Mar 19, 2008

SBI Magnum Multiplier Plus - Analysis

 SBI Magnum Multiplier Plus: Hold

Investors in SBI Magnum Multiplier Plus can retain their holdings. While the fund's performance over the last one-two years has been subdued, it has notched up a good track record over a three and five-year period. Investors holding on to the fund since inception in 1993 would have earned a compounded annual return of 19 per cent.

Suitability: The fund is similar to other diversified funds in terms of objectives. However, its strategy is slightly riskier.

Magnum Multiplier has a tendency to take concentrated bets on a few sectors with close to 50 per cent of the assets invested in such sectors.

In such a strategy, right timing and selection of sectors become crucial for performance. While such concentrated exposure can help during a bull market, during volatile phases, the valuations offered by the market to certain sectors can change dramatically and alter the overall return of the fund for the better or worse. Hence the fund is suitable for investors who prefer higher risks compared to diversified funds.

Performance: The fund has generated a return of 64 per cent over a five-year time frame and outpaced the benchmark BSE 100 by 15 percentage points.

However, over a more recent period of one to two years, the return does not appear to be compensating the risk. On both occasions, it just managed to outpace the benchmark by a few percentage points.

But the fund has consistently outpaced the category average substantially over the past five years. On a rolling return basis, it has trailed the benchmark on eleven out of the past twenty-four months.

Portfolio: Capital goods, construction and finance are the preferred sectors and together they account for 55 per cent of the assets. The fund predominantly invests in large-cap stocks and exposure to stocks with market capitalisation of less than Rs 7,500 crore is about one-third of the total assets. In general, diversified funds prefer to restrict exposure to any single stock to less than 10 per cent of the portfolio.

Magnum Multiplier, however, stepped up exposure in Kotak Mahindra Bank recently as it constituted 11.4 per cent of the assets despite the fund pruning the holdings over the past quarter. The fund prefers to adopt a buy-and-hold strategy that has paid off in stocks such as BHEL, Kotak Mahindra Bank and Crompton Greaves.

Fund facts: The fund was launched in February 1993 as a close ended one and was made open-ended in April 1998. Earlier, it was jointly managed by Mr Sanjay Sinha and Mr Jayesh Shroff. Now the latter manages it. The NAV per unit is Rs 73.67.