SBI Equity Hybrid: The right blend of equity and debt

The fund has delivered annualised returns of 13% in the past 10 years

Investors with a moderate risk appetite could consider parking some of their surplus in SBI Equity Hybrid Fund. The fund is an aggressive hybrid equity-oriented fund with at least 65 per cent in equity and the rest in debt instruments.

The hybrid investment strategy gives you the benefit of the growth potential of equity and the advantage of lower-risk debt securities.

Performance

The scheme was called SBI Magnum Balanced earlier, and has been consistently delivering above-average returns over the past 20-plus years. In the past 10 years, it has delivered 13 per cent annual returns. By taking exposure to low-risk instruments and investing mainly in quality large-cap stocks, the fund has ensured outperformance vis-à-vis its benchmark and several peers over the years.

SBI Equity Hybrid is an appropriate addition for medium-risk investors, especially for those just beginning to invest in mutual funds.

It has delivered 8.5 per cent, 12.6 per cent, 14 per cent and 16.7 per cent compound annualised returns in one-, three-, five- and seven-year periods, respectively, while the category posted 3.6 per cent, 11 per cent, 11.2 per cent and 13.8 per cent returns, respectively.

Portfolio

The fund manages its asset allocation quite well to cash in on conducive conditions across equity and debt markets. Over the past five years, the fund has actively shifted its equity allocation between 64 per cent and 72 per cent of its assets.

In volatile times, it increases its cash position up to 10 per cent. For instance, the fund maintained its equity portion as high as 72 per cent during the strong rally in 2017, but cut it down to 64 per cent in 2018. It now holds 72.2 per cent in the segment. This has helped the scheme contain losses better than its benchmark as well as peers in falling and iffy markets such as those in 2011, 2013, 2015 and 2018.

On the equity side, the fund follows a multi-cap approach and churns its portfolio actively. Presently, 72 per cent of the equity portfolio is large-cap and the rest is mid- and small-cap.

The portfolio is well-diversified across a large number of stocks (100 stocks as of April 2019) which mitigates concentration risk.

On the debt side, the fixed-income allocation is actively managed, following a blend of accrual and duration strategy.

As per the latest portfolio, around 50 per cent of the debt portfolio has been deployed in high-yielding credits (minimum rating of A-). Though this pegs up the credit risk, it will increase the overall portfolio yield.

The latest portfolio shows that the fund holds a meagre portion of 0.15 per cent in the NCD issued by Reliance Home Finance which has now been downgraded to ‘C’.

The balance is managed more dynamically, having exposure to government bonds and liquid AAA rated credits while keeping in mind the overall view on interest rates.

Currently, the average maturity of the debt portfolio is at 5.2 years.

Read the rest of this article by Signing up for Portfolio.It's completely free!

What You'll Get





TOPICS

Related

This article is closed for comments.
Please Email the Editor