SBI Funds Management

About

SBI Mutual Fund is an asset management company owned by State Bank of India and incorporated in June 1987 with its corporate head office located in Mumbai, India. SBI Mutual Fund Trustee Company Private Limited is the trustee of the AMC. SBI Funds Management Pvt. Ltd. is a joint venture between the SBI, an Indian public sector bank and Amundi, a European asset management company. A shareholder agreement in this regard was entered on April 13, 2011, between SBI and Amundi Asset Management. Accordingly, SBI currently holds 63% stake in SBIFMPL and the 37% stake is held by Amundi Asset Management through a wholly owned subsidiary, Amundi India Holding. In 2013, SBI Mutual Fund acquired four schemes of Daiwa Mutual Fund, part of the Daiwa Group of Japan. 

The total assets under management recorded a year-on-year growth of 9 per cent to INR 7,02,166 crore (~ USD 85.63 billion) as of March 31, 2023, against INR 6,47,067 crore (~ USD 78.91 billion) at the end of March 31, 2022, making it the largest AMC in India.

Key figures for the financial year 2021-22                                                                                                       

YearTotal Income (in Lacs)Total Expense (in Lacs)EBIT (in Lacs)EBIT (%)Net Profit (in Lacs)Total Income (in million)Total Expense (in million)Net Profit (in million)
2021-221995.62568.311427.3172%1427.31266.0875.77190.31

Key staff

Shamsher Singh, MD & CEO – Shamsher Singh, Deputy Managing Director of State Bank of India (SBI), is on deputation to SBI Funds Management Ltd. since November 02, 2022. Singh joined SBI in June 1990 as Probationary Officer and has more than 32 years of experience. Before his deputation to SBIFML, he was heading the Ahmedabad Circle of SBI as Chief General Manager from November 2020 responsible for driving business growth and ensuring regulatory compliance across 1400+ branches of SBI. 

R Srinivasan, CIO,  Equity –In May 2009, R Srinivasan joined SBI Funds Management as a Senior Fund Manager and currently serves as the Chief Investment Officer (CIO) – Equity. He directly oversees the management of several funds. He was formerly the Head of Equity. He has industry experience spanning 28 years and has previously worked at a number of leading organizations in the BFSI space. Srinivasan is a postgraduate in Commerce and has done his MFM from the University of Bombay.

Rajeev Radhakrishnan, CIO, Fixed Income – Rajeev joined SBIFM as a fixed income portfolio manager in 2008. He currently heads the Fixed Income desk at the AMC. Prior to joining SBIFM, Rajeev was Co-Fund Manager for Fixed Income with UTI Asset Management for seven years. Rajeev is an Engineering graduate and holds a Masters degree in finance from Mumbai University. He is also a charter holder of the CFA Institute, USA.

Investment philosophy (for firm)

Growth through innovation

Their expert team of experienced and market savvy researchers prepare comprehensive analytical and informative reports on diverse sectors and identify stocks that promise high performance in the future.What is innovation? Innovation is the process of turning ideas into concrete plans for progressive growth. They always seek to provide their investors with opportunities for progressive growth through their innovative products, stock selection and active portfolio management. Accordingly, they also enhance and optimize asset allocation and stock selection based on internal and external research.

Their objective is to endeavor to outperform their benchmarks through well researched investments in Indian equities and debt markets. This is achieved by implementing an active management style based on fundamental analysis, leading to the construction of a portfolio. It could be blended, large cap, mid cap, or specific sector oriented – which aims at capturing the growth potential of Indian equities.

Media

Beat the street with R. Srinivasan, CIO-Equity, SBI MF, Youtube, August 20, 2021 

A single variable does not define valuation. Valuations are a function of both cost of equity and return on capital, and return on capital is correlated to both cost of equity and growth. Sustainability of strong earnings is key to market growth. 

In a highly uncertain market, the mutual fund only needs to outperform the benchmark. The team focuses on trying to figure out whether the business that they are buying is a good business and keeps evaluating the same on a constant basis. A good business is identified by its comparative advantage, longevity of growth, return on capital and its management. The sources of alpha will change depending on the momentum of the market, but it keeps active investing relevant.

R. Srinivasan says that he is skeptical about the new upcoming businesses and needs to assess if these businesses have a comparative advantage and if they can sustain themselves. He prefers consumer companies that exhibit growth, to the new businesses, even though they might be expensive.

Coffee Can Investing | Navneet Munot feels investing in equities is more about EQ than IQ, Bloomberg, April 30, 2019, https://youtu.be/3Vi6_gZmhp8

Given that most of the fund managers are from equity background on the platform, Navneet Munot has a background of managing debt funds, so in his view credit funds have to take a macro look, duration call, looking at the yield curves etc.

Debt management is more about numbers, while equity management is more narrative. Debt and equity mindsets are complementary to each other. He then talks about his understanding of credit cycles – 5 stages of Mc Kinsey’s model of credit cycle – displacement, boom, euphoria, profit taking and panic. 

According to Navneet Munot, minority shareholders should engage constructively. The topic goes on to ESG investing wherein he mentions to the whole investable universe that they apply a screening process where around 30-40% companies do not fit in. In conclusion he says, investing in equity is not about collecting information or analyzing it but more about having common sense and faith in compounding.

Interview – Money Management India, June 20, 2014

Talking about philosophy, the firm believes in generating alpha in Indian markets and has been doing it for 25 years.

  • First – time arbitrage, wherein the time horizon being long or short depends upon the opportunity.
  • Second – a portion of the market which is under research, falls in the small and mid sized category and they run funds for large and mid caps.
  • Third – market timing, sector preferred than stock, but they have decided not to time the market. They believe in the capability of alpha generation through stock selection. Philosophy fundamentals are – fundamental change (change in margin), earnings momentum, market expectation and valuation (relative and absolute). 

Relative to market, sector and its history.

  • For mid caps – absolute valuation perspective
  • For large caps – relative valuation perspective (more you know about the company, the better it is)
  • They follow a bottom up approach for equities, and top down for the fixed income section.

Talking about research – the research team should follow a proper process, by having an investment thesis and investment model in place. People then come with the devil’s advocate and a guy presents the idea, it’s then decided whether the stock has to be included or not. This is followed by an in-house research team providing quarterly updates and two types of star ratings. People playing devil’s advocate will be testing the analysts to see how alert they are.

Focused strategy is not as risky as it seems, says R Srinivasan of SBI Mutual Fund, The Economic Times, Nov 22, 2019, https://economictimes.indiatimes.com/mf/analysis/focused-strategy-is-not-as-risky-as-it-seems-says-r-srinivasan-of-sbi-mutual-fund/articleshow/72182456.cms

R Srinivasan, Head of Equity, SBI Mutual Fund, is one of the top fund managers who created maximum wealth for investors in the last five years. SBI Small Cap Fund and SBI Focused Equity Fund, the two flagship schemes of the fund house, are managed by him and both the schemes have been consistent outperformers in their respective categories. SBI Small Cap Fund is the category topper with 17.24% returns in the last five years. Srinivasan shares his strategy in an interview with Avneet Kaur of ETMutualFunds.com.

Prepared by – Charles Mathew, May 2022, updated financials Aniket Ghoshal, Dec 2022

Updated by – Oraina Dsouza, June 2023

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