Fund Pick: SBI Conservative Hybrid Fund is a consistent outperformer

SBI Conservative Hybrid Fund was launched in April 2001, and has featured in the top 30 percentile of the conservative hybrid category of CRISIL Mutual Fund Ranking (CMFR) for three consecutive quarters through September this year.

Mansi Sajeja and Saurabh Pant have been managing the fund since June 2021 and January this year, respectively.

The fund’s month-end assets under management increased to Rs6,714.5 crore in September this year, from Rs1,086.8 crore in September 2019.

The investment objective of the fund is to provide investors an opportunity to invest primarily in debt and money-market instruments, and secondarily in equity and related instruments.

Consistent performance

The fund has consistently outperformed its peers (funds ranked under conservative hybrid category in CMFR) and the benchmark (CRISIL Hybrid 85+15 – Conservative Index) in the past decade.

A sum of Rs10,000 invested in the fund on November 1, 2012, would have grown to Rs24,191 (9.23 per cent compound annual growth rate, or CAGR) on November 3 this year, compared with Rs22,420 (8.4 per cent CAGR) for the peer group and Rs23,772 (9.04 per cent CAGR) for the benchmark.

Duration management

In the past 12 months, as yields of government securities (G-secs) increased, the fund reduced its modified duration to lower its exposure to interest rate risk, before increasing the duration again from 18 months in March this year to 32.4 months in September. Its peers also increased their modified duration from 21.6 months to 27.6 months during the period.

Portfolio analysis

The fund has predominantly allocated its exposure to non-convertible debentures/bonds (40.1 per cent exposure on average), followed by equity (23.5 per cent, in line with the category average of 21.67 per cent) and G-secs (22.51 per cent versus peers’ 33.23 per cent).

The fund has reduced the credit risk in the portfolio by lowering exposure to papers rated below ‘AAA’ to 19.5 per cent in the past 12 months, from 24.61 per cent in the past 36 months.

The exposure to ‘AAA’ and ‘A1+’ rated securities averaged 28.25 per cent during the last 36 months. compared with the category’s average exposure of 26.08 per cent.