SBI Focused Equity: Consistent, long-term returns

The fund has outperformed its benchmark over the past five- and 10-year periods

Given the current volatility in the market and the corrective phase it is undergoing, investors expecting steady returns in the long term can consider investing in the multi-cap fund SBI Focused Equity. Over the past five- and 10-year periods, the fund has given annualised returns of 12.7 per cent and 18 per cent, respectively, while its benchmark (S&P BSE 500 TRI) returned 9.2 per cent and 10.6 per cent, respectively.

SBI Focused Equity has been a top-quartile fund in the multi-cap spectrum. Following SEBI’s re-categorisation and rationalisation of mutual fund schemes last year, the scheme was categorised as a focussed fund. The funds under this category take a concentrated approach of investing in up to 30 stocks.

SBI Focused Equity invests in 20-30 large- and mid-cap stocks. The fund invests across market capitalisation, with 65-100 per cent exposure to equity, and the remaining in debt. Currently, it has about 87.6 per cent exposure in equity, and 12.4 per cent in cash, cash equivalents, derivatives and others.

Over the past one- and three-year periods, the scheme has outperformed some of the top-performing focussed funds such as ICICI Prudential Focused Equity, HDFC Focused 30 and IDFC Focused Equity.

 

 

 

Investors with a long-term perspective and looking for a multi-cap fund with a concentrated portfolio can buy the units of SBI Focused Equity.

Performance and strategy

The fund follows a bottom-up approach and invests in companies across market capitalisation and sectors. It has exposure in 16 sectors, recently adding power and retailing sectors to its portfolio. Banking has been the top preferred sector since October 2018.

Over the past year, it has gradually trimmed its exposure to finance while increasing its holdings in consumer non-durables, consumer durables, industrial capital goods and auto ancillary. The fund is overweight on FMCG, engineering and chemicals sectors. On the other hand, it is underweight on software, energy and automobiles.

After a passive 2015 and 2016, the scheme delivered a notable return of 44.7 per cent in 2017. It contained the downside well in 2018, which helped it deliver a positive return of 0.87 per cent in the past one-year period; whereas, the S&P BSE 500 TRI and the multi-cap category declined 6 per cent each in the same period. Interestingly, the fund continues to control the downside well in this year as well.

Top holding such as HDFC Bank, State Bank of India, Procter & Gamble Hygiene and Health Care, and Kotak Mahindra Bank have derived good returns over the past year. Mid-cap stocks such as Tube Investments of India and Relaxo Footwears have done well.

The fund recently added Power Grid Corporation of India and Avenue Supermarts to its portfolio, and exited Hawkins Cookers, Kirloskar Oil Engines and Muthoot Finance.

Published on August 10, 2019

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