13.53% 22.15% 3.29% 17.37% Annualized SD -15.53% -22.32% -36.55% -5.43% -28.67% VAR -21.43% -36.08% -56.17% -6.29% -25.22% Maximum Drawdown 0.5332 0.3674 0.2936 0.3662 0.3094 Sharpe Ratio Time frame is November 2004 to April 2021. The period is taken from 2004 since the asset allocation weights are calculated based on normalizing the historical monthly equity and debt indicators. Given the normalization time frame used in the strategy, data availability for certain parameters beyond the time frame analyzed was a constraint. Compiled by Quantum AMC *Equity-Debt-Gold in ratio of 40-40-20. **Equity-Debt allocated in 60-40 range Based on Sensex TRI, Crisil Composite Bond fund index, and Domestic Gold Prices Note: Past performance may or may not be sustained in the future The most diversified strategy yields similar returns with the lower volatility, compared to a pure equity strategy

34. Quantum Multi Asset Fund of Fund An example of dynamic asset allocation Equity allocation Sensex TRI 65.00% 75000 60.00% 60000 55.00% 50.00% 45000 45.00% 30000 40.00% 35.00% 15000 30.00% 25.00% 0 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19 Oct-20 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19 Feb-20 Feb-21 Data as of April 2021; Source: Quantum MF Note: Past performance may or may not be sustained in future.

35. 2021- A Simple Asset Allocation Strategy to Deal with Market Cycles

36. Disclaimer – Terms of Use For AMFI/NISM Certified partners only. For private circulation only. The data in this presentation are meant for general reading purpose only and are not meant to serve as a professional guide/investment advice for the readers. This presentation has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been suggested or offered based upon the information provided herein, due care has been taken to endeavor that the facts are accurate and reasonable as on date. Quantum AMC shall make modifications and alterations to the performance and related data from time to time as may be required as per SEBI Mutual Fund Regulations. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investment. None of the Sponsors, the Investment Manager, the Trustee, their respective Directors, Employees, Affiliates or Representatives shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the data/information/opinions contained in this presentation. The Quantum AMC shall make modifications and alterations to the performance and related data from time to time as may be required. Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme. Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-). Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956. 7thMay 2021 Mutual fund investments are subject to market risks, read all scheme related documents carefully.

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