|Time Period||1 year||3 years||5 years|
Data as on 21-11-2018, Source: Value Research
SBI Monthly Income Plan is a hybrid scheme of SBI Asset Management Company (SBI Mutual Fund). It was renamed as SBI Debt Hybrid Fund after the SEBI fund classification rules of October 2017 went into effect. Monthly Income Plans (now called Conservative Hybrid Funds) invest predominantly in debt. According to SEBI rules they are required to invest 75-90% of their assets in debt and 10-25% in equity.
In 2018, as interest rates rose and stock markets struggled, these funds were hit by a double whammy. Interest rate hikes negatively affected debt, hitting the returns of the debt component of these funds. Stocks market corrections hurt the equity component of such funds. In this difficult market, the fund has done worse than the category average, in contrast to its outperformance against the category over the past 3 and 5 years.
Its managers, Dinesh Ahuja and Ruchit Mehta have been at the helm since 2011. Their performance has been a mixed bag with outperformance in 2011, 2015 and 2016 paired with underperformance compared to the category average in 2012, 2013, 2014 and 2017. On a 3 and 5, the fund is still marginally outperforming. However the margin of outperformance has come off substantially of late.
The fund has 73% of its assets in debt, 2% in cash and the balance 25% in equity. In its equity component, the fund goes for large cap growth stocks. Its top equity holdings are HDFC Bank, Bajaj Finance, TCS, L&T and Ramco Cements. The fund currently holds 29 stocks in total.
On the debt side, the fund takes a high exposure to relatively low rated AA paper at 32% of its total assets, compared to 20% in AAA paper. 2.3% is invested in paper rated below AA and the balance debt allocation is placed in sovereign debt or A1+ debt (short term paper with typical maturity less than 1 year).
The worst may be over in this fund if the rate hike cycle comes to a halt. The fund’s relatively higher exposure to lower rated paper may give investors a boost in term of yield. A lot depends on whether the fund managers are able to pull up their socks and demonstrate outperformance once again. Investors should exercise great caution while investing in this fund.