Mutual Funds

Marrying risk with stability

Bhavana Acharya | Updated on November 22, 2014

SBI

Blue-chips offset the risk related to mid-caps and a concentrated portfolio



A fund that blends blue-chip stocks with the more risky mid- and small-cap picks, SBI Magnum Multiplier Plus has delivered annual returns of 20.6 per cent over the past 10 years. That compares favourably with the 13 per cent managed by its benchmark, the BSE 200 or even the broader CNX 500.

The fund usually puts more than half its portfolio in large-cap stocks, with mid-caps making up 30-35 per cent of the portfolio. In the one-, three- and five-year timeframes, Magnum Multiplier has held fast in the top quartile of funds in its category.

Returns in these periods have been ahead of the BSE 200 by a margin of 3 to 9 percentage points. Magnum Multiplier’s performance is better than funds such as ICICI Pru Top 200, and in line with those such as Franklin Prima Plus. But Magnum Multiplier’s mid-cap inclusion, and its strategy of concentrating bets on a few sectors and stocks heightens its risk. The fund is thus suitable as a portfolio diversifier for an investor with a reasonable risk appetite and long investment horizon.

Performance

The fund has a long history, having been launched in 1993. Annual returns since then have been at 14 per cent. In the past five years, the fund has beaten its benchmark about 70 per cent of the time on an annual rolling return basis.

This lower figure is on account of the bearish 2011 market, when the fund’s losses were in line with the BSE 200.

In that period, it eschewed weak performers such as Future Retail, Orbit Corp and several other stocks in capital goods and infrastructure. But it retained faith in other stocks of the two sectors, as well as power, all of which were severely hit and thus hurt overall returns.

The fund’s weightage to the capital goods sector, in fact, has been pared only in the past couple of years.

SBI Magnum Multiplier has survived the previous market crash in 2008-09 reasonably well, containing losses better than the benchmark. During market upswings, the fund has surged well ahead.

Heavy reliance

Its top ten stock holdings are reasonably spread, usually forming around 40 per cent of the portfolio. Sector weightage, though, is heavily tilted towards a handful.

But the fund, for the most part, has switched between sectors in a well-timed fashion. It added auto ancillaries in 2012 and adroitly shifted in and out of oil and gas. Software and pharmaceuticals have been the top three sectors for the fund during the past few years. Picks such as Ipca Labs and AstraZeneca Pharma have worked well.

The fund generally sticks to a buy-and-hold strategy. In the mid-cap space, it doesn’t take too many risks, going for sound companies such as SKF India, PTC India, Bata India and Puravankara Projects.

Published on May 11, 2014

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