SBI Magnum Equity Fund, one of the oldest in the mutual fund sector, was launched in January 1991. It intends to provide long-term capital appreciation by investing in high-growth companies, and has maintained its position in the top 30 percentile under the large-cap category of CRISIL Mutual Fund Ranking for the past four quarters.
The fund’s average assets under management (AUM) stood at Rs 507.6 crore for the quarter ended June 2012. It has witnessed 15.2 per cent growth in assets over the past year compared to the 2.9 per cent of the category. Since May 2009, the fund has been managed by Rama Iyer Srinivasan, head of equities.
Performance
The fund has outperformed both its benchmark (S&P CNX Nifty) and its category across time frames as on September 14. The return was marginally lower than the benchmark for the one-year period. But, over the past three years, it has delivered annualised returns of 8.3 per cent, compared to 5.1 per cent of the benchmark and 6.3 per cent of the category.
Also, its average volatility was 18.3 per cent vis-à-vis 22.1 per cent of the benchmark over the same period. With respect to the category, the fund ranks within the top 20 percentile on volatility. This indicates it has given better risk adjusted returns compared to the benchmark and the category.
Since inception, its performance can be gauged from the growth of an initial investment of Rs 1,000 to Rs 19,292 as on September 14, 2012. A similar investment in the benchmark would have grown to Rs 17,488.
| AHEAD OF THE BENCHMARK | |||||
| SIP period (yrs) | Amount More From This Section | Present value (Rs) | Compounded | ||
| SBI Magnum Equity Fund | S&P CNX Nifty | SBI Magnum Equity Fund | S&P CNX Nifty | ||
| 3 | 36,000 | 38,743 | 37,773 | 5.10% | 3.30% |
| 5 | 60,000 | 76,286 | 70,754 | 9.80% | 6.70% |
| 7 | 84,000 | 122,041 | 109,639 | 10.70% | 7.70% |
| 10 | 120,000 | 317,049 | 245,408 | 18.70% | 13.90% |
A monthly systematic investment plan of Rs 1,000 invested for 10 years (principal Rs 1,20,000) would have grown to Rs 3,17,049 delivering a compounded annual growth rate (CAGR) of 18.7 per cent. A similar investment in the benchmark would have grown to Rs 2,45,408, a CAGR of 13.9 per cent (as of September 14).
Market phase analysis
During the four market phases of the past decade — bull phase of 2003-07, sub-prime crisis of 2008, recovery period in 2009-10 and the present European crisis — the fund has always outperformed the benchmark except during the sub-prime crisis.
An analysis of the portfolio reveals it has actively managed its equity exposures during the market cycles. During the sub-prime crisis (January 2008 to March 2009), the average equity exposure was 88 per cent. This was increased during the subsequent recovery in the market (April 2009 to December 2010) to an average 93 per cent.
Portfolio analysis
The fund has followed a focused approach by investing 91 per cent of the average AUM in CRISIL defined large-cap stocks over the past three years. It held an average 30 companies in its portfolio as compared to 38 of the category during the same period.
A look at the fund’s sector holdings over the past three years reveals it had the highest exposure to banking followed by software, consumer non-durables, petroleum products, finance and pharmaceuticals, with a combined exposure of 58.3 per cent.
It has been overweight on banking, consumer non-durables and pharmaceutical sectors compared to the benchmark. These sectors have outperformed the S&P CNX Nifty over the past three years. As such, higher exposure to these sectors has helped the fund generate excess return.
CRISIL Research