Mutual Funds

SBI Magnum Balanced: Stability with a dash of spice

Parvatha Vardhini C | Updated on January 15, 2018


The fund scores with deft asset allocation and higher exposure to mid-caps

If you believe the equity markets are heated up and volatility will be the name of the game hereon, equity-oriented balanced funds are a good choice. These funds invest up to 35 per cent in debt instruments, providing good downside protection. With returns on par with or better than low-risk, pure equity funds such as SBI Magnum Equity, SBI Magnum Balanced is an ideal fit for your portfolio.

Performance and strategy

Lower exposure to equities helped Magnum Balanced contains losses well in the stormy markets of 2011 and the seesawing markets of 2015. In 2011, while the the Nifty and the BSE 500 lost 25-28 per cent, the fund came out stronger, falling only about 22.5 per cent. In 2015, the fund’s NAV rose 6 per cent, compared with the 1-5 per cent decline in the above mentioned indices.

Thanks to its deft asset allocation and higher exposure to mid-cap stocks (those with market capitalisation of below ₹10,000 crore), the fund has managed to emerge on top during market rallies. In the mid-cap-led rally of 2012, for instance, the fund scored 3-9 percentage points higher than the Sensex/Nifty and the broader market indices. Mid-cap allocations, which were at less than 5 per cent of the equity holdings in the beginning of 2012, moved up to 21 per cent by December. An allocation of about 30 per cent to mid-caps saw the fund do well in the bull market of 2014. Magnum Balanced benefited on the debt side, too, that year by increasing allocation to government securities, to ride on the rally in bond prices. The fund held up to 23 per cent in government securities in 2014, compared with less than 10 per cent the previous year.

Overall, in one-, three- and five-year time-frames, the fund has beaten its category average returns by 1.5-7.5 percentage points.


The fund currently holds 70 per cent in equities and the rest in debt and cash.

On the equity side, it churns its sectors well according to the flavour of the season. Usually, it latches on to cyclicals, such as industrials or auto in market upswings while increasing stakes in defensives, such as consumer non-durables in troubled times. Banks and software have been the top sector preferences in 2016. But thanks to issues such as Brexit and a general global slowdown, the fund has reduced its software holdings by 5 percentage points since the beginning of the year. It has pruned holdings in Infosys and HCL Technologies in this space. At the same time, with borrowing rates coming down and credit looking up, it has increased its allocation to banking stocks in recent months. Besides receiving allotments in the IPOs of ICICI Prudential Life Insurance and RBL Bank, the fund has bought stakes in private banks, such as HDFC Bank and Kotak Mahindra Bank.

On the debt side, the fund currently holds about 15 per cent in long-term government securities. This will help the fund benefit from further rate cuts, if any. AAA and AA rated instruments from institutions, such as HDFC, PFC, M&M Financial Services, Repco Home Finance and Manappuram Finance also form part of the latest portfolio.

Published on November 05, 2016

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