The AMC has witnessed a lot of flux in the past. The fund house’s unsuccessful attempts to retain talent within the investment team, the absence of documented processes and differentiated funds had a negative impact on the AMC.
However, the fund house has come a long way under its new leadership, put into place in 2008-2009. Navneet Munot--CIO at SBI Mutual Fund--and R. Srinivasan implemented various measures to address these issues and have been successful in turning around the fortunes of the AMC.
While the fund house has witnessed a story of a fall and rise, we think that there are many positive attributes at a fund house level under the current investment team.
SBI Bluechip
- Analyst Rating: Bronze
- Star Rating: 4 stars
- Category: Large Cap
- Fund Manager: Sohini Andani
The fund is a consistent performer led by an experienced stock-picker, backed by a stable process and an experienced team that has been trained in-house.
The fund is a relative return strategy that seeks to outperform the benchmark and its peers on a consistent basis. The fund uses in-house templates and processes that are key to the execution of the strategy. Despite being a large-cap fund, the mandate allows the manager to invest up to 20% in mid-caps. Andani tends to invest in mid-caps with a relatively higher market capitalisation and currently has an exposure of around 11% to midcaps here.
Overall, we are impressed with the investment team’s disciplined approach and believe that the investment process is well-defined. Despite this, we’d like to see the processes remain stable over a longer period of time.
You can read more of the analyst’s views here.
SBI Contra
- Analyst Rating: Neutral
- Star Rating: 3 stars
- Category: Flexi Cap
- Fund Manager: R Srinivasan
The fund manager adopts a flexible investment approach and invests in high-conviction growth picks. While he seeks contrarian opportunities and will invest in stocks that are out of favour for reasons like perceived risk or negative sentiment, the preference is to remain invested in stocks with a high intrinsic value.
While the contrarian nature of the fund distinguishes it from its peers, it will be interesting to see how the manager plies this aspect of the strategy. The fluidity with which the manager merges his growth and contrarian bets is an aspect we’d like to keep an eye on.
While we hold a positive opinion in the manager, we are inclined to believe that the overall strategy is still coming together and that it will evolve over time. Until we have seen more of the strategy, our confidence in the fund’s prospects remains muted.
You can read more of the analyst’s views here.
SBI Magnum Global
- Analyst Rating: Bronze
- Star Rating: 3 stars
- Category: Small/ Mid-Cap
- Fund Manager: R Srinivasan
Srinivasan seeks companies capable of delivering high growth on a sustained basis. He looks at business models for competencies such as brand equity, technological edges, and cost advantages.
The emphasis on growth and business competencies often results in investments in richly valued stocks, and the manager will pay a higher price for the incremental growth. This could result in the fund experiencing more volatility than a typical peer, particularly if such firms fail to deliver on the lofty growth rates required to justify their valuations.
That is amplified to an extent by Srinivasan’s adherence to the fund’s small/mid-cap character versus the category norm. In a downturn, the fund may underperform peers that are able to make a quick exit from their more liquid investments. But Srinivasan compensates investors for the additional risk as is borne out by the fund’s strong risk-adjusted showing and standard deviation on a longer-term 3-year basis.
This fund can deliver pleasing results over a market cycle.
You can read more of the analyst’s views here.
SBI Emerging Businesses
- Analyst Rating: Neutral
- Star Rating: 3 stars
- Category: Small/ Mid-Cap
- Fund Manager: R Srinivasan
While Srinivasan focuses on high-growth companies, there is also room for value buys. He seeks lesser-known names where the market has not recognised the business prospects, or stocks that are beaten-down because of negative sentiment. While value stocks can help lower price risk in the portfolio, given the growth bias, they have to be well-executed consistently. To build more conviction in the overall process, we would like to see this aspect of the strategy evolve further.
The fund was earlier run with a focus on small caps but now holds a fairly high exposure to large caps. This trend could fundamentally alter the fund’s distinctive character over time.
You can read more of the analyst’s views here.
SBI Magnum Midcap
- Analyst Rating: Bronze
- Star Rating: 3 stars
- Category: Small/ Mid-Cap
- Fund Manager: Sohini Andani
Magnum Midcap follows an absolute return strategy that invests in high-conviction ideas. While the fund can invest up to 20% in large-caps, most of the existing large caps in the portfolio are mid caps that have grown in size.
The team evaluates a company’s management and focuses on stocks that are able to meet their threshold in terms of CAGR and a consistent ROCE over a 3- to 5-year horizon.
Given the manager’s focus on bottom-up stock selection and investing in growth stocks for the long haul, the team tends to overlook short-term aberrations in favour of fundamentally strong companies that are able to deliver positive longer-term returns.
The fund's performance has not been very consistent. But it's 1-, 3- and 5-year returns put it in a good light. While we have a positive view on the fund’s strategy, we would like to see the trend continue over a long term before we can build more conviction.
You can read more of the analyst’s views here.
SBI Magnum Multiplier
- Star Rating: 5 stars
- Category: Flexi Cap
The fund's Morningstar Analyst Rating has been placed under review following manager Jayesh Shroff's exit.
In 2012, the fund was awarded a Neutral rating, which was an upgrade from the prior Negative.
You can read the earlier analysis here.
