AMFI Registered Mutual Fund Distributor | SEBI registered Investment Adviser


Share | Email Print more
Fund Manager Insight: Sohini Andani, Fund Manager, SBI Magnum MidCap Fund
May 6, 2016

Ms. Sohini Andani, Fund Manager, SBI Magnum MidCap Fund in an interview with Fundsupermart,  enlightening investors on the investment strategy of the fund along with the processes that she follows to select the gems in the midcap space.

Author : iFAST Research

Fund Manager Insight : Sohini Andani, Fund Manager, SBI Magnum Midcap Fund

"SBI Magnum MidCap Fund is one of the top performing midcap funds on our platform in 2016. In this context, we decided to catch up with Ms. Sohini Andani who has been managing this fund since July 2010. We tried to understand the investment strategy of the fund along with the processes that she follows to select the gems in the midcap space. We also quizzed Andani on the valuation of the S&P BSE Midcap Index and if it is the right time for investors to enter into the midcap category"

Sohini Andani

Sohini Andani, Fund Manager, SBI Magnum MidCap Fund

Q. 1. SBI Magnum MidCap Fund is one of the top performing midcap funds on our platform for 2016. Please describe this fund in a few words for our investors.

A. It is a fund focused on generating absolute returns for investors by investing in mid and small cap companies picked up through bottoms up stock selection process. The fund invests minimum of 65% in midcap stocks and the rest is allocated among small caps, large caps and cash.

Q. 2. As per the product note, "The fund follows a bottom up strategy and focuses on generating absolute returns with a three years perspective". Does this mean that the stocks are selected in the portfolio with a 3 year time horizon in view?

A. Yes. Stocks are selected with a time horizon of 3-5 years, minimum being 3 years.

Q. 3. Midcap Funds carry a lot of risk and are highly volatile in nature. What are the investment processes that you follow while selecting midcap stocks in the portfolio?

A. We have a large research team which looks at each investment idea in great detail. We meet the company, its peers in the industry and in many cases its vendors to get feedback on the company. Every investment idea is internally debated thoroughly before we make investment.

Some of the basic factors we look at are that the company’s long term growth potential is better than its large peers in the sector and also some of the similar sized peers across sectors. The business is scalable and management is competent and focused on executing growth strategy well. Return ratios are important especially improving trend there. We prefer capital light business models where need to come to market frequently to fund growth is less. We avoid companies which raise excess capital when going is good and run into risk of misallocation of capital at a later date. We also look for reasonably decent size of promoter holding in case of midcap companies. Making fewer mistakes at stock selection level is very important to us and we believe it is okay to let go of some investment opportunities where we do not find margin of safety based on some of the above criteria. Preservation of capital is very important to us while we continuously strive to make money on new investment ideas.

Q. 4. Do you think that the S&P BSE Midcap Index is fairly valued? Is it the right time to enter the midcap funds?

A. The midcap valuations have moved up meaningfully after the significant rally for the last two years and are likely to consolidate here till the growth visibility improves sustainably. However, in any recovery cycle, midcaps tend to outperform large caps as their growth is higher than that of large caps and the stocks also are rerated in this period. Hence, one has to consistently invest in midcaps in a staggered manner to benefit of this recovery cycle rather than trying to time the same.

Q. 5. What is the maximum exposure that you will take into large cap stocks and is liquidity the sole criterion for this decision?

A. The fund can invest up to a maximum 20% of the AUM in large caps. In case of some stocks where we have invested as midcaps and due to appreciation they become large caps, we may like to hold a few of them where we believe that the long term growth potential is not fully captured by the stock price and there are still significant gains to be made on the stocks. Liquidity is another criteria for which we may sometime hold exposure in large caps, though this is not the main reason why we hold large cap stocks in the portfolio.

Q. 6. A trend that we have observed since January 2014 is that the fund has invested into stocks with less than 1% exposure in the range of 5% to 11%. Please comment on the same.

A. In such stocks, we either increase weight where we are positive or sell stocks if not so positive.

Q .7. Does the fund need to maintain the sectoral weights in line with the benchmark, that is S&P BSE Midcap Index, or is it completely sector agnostic?

A. The fund can be 10% underweight/overweight over the weight of that sector in BSE Midcap Index.

Q. 8. Give us 2 reasons on why our investors should make SBI Magnum MidCap Fund a part of their portfolios.

A. 1) The fund provides an opportunity to invest in midcaps which have potential to outperform large caps in the long term (5-10 years or more).

2)      The fund is focused on long term compounding by identifying and investing companies which grow faster than their peers in the industry.

iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund’s offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice.
Mutual Fund investments are subject to market risks. Please read all scheme related documents carefully.

Comments (0) | Comment on this Article
 (Click on Comments/Comment on this Article to show or hide comments/post a comment)
Recommended Funds
Recommended Portfolios
Chart Centre
Risk Profiler