The Hindu Business Line : SBI Mutual Fund: A smooth transition

The fund house lost its Head of Research, Mr Sandip Sabharwal, to a private equity fund and hired Mr Sanjay Sinha from UTI Mutual Fund to replace him.

We advocated that investors in SBI Mutual Fund wait and track the performance of its equity funds more closely over the next few months.

Revisiting the performance of SBI's equity funds today, there is no sign of slippage in performance in the crucial initial months after these changes. With the new management team just four or five months into its stint, it is early days yet to give the "all-clear" signal on SBI's equity funds.

After all, changes in investment style may be gradual and could take time to manifest.

However, the recent performance inspires confidence about the new team and shows that the fund-house has probably put the transition behind it.

How the funds fared

Magnum Contra Fund- — the flagship equity fund — sports a six-month return of about 32 per cent, well above the category average for diversified equity funds.

Magnum Multiplier Plus, a fund with a mix of large- and mid-cap stocks, has improved its performance, climbing to the top quartile in the diversified funds category.

In both these funds, SBI Mutual appears to have a made conscious decision, in end-2005, to carve out a larger portion of the portfolio to large-cap stocks and trim exposures to mid-caps.

This shift in asset allocation has helped the fund's cause. In performance, large-caps have left mid-cap stocks in the dust over the past nine months.

Magnum Contra now has two-thirds of its assets invested in stocks with a market cap of over Rs 2,000 crore (large-cap stocks). Magnum Multiplier Plus has an even larger 85 per cent allocation to large cap stocks. Meanwhile, as returns from the mid-cap pack slowed, the mid-cap funds managed by SBI Mutual Fund actually did better than their peers.

Magnum Global's 6-month returns, for instance compare favourably to those from Franklin Prima Fund and HSBC Midcap Fund, two of the good mid-cap funds on offer.

After a slow start, Magnum Comma Fund has improved in recent months. The Emerging Businesses Fund has recorded a slowdown in performance in recent months after an impressive start.

Investor action

Relatively new offerings from the SBI stables, such as Magnum Midcap Fund, SBI Multicap and SBI Bluechip Fund, have not as yet accumulated a track record on the basis of which fresh investments can be recommended.

We maintain our stance that investors should stay with the diversified equity funds from the SBI bouquet that have a good five-year track record.

Investors can retain their units in Magnum Contra, Multiplier Plus and Magnum Global Fund. Fresh investments can be contemplated in Magnum Contra Fund.

The fund sports an impressive five-year record that has not been disturbed by the recent management changes.

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