In an interview with Outlook Money, Saurabh Pant, Fund Manager, SBI Magnum Multiplier Fund, shares his views on the fund's objective, how the fund has fared in the last one year, and more. Excerpts:

What is the investment objective of this fund?

This is your typical multi-cap fund. The large-cap to mid and small-cap proportion is around 60:40. We have no reason to believe this will change significantly. The size allocation is typically a function of sector allocation and stock selection. We do not consciously run a predetermined allocation strategy on size. The objective of the fund is like any other— out perform its benchmark consistently (3-year rolling returns) and outperform the average of a relevant multi-cap peer set.

How do you identify stocks that enter this fund?

We use two parameters to identify stocks— a) stocks which are below intrinsic value, or said another way, where implied growth is below potential growth and b) Positive change in fundamental variables. Large-caps are typically evaluated based on one-year outlook. We also leverage on our quant skills which helps us factor in non-fundamental variables for large-caps. Mid- and small-caps are evaluated from a three-year horizon and are purely based on fundamental research.

What kind of stocks or companies never make the portfolio cut?

All stocks or companies are eligible to enter. But as a rule, we avoid companies with serious corporate governance issues.

What is the investment universe for this fund?

The fund can potentially invest in any listed stock. Having said that, the template ensures the risk is reduced by setting limits on stock, sector and market-cap. Stock limits are ±5 per cent, sector limits are ±8 per cent vis-à-vis the benchmark. For market cap, we operate in the following bands: 0-10 per cent for small caps, 20-50 per cent for mid-caps and 30-80 per cent for large-caps. The benchmark for the fund is BSE 200.

What should an investor expect when investing through SIPs in this fund?

BSE 200 index has about 87 per cent of its weight in large caps and the balance is from mid-caps. Suffice to say that its performance is largely aligned to large-cap category. For the fund, our target is to better the benchmark performance which we try and achieve through superior stock selection in large-caps and by identifying opportunities down the market capitalisation curve.

What has aided the performance of this scheme in the past one year?

Bajaj Finance, Hindustan Petroleum and UPL have been the top stock attributors and among the sectors, being underweight in IT and overweight in energy and fertilizer has helped over the last one year. Higher allocation to mid- and small-caps has also helped the fund outperform the benchmark over the past one year. Allocation to mid- and small-caps is largely a derivative of bottom up stock selection and some of these picks have done well for the fund.

olmdesk@outlookindia.com