SBI Magnum Children’s Benefit Plan: Stability, with a dash of excitement

The fund invests mostly in debt alongside exposure to mid-caps and lower-rated bonds

Investors with a moderate risk appetite or those wanting to switch part of their equity investments to relatively safer assets can consider SBI Magnum Children’s Benefit Plan.

The equity markets have been on a tear over the past year. SBI Magnum Children’s Benefit, a debt-oriented scheme investing about 60-70 per cent in debt, can help cap downside if equity markets turn volatile.

That said, the fund’s relatively higher exposure to mid-caps and lower rated debt instruments vis-à-vis its peers peg up the risk quotient a tad.

Nonetheless, investors game for some risk can take comfort from the fund’s consistent top-notch performance across time frames. The fund is in the top quartile spot across three, five and 10-year periods, delivering healthy double-digit returns.

Over a 10-year period, the fund has made 11 per cent returns, while over three- and five-year periods it has raked in around 15 per cent returns.

The fund carries exit loads of 3, 2 and 1 per cent for exits before one, two and three years, respectively.



More mid-caps



SBI Magnum Children Benefit Plan has invested about 60-70 per cent of its assets in debt instruments over the last two years. While this should help mitigate risk, the fund’s equity exposure can spice up returns.

In fact, the fund has had a good exposure to mid-cap stocks (market capitalisation below ₹10,000 crore) over the past two years, raking in rich returns as mid-caps continued their stellar run.

While the fund currently holds about 52 per cent of its equity portfolio in mid-caps, it has taken its exposure all the way up to 70-80 per cent intermittently over the past two years. ICICI Pru Child Care-Study Plan, another debt oriented fund that has delivered healthy returns, carries a relatively lower exposure to mid-cap stocks — 25-30 per cent of equity portfolio over the past two years.

Hence, SBI Magnum Children Benefit, which still has a notable portion of its equity investments in mid-caps, carries a slightly higher risk. But the risk is diffused across the 25 stocks it invests. No single stock constitutes more than 3 per cent of assets in the fund’s portfolio.



Active calls



The fund has been actively managing its debt portfolio, upping its duration during bond rallies and paring it when upsides are limited. In the bull market of 2014, when both equity and debt did well, the fund’s deft calls in debt helped it to make a robust 31 per cent returns.

The fund had upped its average maturity from 1-2 years in the beginning of the year all the way up to 7-9 years by the end of 2014.

The fund’s average maturity remained at 8-9 years through most of 2015, and was tempered to 4-5 years in 2016.

Taking an active call on the rate outlook, the fund has now trimmed its maturity to less than a year (0.68 years). Given the near-zero possibility of the RBI cutting rates, the move can help contain volatility in bond markets in the coming year.

In fact, over the past two months, the fund has moved a significant portion of its assets into cash.

Aside from being slightly aggressive on its equity portfolio, the fund also carries a relatively higher credit risk.

Over the past two years, the fund has held about one-third (on an average) of its assets in AA or below rated papers.

Currently though, the fund holds a lower 6.57 per cent of assets in A rated papers, 25 per cent in AA rated and 44 per cent in cash and equivalent.

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