SBI Focused Equity Fund: One of the best performing focused funds in the last 3 years

Focused funds are equity mutual fund schemes, which invest in a concentrated portfolio of stocks. As per SEBI’s mandate, focused funds can invest in maximum 30 funds. SBI Focused Equity Fund is among the top 3 focused funds in the last 3 years (please see our Top Performing Mutual Funds (Trailing returns) - Equity: Focused). If started a monthly SIP of Rs 5,000 in SBI Focused Equity Fund 10 years back, by now (as on April 5, 2019) you could have accumulated a corpus of Rs 14.5 Lakhs with a cumulative investment of Rs 6 Lakhs only (please see our Top Performing Systematic Investment Plan - Equity: Focused); the annualized SIP return of the scheme over the last 10 years was 17.1%.

Some investors have a misconception that focused funds are as risky as thematic or sector funds. You should understand that, even though focused funds invest in a limited number of stocks (less than 30), they invest across multiple industry sectors and segments, thus diversifying sector risks. However, the company concentration risk is slightly higher in focused funds compared to more diversified funds. SBI Focused Equity Fund has 25 stocks in its portfolio, but they are spread across more than 10 industry sectors. The concentrations in Top 5 and Top 10 stocks are 32% and 52%, which are a bit on the higher side compared to diversified funds. The chart below shows the top stocks and sectors of SBI Focused Equity Fund.

Source: Advisorkhoj Research

Scheme Performance

The chart below shows the annualized returns of SBI Focused Equity Fund versus its benchmark, S&P BSE 500 TRI and scheme category over different trailing time periods. You can see that the scheme was able to beat the benchmark and the category across most time periods. Even on a year to date basis, the scheme has outperformed the benchmark and the scheme category.

Source: Advisorkhoj Research

The chart below shows the annual returns of the scheme versus the benchmark and category over the last 5 years. You can see that the scheme has been able to outperform the category and the benchmark fairly consistently.

Source: Advisorkhoj Research

The chart below shows the NAV growth of the scheme over the last 5 years.

Source: Advisorkhoj Research

Growth of investment – lump sum and SIP

The chart below shows the growth of Rs 1 Lakh lumpsum investment in SBI Focused Equity Fund (Growth Option) over the last 5 years. The investment would have grown to Rs 2.38 Lakhs over this period.

Source: Advisorkhoj Research

The chart below shows the returns of Rs 5,000 monthly SIP in SBI Focused Equity Fund (Growth Option) over the last 5 years. The current value of the SIP is around Rs 4.24 Lakhs – a profit of Rs 1.24 Lakhs on a cumulative investment of Rs 3 Lakhs.

Source: Advisorkhoj Research

Rolling Returns

The chart below shows the 3 years rolling returns of the SBI Focused Equity Fund versus its benchmark (BSE 500 TRI) over the last 5 years. Rolling return is the best measure of a mutual fund scheme’s performance consistency because it measures scheme performance across different market conditions and biased by prevailing market conditions. You can see that the scheme outperformed the benchmark across most periods.

Source: Advisorkhoj Research

The chart below shows the 3 year rolling returns of the SBI Focused Equity Fund versus the focused funds category over the last 5 years. You can see that the scheme outperformed the category nearly 100% of the times in the last 5 years. The average 3 year rolling return of the scheme over the last 5 years was 14.65%. The median 3 year rolling return of the scheme over the last 5 years was 14.5%. The maximum 3 year rolling return of the scheme over the last 5 years was 22.18%, while the minimum 3 year rolling return of the scheme over the last years was 8.76%. The scheme gave more than 12% annualized rolling returns 90% of the times in the last 5 years. The rolling return performance consistency of the scheme is very impressive.

Source: Advisorkhoj Research

Dividend History

SBI Focused Equity Fund has been paying regular dividends every year since 2011. The dividend yield is also quite good. However, investors should know that mutual fund dividends are paid from the accumulated profits of the scheme and hence cannot be assured.

About SBI Focused Equity Fund and conclusion

The scheme (formerly known as SBI Emerging Businesses Fund) was launched in October 2004 and has Rs 3,580 Crores of assets under management (AUM). The expense ratio of the scheme is 2.24%. Industry veteran R.Srinivasan is the fund manager of this scheme. Srinivasan has 26 years of experience and has been the managing the scheme for nearly 10 years. The long continuity of the fund manager of this scheme, in our view, has enabled the scheme to deliver strong performance. This scheme is suitable for long term financial goals. We think that investors should have a minimum investment horizon of 5 years for this scheme. The risk profile of this scheme is moderately high; the scheme is suitable for investors with moderately high to high risk appetites. Investors should consult with their financial advisors, if SBI Focused Equity Fund is suitable for their investment needs.