SBI Magnum Emerging Business Fund: Invest

Investors looking for high-risk, high-return opportunities can consider limited exposure to the SBI Magnum Emerging Business Fund.

During a three-year period, the fund has clocked a compounded annualised return of 20.5 per cent and bettered its benchmark BSE 500 by 10 percentage points. The fund is, however, suitable for investors with a high-risk appetite, as the fund takes concentrated bets and is also sharply impacted during corrective market phases.

The fund's mandate is to invest in emerging business themes based on exports, outsourcing as well as emerging domestic investment themes. Although the fund watches out for the opportunities in sectors based on general economic patterns, its concentrated exposure to certain sectors makes it similar to sector funds. Higher exposure to select sectors and its mid-cap bias makes it a risky bet during market falls.

For instance, during the market meltdown in 2008, the fund lost close to 70 per cent of its value. Investment in stocks with market capitalisation of less than Rs 7500 crore to as low as Rs 70 crore though, provides scope for high returns, if the fund manages to pick the performers.

Performance: While several funds have been struggling to post good returns during the last one year, with leading indices such as BSE Sensex and Nifty being no exception, the fund clocked an absolute return of 17.5 per cent and also bettered its benchmark by 19 percentage points. The fund's performance placed it at the top of the diversified fund category during a one-year period. The fund's strategy to move away from interest-sensitive sectors such as auto and banks, and increasing the exposure to consumer space has paid off investors handsomely.

Portfolio strategy: The fund has concentrated exposure to the top ten stocks that accounted for 60 per cent of the assets, as of June. Some of the top holdings in the portfolios are Page Industries, Goodyear India, Hawkins Pressure Cooker and Manappuram Finance. With its tendency to take concentrated sector exposure, the fund currently holds one-fourth of its assets in the consumer theme.

However, there is an element of risk in this exposure. While Fast-Moving Consumer Goods (FMCG) stocks continue to deliver results, consumer durables have shown signs of slowdown. The fund's challenge would now lie in identifying initial signs of its performance hitting the brakes, and making deft switches. That the fund has managed such timely moves earlier, provides confidence. The fund is managed by Mr R. Srinivasan.

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