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A high risk-high return bet that seems to be paying off - that's how one can perhaps sum up SBI Magnum Emerging Businesses Fund. The fund saw a remarkable improvement in performance since 2009 and has been comfortably beating its benchmark over long and medium term periods of time since then

Fund Benchmark : BSE 500

Fund Strategy and its impact on performance

Since 2009 the fund has been incrementally managed as a market cap agnostic, high conviction strategy with an active churn. The bias towards mid-and-small caps is a derivative of the high conviction strategy. It is also managed from a pure bottom up perspective, sector active weight being a pure function of that bottom up strategy.

The bottom up strategy has worked very well for the fund and continues to do so. Markets have been choppy in recent months and that theoretically does tend to affect performance relative to the benchmark. But, we have consciously stuck to our high conviction bets and most of them have paid off during this period.

Sectoral preferences, rationale for higher concentration

As a derivative, the fund is significantly over-weight Consumers as a theme. It is also heavy into mid-and-small caps given the relative information arbitrage and higher stock selection opportunities in this space and better growth prospects. The increased concentration is a conscious strategy to maintain the high risk, high return nature of the fund

Outlook

The fund has a healthy mix of stocks that have done well and others that continue to have high return potential based on their valuations. We do not foresee immediate churn unless we find very attractive opportunities that can fit into the top 3. While the fund is high risk by definition, it is important to understand that risk is a short term phenomenon. Investors with a longer term perspective may not read too much into it. Believe this is a good fund for investors agnostic to short term benchmark movements and focused on creating excess return through bottom stock selection; going consistently right on a majority of the latter is the key risk.

 

 

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

 

 

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