Investors, who can ride out short-term market volatility, can park some of their money in SBI Focused Equity Fund. This fund is suitable only for those who can remain invested over a period of at least five years.
SBI Focused Equity (earlier avatar was SBI Emerging Business Fund, till May 2018) has managed to generate high risk-adjusted returns since its launch.
The fund currently follows a focussed and multi-cap approach of allocating up to 30 stocks across market capitalisation.
In its earlier avatar, the scheme had managed to invest predominantly in mid- and small-cap segments.
SBI Focused Equity has managed to outperform the category with notable margin. The category average returns for the past one year is -10.3 per cent while for SBI Focused is at -5.2 per cent.
But if we extend the periods, the fund has beaten the categoryaverage in three (5.26 per cent CAGR vs category’s -0.11 per cent CAGR) and five years (5.26 per cent CAGR vs category’s 4.7 per cent). The fund is the top performer in the seven- (13.5 per cent CAGR vs category’s 11.08 per cent CAGR), and 10-year time-frames(14.1 per cent CAGR vs category’s 8.7 per cent CAGR).
The scheme has performed decently during bull runs across multiple years — 2009, 2014 and 2017. It outperformed its category and benchmark index, the S&P BSE 500 TRI, in these years.
During the bear run in 2011, the fund managed to stem its losses. However, during the 2013 bear phase, the fund underperformed its category and benchmark index.
Portfolio
The fund’s high conviction in multi-cap approach has held it in good stead. As per the latest portfolio of May 2020, the allocation to large-, mid- and small-cap stocks stood at 56, 20 and 7 per cent, respectively (based on AMFI’s classification).
An allocation to global stocks has provided diversification benefits and a good upside. Currently, the scheme holds a single US-based stock — Alphabet — in its portfolio (7.8 per cent of the portfolio).
The short-term under-performance over the past one year was because of the concentrated portfolio that the fund maintains of around 24 stocks.
Nearly 30 per cent of the fund’s corpus is invested in banks and NBFCs such as Axis Bank, State Bank of India and Bajaj Finance.
This is despite the fund shedding some of its holdings in this sector over the past two months. Stock prices of financial stocks fell after the moratorium announcement by the RBI in March 2020.
On the other hand, the scheme has incrementally increased its stake in Page Industries over the past four months.
The fund currently holds 9.7 per cent of its corpus in cash and cash equivalents.
The average cash holding for the multi-cap category is 6.4 per cent right now.