SBI Equity Savings Fund

An open-ended equity scheme with the primary objective of investing in arbitrage opportunities in the cash and derivatives segment of the equity market.

Summary

Type	An Open Ended Equity Scheme	Benchmark Index	30% in CNX Nifty & 70% of Crisil Liquid fund Index
Min. investment: Additional purchase:	Rs.5, 000/- & in multiples of Re. 1 thereafter Rs 1,000 and in multiples of Re 1 thereafter	Plans:	Direct Plan: Regular Plan:
Face Value	Rs 10 per unit	Expense Ratio:	Upto 2.25%
Entry Load	Nil	Exit Load:	For exit within 1 year from the date of allotment – 1 % For exit after 1 year from the date of allotment – Nil.
Issue Opens	May 11, 2015	Issue Closes:	May 25, 2015

 

Investment Objective*

The investment objective of the scheme is to generate income by investing in arbitrage opportunities in the cash and derivatives segment of the equity market, and capital appreciation through a moderate exposure in equity.

*Source: Scheme Information Document

 

Is this fund for you?

The net assets of the Scheme are invested primarily into equity and equity related instruments including equity derivatives. The Scheme invests rest of the assets into debt and money market instruments for liquidity and regular income. The expected returns from this Scheme can be attributed to the following return drivers:
 

• Cash and Futures equity arbitrage: The scheme endeavours to achieve its primary objective of generating income by exploitation of arbitrage opportunities in equities market. Majority of equity exposure to stocks shall be offset by simultaneously taking equivalent exposure in derivatives. The scheme may invest into equity stocks in the cash market and take short position in futures market equivalent to the extent of equity assets that covers the exposure and only avail arbitrage between spot & futures market. Thus, the entire position may be used to lock risk free returns.
   
• Net long equity: The Scheme may take limited long only exposures to equity stocks in order to generate market related returns. The secondary objective of the Scheme to generate long-term capital appreciation is endeavoured to be achieved by investing a portion of the Scheme’s assets in equity. The Scheme shall invest into a well diversified portfolio of equity and equity related securities across market capitalisation and sectors to participate in the all-round growth of the Indian economy.
   
• Debt and Money Market Instruments: The Scheme may invest upto 35% of the net assets of the Scheme into debt and money market instruments. This portion of the scheme assets is discretionary to provide liquidity into the scheme, management of derivative margins and accrual of regular income.
   

The asset allocation under normal circumstances:

 

Instruments	Allocation Range (%)		Risk Profile High/Medium/Low
	Minimum	Maximum
Equity and Equity related Instruments including derivativesOut of which: - Cash-future arbitrage:15%-70%; - Net long equity exposure: 20%-50%	65	90	Medium to High
Debt* and Money Market Instruments (including margin for derivatives)	10	35	Low to Medium

 

Asset allocation when adequate arbitrage opportunities are not available in the Derivative and Equity markets:

 

Instruments	Allocation Range (%)		Risk Profile High/Medium/Low
	Minimum	Maximum
Equity and Equity related Instruments including derivatives Out of which: - Cash-future arbitrage: 0%-45% - Net long equity exposure:20%-50%	30	70	Medium to High
Debt* and Money Market Instruments (including margin for derivatives) - Cash-future arbitrage: 0%-45% - Net long equity exposure:20%-50%	30	70	Medium to High

#The above alternate asset allocation will be for temporary period and would be rebalanced by the AMC within 30 days.
(i) The cumulative gross exposure through Equity and Equity related Instruments including derivatives position, debt, Money Market Instruments will not exceed 100% of the net assets of the scheme.
(ii) *Exposure to domestic securitized debt may be to the extent of 20% of the net assets.
(iii) The Scheme shall not invest in ADR/ GDR/ Foreign Securities / foreign securitized debt.
(iv) The Scheme shall invest in repo in corporate debt.
(v) The Scheme shall not engage in Stock lending.
(vi) The Scheme shall not engage in short selling

(Source: Scheme Information Document)  

The performance of SBI Equity Savings Fund will be measured against 30% in CNX Nifty & 70% of Crisil Liquid fund Index. CRISIL Liquid Fund Index seeks to track the performance of a debt portfolio that includes CBLO, Commercial Papers and Certificates of Deposit. Liquid fund index tracks the performance of short term money market instruments & is ideal for benchmarking the performance of the schemes which have short term investment horizon & have low element of risk. Arbitrage opportunities are captured by buying in spot market & selling in future market. On the day of settlement prices of both markets converges. Arbitrage thus generates return with least element of risk. Therefore this index is appropriate for benchmarking the income generated by the equity arbitrage opportunities which will constitutes the significant part of the portfolio. CNX Nifty is a well diversified 50 stock index accounting for 23 sectors of the economy. It is appropriate for benchmarking un-hedged equity portion of the portfolio which would be a maximum of 50% of the scheme.

 

Fund Manager Profile

Mr. Neeraj Kumar has over 16 years of experience in equity dealing, equity research & Finance & Accounts Dept. He is a B Com (H) graduate and an ACA.

Mr. Ruchit Mehta has over 9 year experience in the industry primarily as a research analyst. He is a B.Com graduate with a MSc in Finance and also a CFA Charter holder.

 

Fund Outlook

Considering investment objective, indicative asset allocation and suggestive portfolio strategies, it is likely that, the fund will invest predominantly in debt and money market instruments when equity markets are not volatile. On the other hand, volatile market conditions may throw up enough arbitrage opportunities for the fund to reduce its exposure to debt. Since SESF is also going to invest in unhedged equity, the fund may be riskier than a pure arbitrage fund or a pure debt fund. Thus, the return potential of the fund may also be on the higher side as compared to that of a pure debt fund or an equity arbitrage fund. Success of SESF is contingent primarily upon market volatility and movement of interest rates. This leaves it with little margin for errors.

 

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