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Consistency is key

"Stock selection is based on fundamental change, market expectations, stock momentum and valuations," says R Srinivasan of SBI Magnum Equity Fund

Our Q & A session with R. Srinivasan

Consistency is key

What is the investment strategy of your fund? (Including internal rules on investment universe, capitalization orientation and maximum cash allocation)
SBI Magnum Equity Fund is run as a pure large cap (top 100 companies in terms of market cap rank) strategy focused on consistency of benchmark out-performance over a 1 to 3 year period. The target is on risk adjusted returns with an eye on tracking error. Portfolio construction revolves around active weights. Since the benchmark typically hovers around the middle of a large cap peer set, it is expected that benchmark out-performance will lead to above-average returns within the peer set too.

As per our internal portfolio template, the fund needs to maintain minimum benchmark coverage of 50% with active sector and stock limits of 6% and 4%, respectively. Cash is restricted to 7% of the portfolio.

What are the essential attributes for the stocks to be in our portfolio?
Out-performance over the Nifty 50. For that, we look at four factors, in addition and complementary to the qualitative and quantitative analysis that goes into stock selection Fundamental change, Market expectations, Stock momentum and Valuations.

What kind of stocks never enter your portfolio?
Apart from non-large-caps, none in particular.

What will you attribute the relatively consistent performance of your fund in recent years?
The tight template and a conscious focus on consistency of performance rather than just performance.

Any tactical miss you regret (not having, or not having enough or holding something) in your portfolio?
None, in particular.

Please click here to read the analysis of this fund.