SBI MUTUAL FUND PERFORMANCE DIPS

Mr Jayesh Shroff , Fund Manager with SBI Mutual Fund, answered a few questions on the performance of funds from the SBI Mutual Fund stable.

Excerpts from the interaction:

Why has there been a dip in the performance of Magnum Taxgain over one- and three-year periods? Is it because of a high asset base or was it the sector preferences?

Our endeavour is to generate consistent returns over the long term which is reflected in the superior performance over longer periods. The fund turned defensive last year considering the state of the global economy and that helped it weather the storm, particularly after the Lehman crisis. However, we must admit that we were surprised by the sudden and swift rally in the market in the initial phase — that’s when the performance dipped. However, we are confident that the portfolio is now rightly positioned and is likely to generate alpha over the long period.

SBI One India Fund is nearly three years old, but its NAV is still quoting below par. Why is this so?

The market turned pretty volatile after the launch of the fund and some of the mid-caps in the portfolio didn’t perform to our expectations. The portfolio initially had a very large number of stocks to achieve geographic diversification in line with the scheme objective, and four fund managers were jointly responsible for the fund. The fund has increased exposure to ‘high-conviction ideas’ and has reduced the number of stocks in the portfolio. The performance has improved over the last one-year.

Is the zone-wise concept in selecting stocks letting you down in the SBI One India Fund?

With the benefit of hindsight, the strategy resulted in a larger number of stocks and meaningful exposure was not taken to some of the top picks. But that has been corrected and it is now showing the expected results.

Magnum Multiplier Plus 93 has taken a higher exposure to consumer goods and lower exposure to top performing sectors such as construction. Is that a strategic call?

Magnum Multiplier Plus 93 has a high exposure to the infrastructure space, including capital goods and construction. In fact, we are significantly overweight in both the sectors. However, we are now increasing exposure to the consumer space as we are extremely bullish on the domestic consumption story. And as it is an aggressive multi-cap fund, we plan to take relatively higher exposure to any stock or sector in which we have high conviction. This, definitely, is a strategic call.

Why has your IT fund underperformed over one- and three-year periods? What is the outlook for this sector?

Our IT Fund had a large exposure to mid-cap stocks, which faced quite a challenging period, particularly in the second half of last year and first quarter of this year. However, some of the same stocks and couple of new ideas have performed well recently and, in fact, the fund is best in class over the last six months. We expect it to do well going forward.