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SBI Magnum Global 94: Defensive & high quality mid cap fund
Wed, Dec 30, 2015
Source : Khyati Shah, Citrus Interactive

SBI Magnum Global 94 Fund is an open-end diversified equity mid cap fund. This scheme was launched on 24th August 1994 as a close-ended scheme maturing on 30th September 1999. The scheme was converted into an open-ended fund from 1st October 1999. It is benchmarked against the S&P BSE Mid-Cap Index. The fund has an AUM of Rs. 2,378 crores as on November 30, 2015 which is gone up by 759 crores as compared to the last year November 30, 2014 (1,619 crores).

 

Performance

SBI Magnum Global Fund 94 has a very good performance track record of consistently outperforming its benchmark index and the equity diversified category average across all time frames (except 6 months where it has underperformed its benchmark index) as shown from the table given below. It has been in the top quartile of its peer-set across all time frames as shown from the table given below (except 6 months where it is in second quartile). Since inception is has underperformed its benchmark by 6.45%.

Scheme Name

YTD

6 Months

1 Year

2 Years

5 Years

Since Inception

SBI Magnum Global Fund 94

6.63

-0.57

11.31

36.71

18.21

15.39

S&P BSE Mid-Cap Index

5.95

2.55

7

31.76

7.19

21.84

Category Average

3.31

-1.03

3.42

28.68

11.68

NA

Rank

37/158

62/161

25/158

37/148

12/136

NA

Figures are in % as on November 30, 2015; Returns above 1-year in Compounded Annual Growth Rate (CAGR)

When we look at the calendar year returns it’s quite clear that this fund has beaten its benchmark in the last four out of five calendar years. It is interesting that this fund has given positive returns in 4 out of the last 5 years even though the bench mark gave a negative return in 2 out of these 5 years. It has beaten its category average in the last four calendar years but it has underperformed in the year 2010. The fund has been in the top quartile of its peer-set in three of the last five years (excluding the years 2011 and 2013). 

Scheme Name

2010

2011

2012

2013

2014

SBI Magnum Global Fund 94

18.1

-14.21

35.98

9.71

66.56

S&P BSE Mid-Cap Index

16.15

-34.19

38.52

-5.73

54.69

Category Average

19.64

-23.95

34.05

5.43

53.99

Rank

79/131

4/138

52/142

19/146

34/149

All figures in %

Risk: In terms of measures of risk such as standard deviation and beta (measured over last three years), the fund has taken lower risk compared to the category median.

 

Standard Deviation

Beta

SBI Magnum Global Fund 94

0.73

0.53

Category Median

0.94

0.89

 

Risk-adjusted Returns: In terms Treynor and Sharpe ratio (measured over last three years), the fund has provided higher risk-adjusted returns than the category median.

 

Treynor

Sharpe

SBI Magnum Global Fund 94

0.17

0.13

Category Median

0.07

0.07

 

Portfolio Characteristics

Sector Concentration:  The fund’s concentration in the top 3, 5 and 10 sectors is significantly lower than the category median highlighting lesser risk of the fund.

 

Top 3

Top 5

Top 10

SBI Magnum Global Fund 94

25.83

37.14

57.15

Category Median

36.41

49.23

70.15


Company Concentration:
The concentration of funds in top 3, 5 and 10 companies in its portfolio is also significantly lower than the category median highlighting lesser risk of the fund.

 

Top 3

Top 5

Top 10

SBI Magnum Global Fund 94

16.94

24.01

38.81

Category Median

18.7

27.22

44.12

Comparatively lower sector & company Concentration signifies the low risk profile of the fund.

Number of equity holdings: The fund currently holds 38 stocks in its portfolio (November 30, 2015), which is lower than the median stock count for the diversified-equity category, which currently stands at 46. Thus, based on equity count the fund runs a concentrated portfolio compared to its peer set. Over the past five years the fund has always had a diversified portfolio with the number of equity holdings over this period averaging 43. This seems to be a recent change in strategy.

Cash allocation: Its cash allocation at the end of November 2015 was 8.73 per cent. The average cash allocation for last five years is 5.37 per cent. Its maximum allocation to cash over last two years was 8.73 per cent in November 2015 and lowest was 0.25 per cent in January 2015. In 2015 it had an average cash allocation of 4.85 per cent. Thus on the whole the fund maintains higher percentage of allocation to cash.

Portfolio Characteristics: The top 5 sectors in the portfolio had an allocation of 37.14% which is lower than the category average of 48.64%. The top 5 sector include Finance – NBFC, Chemicals, Bearings, Textile and Finance – Housing.

The fund’s exposure to cyclical stocks currently is 69.97% followed by Defensives with 14.30% and Services with 7.00%. The top five holding are Procter & Gamble Hygiene & Health Care Ltd., Solar Industries (India) Ltd., Britannia Industries Ltd., Cholamandalam Investment & Finance Company Ltd. and MRF Ltd.

Portfolio comments: In the last six months the fund has not bought any new stocks but the stocks of Nirvikara Paper Mills Ltd., Sun Pharmaceutical Industries Ltd. and Kennametal India Ltd. has been dropped from the portfolio.

A closer look at the portfolio seems to suggest that urban consumption is the underlying theme behind majority of the stocks selected. This is being played out through FMCG (P&G and Brittania are among the Top 3 holdings), NBFCs (Chola , Sundaram & City Unioin Finance), Auto Ancillaries (MRF, Exide, Motherson, Exide etc), Brands (Page, Kewal Kiran, Bata etc) and Home improvement (Kajaria, Pidilite, Kansai Nerolac) and many other similar sectors which are leveraged on urban consumption and trends.


Process

A miminum of 80% will be invested in equity, partly convertible debentures and fully convertible debentures from selected industries with high growth potential and bonds. A maximum of 20% can be invested in money market instruments.  The fund may invest in foreign equities or debt and may use any hedging techniques that are permissible under SEBI Regulations.

The fund is currently positioned as a midcap fund focused on high quality stocks, investing into a portfolio of mid cap stocks and selective exposure to large cap stocks. The mid cap funds traditionally have higher risk and more volatility compared to large cap funds. The fund is ideally suited for investors with higher risk appetite but has potential to generate higher returns. The fund manager endeavors to outperform its benchmark (S&P BSE Mid-Cap Index) by active sector calls (over weight/underweight) and active stock weights (over weight/underweight).

The positioning as described by the fund manager R. Srinivasas – “Magnum Global is run as a defensive mid cap strategy focused on generating above average returns from a long term perspective. We believe the combination of ‘defensive’ and ‘mid cap’, in a way, optimizes the risk-return trade off for investors. The fund does not focus on short to medium term relative performance consistency but rather on healthy but stable capital appreciation in a rising market and capital preservation in a falling market. Quality as defined by a right-to-win characteristic, return on capital and growth are necessary factors for stock selection in the fund (for a predominant part of portfolio)”

It is stated that the portfolio may be churned in order to take advantage of movements in stock market in order to maximize the average returns on the portfolio while maintaining a desirable risk profile and adequate liquidity.

The fund’s expense ratio is 1.95% which is much lower than the category average of 2.36%. Like most equity funds the fund has an exit load of 1 per cent on or before one year from the date of investment. Minimum investment in the fund is Rs 5,000.

 

Fund Manager

The fund is managed by R Srinivasan who is the head of equities at SBI Mutual Fund. Srinivasan has been heading Equity since June 2011 and oversees equity assets worth over Rs. 16,000 crores. He joined SBI MF as a Senior Fund Manager in May 2009 and manages various Equity schemes. He brings with him over 19 years of experience in capital markets. He has earlier worked with Future Capital Holdings, Principal PNB AMC, Oppenheimer & Co, Indosuez WI Carr and Motilal Oswal, among others. Srinivasan is a post graduate in commerce and has done his MFM from the University of Bombay. Srinivasan also manages SBI Small & Mid Cap Fund, SBI Magnum Emerging Businesses Fund, SBI Magnum Equity Fund, SBI Magnum Balanced Fund and SBI Magnum Contra Fund.

 

View

SBI Magnum Global Fund is one of the better performing funds in its category. Since the change of fund manager in 2009, the performance of this fund has picked up markedly. A strong fund management team, well diversified portfolio, low expense ratio and low turnover in the portfolio positions it favourably as a choice for the midcap allocation in your portfolio. It is also a nice mid-option between a large-cap and a mid-cap strategy given that the fund provides higher beta by being mid-cap but at the same time cuts risk due to its focus on quality.


To read the previous Citrus Analysis of SBI Global Fund 94

Click here

 
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