Last Updated on October 1, 2023 at 6:35 pm
This is an in-depth performance review of SBI Equity Hybrid Fund. We find out how consistently it has outperformed its benchmark and peers. Known as SBI Magnum Balanced prior to SEBI MF categorization, it is the seventh oldest balanced fund or aggressive hybrid fund and largest with assets of 29,354 Crores.
Let us check how the fund has grown, how it has allocated its assets in the past, type and credit quality of the bonds in its portfolio and compare performance with its benchmark and peers recommended in my Handpicked Mutual Funds July 2019 (PlumbLine) – this is due for an update in Oct (last quarter).
SBI Equity Hybrid Fund: Basic Details
| Type | Open-ended scheme | |
| Asset | Hybrid | |
| Category | Aggressive Hybrid Fund | |
| Inception Date | 31-Dec-1995 | |
| Fund Manager | R. Srinivasan, Dinesh Ahuja | |
| Objective | To provide investors with long-term capital appreciation along with the liquidity of an open-ended scheme by investing in a mix of debt and equity. The scheme will invest in a diversified portfolio of equities of high growth companies and balance the risk through investing the rest in fixed-income securities. | |
| Minimum Investment | 1000 | |
| Incremental Investment | 1000 | |
| AUM (31-Aug-2019) | 29353.7003 (Cr.) | |
| Expense Ratio | 1.65% Reg and 1.09% Direct | |
| Benchmark | CRISIL Hybrid 35+65 – Aggressive Index (Benchmark) | |
| Additional Benchmark | S&P BSE SENSEX – TRI (Benchmark) | |
| Investment Pattern | Minimum | Maximum |
| Debt instruments (including securitized debt) & MMI | 20 | 35 |
| Equity and equity-related instruments (including derivatives) | 65 | 80 |
| Units issued by REIT/InVIT | 0 | 10 |
Scheme Information Document
AUM Movement
SBI Equity Hybrid Fund saw its maximum AUM movement bet end-2013 and end-2018. From about 400 Crores in Oct 2013 to 21,000 Crores in Jan 2018 – more than a five-fold increase. The AUM increase in the last few months has been in line with NAV movement pointing to a significant drop in inflow.
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Historical Asset Allocation
Shown below the historical asset allocation of SBI Equity Hybrid Fund from Sep 2009 to Aug 2019. The fund has always held about 20-25% bonds. There are some marginal variations in equity allocation, perhaps tactical. It is a reasonably style-pure fund with regard to asset allocation. This is important to justify the study of past returns and risk.
Next, we have the type of bonds the fund has held. Corporate debt is a prominent holding. Also, one can the fund manager playing the duration game (or yield game) by varying SOV bond allocation tactically.
The credit quality of these is shown next. The fund has dabbled in 5-10% of lower than AAA bonds at different times in the past.
The fund has seen some bond downgrades but the exposure was too small to have made a difference.
Expense Ratio History
Shown below are the expense ratios of the direct plan and regular plan along with the AUM change month on month. The direct plan has got more expensive since early 2016 and that is not quite desirable. The link between AUM movement and ER needs further exploration.
SBI Equity Hybrid Fund: Performance
Comparison with benchmarks
Over a ten year period, the fund return has managed to stay comfortably above Nifty 50 TRI return.
The performance over five years is also pretty reasonable. Notice that the standard CRISL benchmark also performs similar to Nifty over five years.
Comparison with peers
The HDFC Hybrid Equity (aka HDFC Balanced) is clearly the pick of the lot with the other funds in a similar league. The ICIC Fund is clearly second with not much difference between SBI and Franklin
The pattern is similar over five years too.
Amusingly when we look at the risk over five years, all the aggressive hybrid funds have done significantly better than Nifty but their risk is comparable to that of the CRISIL index which has 65% Nifty and 35% bonds.
So with respect to Nifty, these funds are lower-risk + potential higher return funds but with respect to the CRISIL Aggressive Index, they are higher/similar risk + potential higher return funds! A truly low-cost balanced index fund might give these a run for their money. However since AMC likes money more than anything else, it is not happening anytime soon. Even if it does, no one is going to push it!
Summary
SBI Equity Hybrid Fund has performed quite well against Nifty. It may not be the best in the category but it does have a decent track record. Existing investors can continue. New investors who are mature enough to not insist on “top performers” too can consider the fund.
There are three issues though. (1) Already the AUM is fairly high and the next time the market moves up consistently for a few months the AUM could move up again significantly (that fact that the AMC has a bank to push funds does not help). From this viewpoint, a quiet consistent performer with lesser AUM may be better.
The third issue is the expense ratio. Although it is lower than aggressive hybrid funds from ICICI, HDFC and Franklin, at just 0.2% for the direct plan, Mirae Asset Hybrid Equity Fund (click to read review) does look quite enticing!
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