One of the oldest funds in the Indian mutual fund industry, SBI Magnum Equity Fund was launched in January 1991. The fund intends to provide long-term capital appreciation by investing in high growth companies. The fund has maintained its position in the top 30 percentile under the large cap category of the 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. The fund has witnessed 15.2% growth in assets over the past year compared to the 2.9% of the category. Since May 2009, the fund has been managed by Rama Iyer Srinivasan, head of equities at SBI Mutual Fund.
Performance The fund has outperformed both its benchmark (S&P CNX Nifty) and its category across time frames as on September 14, 2012. The return of the fund was marginally lower than the benchmark for the 1-year period. But, over the 3-year period, the fund has delivered annualised returns of 8.3% compared to 5.1% of the benchmark and 6.3% of the category. Also, the fund’s average volatility was 18.3% vis-à-vis 22.1% of the benchmark over the same period. With respect to the category, the fund ranks within the top 20 percentile on volatility. This indicates that the fund has given better risk adjusted returns compared to the benchmark and the category.
Since inception, the fund’s performance can be gauged from the growth of an initial investment of Rs 1,000 to around Rs 19,292 as on September 14, 2012. A similar investment in the benchmark would have grown to Rs 17,488.
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 of 18.7%. A similar investment in the benchmark would have grown to Rs 2,45,408 – a CAGR of 13.9% (as of September 14, 2012).
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 2009-2010 post the sub-prime crisis, and the present European crisis - the fund has always outperformed the benchmark except during the sub-prime crisis.
An analysis of the portfolio also reveals that the fund has actively managed its equity exposures during market cycles. During the sub-prime crisis (January 2008 to March 2009), the average equity exposure of the fund was 88%. This was increased during the subsequent recovery in the market (April 2009 to December 2010) to an average 93%.
Portfolio analysis
The fund has followed a focused approach by investing 91% of the average AUM in CRISIL defined large cap stocks over the past three years. The fund 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 a three-year time frame reveals that 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%. The fund 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
Records with MCA show that Option One was incorporated only in March, 2012. It has since filed forms for issue of debenture amounting to Rs 1,000 crore.
According to the brochure “for purchase of debentures” circulated by the company reviewed by Business Standard said that the debentures can be purchased under three different schemes such as monthly income plan, fixed deposit and recurring deposits. The scheme offered to collect sums varying from Rs 1,000 to Rs 100,000 for tenures varying from one year to 14 years.
