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SBI Corporate Bond Fund
This product is suitable for investors who are seeking:
Investment in debt and money-
market securities
Regular income for medium term
Moderate risk
Disclaimer: Investors should consult their financial advisors if in doubt whether this product is suitable for them.
SBI Corporate Bond Fund
Product Snapshot
* Corporate Debt securities will include Debenture and Bonds issued by Corporate (private institutions across sectors including NBFC’s, banks and other financial institutions), PSU's, Securitized Debt#, and International Bonds. # Investment in securitized debt will be to the extent of 40% of the net assets of the scheme Exposure to derivatives instruments in the scheme will be to the extent of 50% of the net assets of the scheme. The cumulative gross exposure through Debt & Money market instruments and derivative positions will not exceed 100% of the net assets of the scheme. However, trading in derivatives by the scheme shall be restricted to hedging and portfolio balancing purposes as permitted by the regulations.
• To actively manage a portfolio of good quality corporate debt as well as Money Market Instruments so as to provide reasonable returns to the Unit holders
Investment Objective
• Investors having a reasonable risk appetite and an
investment horizon of minimum 2 years.
Investment Suitability
• Corporate Debt Securities* (incl. securitized debt#):
• Indicative Allocation - Minimum 80% & Maximum 100%
• Risk Profile – Medium
• Money Market Instruments:
• Indicative Allocation - Maximum 20%
• Risk Profile – Low to Medium
Asset Allocation
SBI Corporate Bond Fund Performance
Past performance may or may not be sustained in future. Returns (in %) other than since inception are absolute, calculated for growth option of regular plan and in INR are point-to-point (PTP) returns calculated on a standard investment of 10,000/-. Additional benchmark as prescribed by SEBI for long-term debt schemes is used for comparison purposes.
31-Mar-2016 to 31-Mar-2017
31-Mar-2015 to 31-Mar-2016
31-Mar-2014 to 31-Mar-2015
Since Inception
Absolute Returns (%)
CAGR Returns (%)
PTP Returns (INR)
SBI Corporate Bond Fund 9.97 9.28 N.A. 10.25 13,024
Crisil Composite Bond Fund Index 11.09 8.24 N.A. 10.94 13,245
Crisil 10 Yr Gilt Index 11.87 7.97 N.A. 11.54 13,440
Data as on March 31, 2017
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
31-Mar-2016 to31-Mar-2017
31-Mar-2015 to31-Mar-2016
31-Mar-2014 to31-Mar-2015
Since Inception
SBI Corporate Bond Fund - Reg - Growth
Scheme Benchmark: - Crisil CompositeBond Fund Index
Additional Benchmark: - Crisil 10 Yr GiltIndex
Current Portfolio Structure
Portfolio AA+ & Above Below AA+ ₌ ₊
The fund manager will not engage in active duration management but will try to generate alpha by capturing spread over AAA securities.
This portion of the funds is primarily invested with maturities ranging from 1 to 5 years
The segment currently looks attractive on account of fat spreads, comfortable interest rate position and liquidity outlook.
This portion of the portfolio seeks to generate higher returns by way of credit selection.
The allocation to the long bonds to maintain duration within a constant range
Attractive absolute yield levels provide an opportunity from a long term perspective.
This portion of the portfolio seeks to provide stable returns.
Current Exposure : 57.85%*
Current Exposure : 42.15%*
*As on April 30, 2017
CP, 1.37
NCD, 84.45
ZCB, 10.17
CBLO/Reverse Repo,
0.98
NCA, 3.03
Below AA+, 57.85
AA+, 7.71
SOV,AAA and
Equivalent, 30.43
NCA(Incl. Cash,Depo
sits and Equity),
4.01
Current Portfolio Quality
Data as on: April 30, 2017
In
terest
Rate
Sen
sit
ivit
y Credit Quality
High Medium Low
High
Medium
Low
Issuer Name % of AUM
POWER FINANCE CORPORATION LTD 7.66
ADITYA BIRLA RETAIL LTD. 7.29
RURAL ELECTRIFICATION CORP LTD 6.11
STERLITE POWER GRID VENTURES LTD. 5.66
NATIONAL HIGHWAYS AUTHORITY OF INDIA 4.94
AU SMALL FINANCE BANK LIMITED 4.44
TATA REALTY INFRASTRUCTURE LTD. 3.66
VADODARA BHARUCH TOLLWAY LTD 3.65
RELIANCE HOME FINANCE LTD 3.56
LIC HOUSING FINANCE LTD 3.55
Total 50.52%
Top 10 Holdings
Duration Bucket %
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
1 week 30 days 45 days 90 days
Why More AA Rated Bonds in the Portfolio
Source: Bloomberg as on April 30, 2017
Spreads between AA & AAA 3 year corporate bonds are above the 3 year period average
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
Spread 3 Yr Average
Indian bond yields rose dramatically in February as RBI changed
its monetary policy stance from accommodative to neutral and
has continued to stay elevated there since.
As of April end, 10 year G-sec yield stands at 6.87%, up 45bps
from 6.41% in March. Massive foreign inflow during March and
April (due to attractive valuations) also led to the increased
demand for Indian G-sec and consequent fall in yields.
Going forward, as US Fed is expected to hike rates and Indian
inflation is expected to inch up, this attractiveness will likely
reduce.
Further, with surplus liquidity, no RBI OMO purchases and neutral
policy stance, the yield curve would remain steeper in the coming
months.
For FY18 as a whole, supply-demand dynamics of the
government bonds, liquidity situation of the banks once the pace
of currency withdrawal normalized, bank credit outlook and,
global outlook will take prominence in guiding the bond markets
trajectory.
We remain constructive, but with a slightly longer term approach
as average CPI settle lower and government’s measures to widen
the tax base leads to structural improvement in the fiscal balance.
Accordingly, we keep taking tactical calls in duration at the
opportune time (like last two months) .
Debt Market Outlook
Source: Bloomberg, SBIFM Research
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Ap
r-0
9
Sep
-09
Feb
-10
Jul-
10
De
c-1
0
May
-11
Oct
-11
Mar
-12
Au
g-1
2
Jan
-13
Jun
-13
No
v-1
3
Ap
r-1
4
Sep
-14
Feb
-15
Jul-
15
De
c-1
5
May
-16
Oct
-16
Mar
-17
10 year GSec yield (mth end, %) Repo Rate (mth end, %)
Investment Strategy
The fund aims to provide investors with yield spreads on corporate debt securities by
cautiously managing the excess risk on its corporate investments. The fund will follow an
active credit quality management strategy.
The scheme being open ended, some portion of the portfolio will be invested in money
market instruments so as to meet the normal repurchase requirements. The remaining
investments will be made in corporate debt securities which are either expected to be
reasonably liquid or of varying maturities. However, the NAV of the Scheme may be impacted
if the securities invested in are rendered illiquid after investment.
In line with the scheme objective we have deployed funds in 2 – 3 year corporate bonds with
the primary focus on accrual. The portfolio average maturity is 2.79 years and the current
weighted average portfolio yield is 8.47%.
Tactical exposure towards long AAA rated corporate bonds has been initiated with a positive
bias on interest rates.
Credit Evaluation Mechanism
Credit Evaluation Philosophy
Independent
Independent in-house research
Fundamental Approach
Judgemental Approach combined with analysis of financial ratios
Intensive Due Diligence
Channel Checks, Interaction with Company Management & Rating Agencies, Competitor Analysis
Monitoring
Close monitoring of credits under coverage through periodic updates and analysis.
Bottom Up Approach
Credit Selection, Security Allocation, Spread Dynamics, Sector Allocation
Industry Analysis
Structure, Demand & Supply, Industry Cycles,
Entry Barriers, and Outlook
Company’s Business Fundamentals
Competition, Business Model, Inherent Strengths
& Weaknesses
Financial Analysis
Financial Statements, Ratios, Capital Structure, Leverage,
Working Capital Management, Bank Credit Lines , Liabilities,
Asset Quality & Maturity and Risk Management Management
Promoter Background & Track Record, Performance of Group Companies, Internal Controls,
and Succession Plans
Risk Management
Internal reviews and performance matrices to manage Exposure Limits ,
Risks such as Credit, Liquidity, Interest Rate etc.
Macro Fundamentals
Monetary & Fiscal Policies, Regulations ,
Credit Evaluation Approach
Case Study: A Leading Hotel Company
Background: Jointly promoted by a renowned Indian corporate and a prominent Indian business family.
Investment Thesis:
• The company has an experience of over 40 years and operates a portfolio of nine hotels in multiple states in India.
• The company’s financial performance is expected to improve owing to increasing occupancy as well as average room rates in key markets
Investment Rationale:
• Market outlook for key properties is stable to positive.
• Planned capital expenditure for the company is largely over with over 25% of inventory added in previous three years and only maintenance expenditure planned in near term.
• Comfort from the common branding, operations, finance and treasury support extended by a large hotel brand for the Company.
Case Study: A Leading Infra Company
Background:
• The company has a Build, Operate and Transfer (BOT) portfolio of 21 road projects encompassing 5,000 lane km and spread across various states in India.
Investment Thesis:
• 15 out of its portfolio of 21 projects are fully operational.
• The company houses its road projects under two broad holding companies out of which one was carved out with eight projects in its portfolio to enable a strategic stake sale to a fund sponsored by a PSU Bank.
• The PSU Bank Sponsored Fund holds around 35% in the said company.
Investment Rationale:
• Key credit strengths are established track record in executing EPC contracts and BOT road projects
• Moderate financial leverage and working capital requirements and equity investment of Rs. 700 crore by the PSU Bank Sponsored Fund brings the holding company into the league of big BOT players being the exclusive platform for the Bank to bid for newer projects.
Synopsis
Attractiveness of AA & below securities in the improving credit situation.
Sentiments in the bond markets have improved since the formation of a stable and pro reform government at the centre.
Declining interest from foreign investors have been compensated by increasing interest from domestic institutions in the bond market. This inflow of funds will have an impact on the bond prices and may compress yields.
Declining inflation trajectory and the consistent rate cut by RBI. Its better to capitalise on the high corporate bond yields now.
About Us
17
Strong Indian Presence ; Extended International Reach
63% 37%
India’s premier and largest bank with over
200 years experience (Estd: 1806)
Asset base of USD 399 bn*
Pan-India network of ~22,635 branches and
~ 50,000 ATM’s as at end of June 2014
Servicing over 256 million customers
Only Indian bank in Fortune 500 list; ranked
among the top 100 banks in the world
Global leader in asset management
Backed by Credit Agricole and Société Générale
More than 2,000 institutional clients and distributors in
30 countries
Over 100 million retail clients via its partner networks
€ 866 bn AuM as at end of December 2014
Ranking N° 1 in Europe, Top 10 worldwide #
*Source: SBI Analyst Presentation as on end December 2014
# Source : Amundi website as on end December 2014
18
Why SBIFM : Our Value Proposition
Group Advantage Process Expertise Risk Management
27 years of experience in asset
management with a strong
parentage
Leverage on strengths of both
stakeholders to achieve
qualitatively superior business
Extensive Distribution network
and Strong Relationships with
domestic and international
investors
Structured and disciplined
processes to ensure effective
execution of strategies
Rigorous investment templates
in place for each strategy
Flexibility to tailor solutions and
advisory assignments
Proven expertise in
managing strategies across
asset classes
In-depth understanding of
businesses and strong
linkages with company
managements and sell side
analysts
Strong in-house research
provides depth and breadth
of coverage resulting in
superior security selection
Strong six member
independent team
Risk management aligned
to international standards
Emphasis on coherence in
risk monitoring
Mr. Navneet Munot - CIO
Navneet Munot joined SBI Funds Management as Chief Investment Officer in December 2008. He brings
with him over 15 years of rich experience in Financial Markets. In his previous assignment, he was the
Executive Director & Head - multi - strategy boutique with Morgan Stanley Investment Management.
Prior to joining Morgan Stanley Investment Management, he worked as the CIO - Fixed Income and
Hybrid Funds at Birla Sun Life Asset Management Company Ltd. Navneet had been associated with the
financial services business of the group for over 13 years and worked in various areas such as fixed
income, equities and foreign exchange. Navneet is a postgraduate in Accountancy and Business
Statistics and a qualified Chartered Accountant. He is also a Charter holder of the CFA Institute USA and
CAIA Institute USA. He is also an FRM Charter holder of Global Association of Risk Professionals (GARP).
Mr Rajeev Radhakrishnan – Head, 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.
Mr. Dinesh Ahuja – Portfolio Manager
Dinesh Ahuja joined SBIFM in 2010. Prior to joining SBIFM, Dinesh was a portfolio manager at L&T Asset
Management and Reliance Group for four years. Dinesh started his career in 1998 as a fixed income
dealer on the sell side. Thereafter he worked in leading broking outfits for eight years before moving on
the buy side in 2006. Dinesh is a Commerce graduate and holds his Masters degree in Finance from
Mumbai University.
Investments Team
Mr. Dinesh Balachandran - Head of Research
Dinesh joined SBI FM in 2012 as a Senior Credit Analyst. He is now the Head of Research. Dinesh
started his career with Fidelity in Boston USA in 2001 where as an analyst he covered Structured
Finance, and local US fixed income market over 10 years. Dinesh holds a B.Tech degree from IIT,
Mumbai and M.S degree from Massachusetts Institute of Technology (MIT). He is also a Charter holder
of the CFA Institute, USA.
Mr Lokesh Mallya - Credit Analyst
Lokesh Mallya joined SBIFM in 2014. He brings along 9 years of experience in research in the Indian
fixed income market and fund management. Prior to joining SBIFM, Lokesh was working with Birla
Sunlife Asset Management, Investment Team as fund manager for short term and ultra-short term
funds. He is a Charter holder of the CFA Institute, USA and also a FRM charter holder of Global
Association of Risk Professionals (GARP).
Ms Mansi Sajeja - Credit Analyst
Mansi Sajeja joined SBIFM in 2009. Prior to joining SBIFM Mansi was a senior analyst at ICRA Ltd. for
over three years. Mansi holds bachelor’s degree in Financial & Investment analysis from Delhi University
and has completed post graduation diploma in Business Management from MDI, Gurgaon. She is also a
Charter holder of the CFA Institute, USA.
Credit Analysis Team
Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This presentation is for information purposes only and is not an offer to sell or a solicitation to buy any mutual fund units/securities. These views alone are not sufficient and should not be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All opinions and estimates included here constitute our view as of this date and are subject to change without notice. Neither SBI Funds Management Private Limited, nor any person connected with it, accepts any liability arising from the use of this information. The recipient of this material should rely on their investigations and take their own professional advice
SBI Funds Management Private Limited (A joint venture between SBI and AMUNDI) Registered Office: 9th Floor, Crescenzo, C-38 & 39, ‘G’ Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051 Board line: +91 22 61793000 Fax: +91 22 67425687
Call: 1800 425 5425
SMS: “SBIMF” to 56161
Email: [email protected]
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