SBI Small & Midcap Fund has beaten its benchmark five out of the seven years since its launch. A substantial boost to performance in the last one year has earned it a five star rating within the small-cap category.
SBI Small & Midcap Fund has considerable flexibility to rove across the small and mid-cap segments of the market to unearth its bottom-up picks. As per its mandate, the fund needs to maintain a minimum of 50 per cent in small- caps and a minimum of 30 per cent in mid-caps, with the allocations capped at 70 per cent and 40 per cent, respectively.
SBI Small & Midcap Fund looks for five attributes in the stocks it buys: competitive advantage, return on capital, growth, management, and valuation. While all five may not be available, the fund evaluates every company on relative ratings on these variables.
SBI Small & Midcap Fund uses a blend of growth and value metrics to home in on stocks. In practice, the fund has held 65 to 75 per cent of its portfolio in small caps, with the rest in mid-caps and hardly any large-cap allocation.
SBI Small & Midcap Fund boasts significant outperformance of the small-cap category over one, three, five as well as seven year time frames. For three and five years, the margin of outperformance against the benchmark has been hefty, at 11 to 16 percentage points. It has also outpaced the category by 8 percentage points.
SBI Small & Midcap Fund stock picks in the small-cap space in the past couple of years have been behind the strong performance. The fund is among the few in this space to remain at an easy to manage size at Rs 908 crore as on January 2018.
SBI Small & Midcap Fund is An emerging star in the category.
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