The Hindu Business Line : SBI Magnum Emerging Businesses Fund: Hold

INVESTORS in SBI Magnum Emerging Businesses Fund can stay with the fund. It has performed impressively since its launch in August 2004, registering returns of 66 per cent.

In the last six months, it has notched up returns of 32 per cent. This is higher than that registered by most diversified equity funds.

The fund's mandate is to invest in emerging business themes based on exports, outsourcing and domestic investments. In a way it is similar to the `Opportunities' schemes launched by other funds with a restricted mandate of investing in emerging themes.

As it is a sector fund, the risks involved in investing in it are to be considered high. The performance depends strongly on the stock picking skills of the manager. The fund's mandate is to pick out a handful of stocks that would out-perform the indices by a long margin.

In contrast, the investment universe of a diversified equity fund would be much larger and the bets taken by the fund manager would be of a much smaller magnitude. Any failure of the fund manager may reflect quite sharply on investment returns.

Portfolio: The size of the fund was about Rs 200 crore at the end of May. It was almost fully invested with cash position of about 4 per cent.

The scheme's mandate necessarily gives a mid-cap flavour to the portfolio. The fund could invest in large-cap stocks such as Bharti Tele-ventures. It has however shunned such stocks completely.

The scheme, however, is different from other mid-cap schemes as it has concentrated exposures in a select set of stocks. The top ten stocks in its portfolio accounted for about 61 per cent of net assets. In most mid-cap funds, the top ten stocks account for 20-30 per cent of net assets.

In the case of SBI's Mid-cap Fund itself, the top ten stocks account for only about 40 per cent of net assets.

SBI's mid-cap fund had 43 stocks in its portfolio. Emerging Businesses had 24 stocks in its portfolio. Emerging Businesses had also focussed on a few sectors, such as textile, capital goods, healthcare and construction, that accounted for nearly two-thirds of the net assets.

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