SBI Funds Management

About

SBI Mutual Fund is an asset management company sponsored by State Bank of India, and trustee is SBI Mutual Fund Trustee Company Private Limited. It was founded in June 1987 with its corporate headquarters located in Mumbai, India.

SBI Funds Management Private Limited has been appointed as the Asset Management Company of the SBI Mutual Fund. SBI Funds Management Pvt. Ltd. is a Joint Venture between SBI and AMUNDI (France), one of the world’s leading fund management companies. A shareholder agreement in this regard has been entered on April 13, 2011 between SBI & 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 India acquired Daiwa Mutual Fund, part of the Daiwa Group of Japan. 

It has assets under management worth 648198.57 crores INR (~$86.42 billion @ 75 rupees/dollar, March 2022) making it the largest AMC in India.

Key staff

Vinay M. Tonse (Managing Director & CEO) – Vinay Tonse was appointed the MD & CEO  of SBI Funds on 24th August 2020, replacing Ashwani Bhatia. Before his deputation to SBI Funds Management Limited (that being the process for this role), he was heading the Chennai Circle of SBI as Chief General Manager (June 2018 to June 2020). Other key assignments held by Vinay Tonse during the last 10 years in SBI are as General Manager, Corporate Accounts Group – II, Deputy General Manager, Equity & Commodities (Global Markets), and CEO, Osaka Branch, Japan.

D. P. Singh (Chief Business Officer) D. P. Singh has over 30 years of experience in the Banking and Financial services industry and has been associated with SBIFM since 1998. As the Chief Business Officer, he is responsible for all business verticals and segments of the organization. Over the years, he has overseen many roles across the various functions of the organization. Prior to joining the company, he was with SBI where he handled various assignments in Retail Banking, Corporate Credit and Information Technology Initiatives.

R. Srinivasan (CIO – Equity) – R. Srinivasan joined SBI Funds Management as a Senior Fund Manager in May 2009, and is currently CIO-Equity and directly manages a number of funds. He was formerly the Head of Equity. He has rich 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 Masters of Financial Management from the University of Bombay.

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 the investors with opportunities for progressive growth through the innovative products, superior stock selection and active portfolio management. Accordingly, they also enhance and optimize asset allocation and stock selection based on internal and external research.

The objective is to endeavor to outperform our benchmarks through well researched investments in Indian equities. 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 (20th August 2021)

Link: https://www.youtube.com/watch?v=XfesUCxrHz8

A single variable does not define valuations. 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 a business that they are buying is a good business and keeps evaluating that on a constant basis. A good business is identified by its comparative advantage, the longevity of growth, return on capital and its management. The sources of alpha will change depending on the momentum of the market, but it kind of keeps active investing relevant.

R. Srinivasan says that he is sceptical 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, 30th April 2019

Given that the most of the fund managers are from equity background on the platform, Navneet Munoth has a background of managing Debt funds, so in his view credit funds has to take a more of macro look,take a duration call, looking at  the yield curves etc. then he says debt guy look at what can go wrong whereas in equity you look at what can go right.

Debt management is more about numbers, while equity management is more about narrative. Debt and equity mindset are complimentary to each other.Then he talks about his understanding of credit cycles – 5 stages of Mc Kinsey’s model of credit cycle – displacement, boom, euphoria, profit taking and panic. Then topic goes on to the most renowned investors are characterized by the insecurity, there Navneet says we are a team each one having different designations but being anything else we are fund managers first. 

Then he mentions minority shareholders should engage constructively. The topic goes on to ESG investing wherein he mentions to the whole investible universe we takes we apply screening process where around 30-40% companies do not fit in, they invest based on ESG scores. At conclusion he says, investing in Equity is not just about collecting information, analysing them but more about common sense having faith in the compounding given one is rightly invested in suitable asset class.

Interview – Money Management India (20th June 2014)

Talking about philosophy, they believe in generating alpha in Indian markets and has been doing it since 25 years, when concerned about equities market throws 2-3 opportunities.

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

Relative to market, sector and also its own history.

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

Then talking about their research – the research team should be following a proper process, have an investment thesis and have an investment model, then people comes with the devils advocate and a guy presents the idea, then its decided whether the stock has to be included. This is followed by in house research team, they have an investment thesis, provide quarterly updates on them and give two types of star ratings. One against the sector and second against the market and then gives a target price.

People playing devil’s advocate will be people testing the analyst as see how alert they are.

They haven’t set any sector limitations, they have only one product that is emerging business fund the magnitude may differ than other funds but in terms of sector allocation it’s sometime derived because you picking up stocks from bottom up but then you have to assume that the portfolio does not take much of risk then if it’s concentrating on particular sector.In large cap fund like magnum equity there could be a top down view also than you may do a bit of rotation. In the mid cap fund they have three year view but from the overlay perspective they have certain limit in case of sectoral allocation. 

Then Navneet talks about the two critical criterions – people and process.

SBI was set up even before SEBI and there were funds not governed by SEBI, so it terms of regulation and after having looked at the financial crisis situations which arrived he has made many changes.

While comparing with other fund houses they say SBI is known for consistency and its process. 

Then talking about style, he says we are style agnostic.

Analyst questions

SBI MF achieved an increase in AUM of nearly 1 lakh crore INR in less than one year. How did the team manage to achieve this? What was the prime focus and investment philosophy?

SBI MF has some of the top Mutual funds in India giving high returns. How does the team achieve such high returns while keeping the risk under control?

Prepared by – Charles Mathew (20th May 2022)
Peer reviewed by –

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