 "Fund pick: SBI Blue Chip Fund")
Investment objective
The scheme aims to provide opportunities for long-term growth of capital through active management. The fund invests in a diversified basket of equity stocks of companies whose market capitalisation is at least equal to or more than the least market capitalised stock of the S&P BSE 100 Index. The fund maintained an average equity exposure of 83.5 per cent to CRISIL defined large-cap stocks in the three years ended February 2014. During this period, the fund maintained an average 93 per cent exposure to equity and equity-related instruments.
Performance
The fund has consistently outperformed its benchmark (the S&P BSE 100) and category across various time frames (see chart). As of March 14, 2014, the fund posted annualised returns of around 22 per cent over a five-year period compared to 20 per cent by both the category and the benchmark.
Further, the fund (18 per cent) was less volatile compared to the benchmark (21 per cent) during the same period. Also, Jenson’s alpha, a measure of the fund’s risk-adjusted performance, was 6.85 per cent over the benchmark. Hence, the fund has given superior returns over the past three years.
The fund has also outperformed its benchmark across market phases. During the sub-prime crisis (January 2008 to March 2009), the fund declined lower (-47 per cent) than the benchmark (-48 per cent). Later, during the European crisis (January 2011 to June 2013), the fund turned positive with one per cent absolute return compared to negative 2.6 per cent by the benchmark. Also, after the European crisis (and as of March 14, 2014), the fund generated an excess return of three per cent over the benchmark.
A monthly systematic investment plan of Rs 1,000 in this fund for five years would grow to around Rs 78,629 on a principal investment of Rs 60,000, delivering an annualised return of 10.95 per cent; the same amount invested in the benchmark would grow to Rs 72,775, delivering an annualised return of 7.79 per cent. Across different time frames (one-year, three, five and seven years), the fund has outperformed its benchmark.
The fund is well-diversified at the stock and sector levels. It held an average of 48 stocks in its portfolio compared to the category’s 41 stocks during the three years ended February 2014. Top five companies constituted 27 per cent of the fund compared to 31 per cent of the category during the same period. The fund’s average exposure to the top five industries was 57 per cent compared to the category’s 59 per cent.
For the three years ended February, the fund had the highest exposure to the banking sector at around 18 per cent followed by information technology with an average exposure of 13 per cent; while the former did not contribute much to the performance of the fund, the latter — represented by the CNX IT Sector Index — surged nearly 16 per cent in the three year period ended February 2014 compared to the S&P BSE 100’s 5.10 per cent.
Compared to the large-cap category, the scheme also benefitted from the overexposure to outperforming sectors — pharmaceuticals and consumer non-durables. The representative sector indices, the CNX Pharma and the CNX FMCG gave over 24 per cent returns during this period. Unlike the category, the fund remained underexposed to underperforming sectors like power, petroleum products, ferrous and non-ferrous metals, which also helped it escape a severe dent in performance; the S&P BSE Power and the S&P BSE Oil & Gas lost 15.37 per cent and 3.78 per cent, respectively, and the CNX Metal Index plunged nearly 19 per cent.
In the three years until February, the fund consistently retained 64 per cent of its portfolio holdings for at least 24 months. Stocks such as Divis Labs, HCL, HDFC Bank, ITC, Motherson Sumi Systems and TCS boosted the fund’s performance.