SBI Multicap Fund

[00:00:00] Hello and welcome to SBI Mutual Fund Investment ideas and Jagu and today we are talking about

[00:00:08] the SBI Multi-Cap Fund, their new mutual fund offer that is about to hit the market.

[00:00:14] We have with us on the show today Mr. TPCN, his the Chief Business Officer at SBI Mutual

[00:00:18] Fund as well as Mr. Arshrinivasan, the Chief Investment Officer for Equities at the Fund

[00:00:23] Gentlemen.

[00:00:24] Thank you very much for joining us and taking the time out to be able to explain what this

[00:00:27] new NFO is all about.

[00:00:28] Thank you for having us Jagu.

[00:00:30] Thank you Jagu.

[00:00:31] Mr. Singh let me come to you first, you know potential first time investors they have been

[00:00:34] looking at this rising market over the last year, year and a half and they are more aware

[00:00:39] of it there have been conversations happening that has been headlines you are going to train

[00:00:42] literally conversation washers are about how people are making money in the market new

[00:00:46] IPOs have been coming they have been making headlines now they want to participate in this

[00:00:52] they are only let's say they buy gold or they buy or they invest in fixed deposits

[00:00:57] they want to invest in this but literally being first timers they don't know how is a

[00:01:01] multi-cap fund the ideal vehicle for them absolutely Jagu actually this was the basic thought

[00:01:07] behind what we went to the drug table and when we were discussing about this that the

[00:01:12] people have seen only most of the people have seen on the one side of the market keep rising

[00:01:17] rising rising for the last three years but they don't know they are doing it without

[00:01:21] any research most of the I'm not saying everybody but a majority of them they just hear from

[00:01:27] somebody as you rightly said they heard the trains they heard from somebody and they

[00:01:31] just put in the money without knowing how the company is it's not about marketing it's

[00:01:36] all about effects data which which mutual funds are known for having a very very strong team

[00:01:42] in general but in as we in mutual fund we are absolutely proud of our team and up absolutely

[00:01:48] proud of our analytical abilities so that way it's good that for them they don't know

[00:01:52] but they are not aware about large-cap mid-cap small cap so there are good companies in large

[00:01:58] cap they are very good companies in mid-cap we're going to be large cap and they have small

[00:02:01] cap companies which which are doing so well so we as a team in the fund house we know

[00:02:06] that we are doing pretty well for them they are the real target audience for this when

[00:02:11] they're starting their journey without being bogged on by which cap which sector they should

[00:02:17] come to one fund where a team is working for them and a team of research engineers so that

[00:02:23] they don't have a bad experience because what we have seen in the past when people come at a

[00:02:29] wrong time in a wrong stock or a wrong fund they burn their fingers and then they don't come

[00:02:34] for decades they just hate the earth market so we don't want that to happen we are put in

[00:02:39] the whole team working for this particular fund where all the first timers not only

[00:02:44] Melonins but so many people who are there because the penetration rate is so so so low in our

[00:02:50] country we want people to come and such a fund as a long-term investment strategy and bear

[00:02:58] the fruits of the gross flow rate of Indian economy. So this is the whole movement of going from

[00:03:03] savers to investors making that move is what you're in courage. Yeah yeah basically we had called

[00:03:09] it a movement from gender to gender wish we want more and more people to come into this.

[00:03:14] You know Mr. Singh you made an interesting point about people coming in in a booming market they've

[00:03:21] not seen a full cycle and then they burn their fingers and they stay out now there are some people

[00:03:26] who have moved one step ahead from a potential first-time investor who is looking to convert

[00:03:32] from a saver to an investor. Now there are those who during the lockdown had their first taste of

[00:03:37] the market. It's very convenient to trade direct equity it's also cheap to do that so let's

[00:03:44] start. Now they've done that they've tasted blood as it were but now they're going back to work

[00:03:51] there's a 9 to 5 focus that is somewhere else it's not in your 9 to 3-1 market however because they

[00:03:57] have made money they want to continue investing and they realize that they don't have the time to do

[00:04:03] it so there needs to be a longer term strategy then needs to be somebody who is focusing on their

[00:04:07] behalf is this the right way to do it a multi-cap fund or should they be doing something else?

[00:04:12] No no I give you this one more point when they say would we say that they've made money they have

[00:04:17] made money notionally this is on papers only when it will remain or will not remain it's better to

[00:04:25] have lock in that profit and put in a fund which is you don't have time let somebody else work

[00:04:30] for you is doing 24 by 7 working for you in a very very electrical and very very search manner

[00:04:37] so it's better to get into the mutual funds and multi-cap is the best strategy for that people

[00:04:42] so they can do that. Since I'm you had earlier used an analogy I remember of

[00:04:47] in medical terminology a GP a general practitioner versus a multi-speciality hospital

[00:04:53] yeah of course how does that work? How do you use that analogy in the markets?

[00:04:57] No no no because I have a lot of money and I have a lot of money

[00:05:03] I go to GP after I get the money and I take 500 rupees 300 rupees for this thing for me

[00:05:10] and that's at the same cost if I go to a multi-speciality hospital where there is every kind of specialist

[00:05:19] whether it's the neurosurgeon or orthopedician whether it's a dietician whether it is

[00:05:23] gastrointomy whatever you want and you have the multiple tests with the in the

[00:05:29] specially so with the same fee okay why will not I go to the multi-speciality hospital especially

[00:05:36] so the cost is also the same. At the same cost if I can buy expertise then why am I trying to

[00:05:42] figure it out for myself? Yes yes there's the point fair enough fair enough. Sheniversan sir let me

[00:05:47] let me come to you you know this often this debate about should we invest in a already existing

[00:05:55] neutral fund whatever that scheme is or should we put money into an NFO and then

[00:06:00] then you're allowing for the ride from inception. Now there's multiple multi-cap funds that are

[00:06:05] already in the market but this particular one from SBI the SBI multi-cap fund is coming with a

[00:06:11] bit of a unique proposition the analysts are going to have a larger role to play in it than usual.

[00:06:16] It is it is you're very excited about it to be honest. How will that work? To

[00:06:20] this media and a media and a fund manager will go much larger.

[00:06:23] Okay right so I think this whole alpha male this lone wolf maverick is a myth especially

[00:06:29] well uptie guy I am South Indian I love South Indian movies extreme hero extreme villain

[00:06:34] Bollywood may be a presinger Jalta Sarmankan Jalta but investment management may you have a set of

[00:06:40] you have a research team you have a set of analysts there's nothing negative to a single guy

[00:06:45] taking decisions but you have to recognize that the circle of competence is limited that guy

[00:06:51] is biased towards certain styles he's biased towards stuff he knows better which is obviously

[00:06:57] he's kind of a jack of all he has skill sets in location which is relevant but it's very

[00:07:03] important to ensure that the individual sector analyst the experts who do the grind who meet

[00:07:09] the companies mid-level management who channel check their plan visit their fund manager

[00:07:14] be a part of as an analyst but if I T analyst I want to consumer analyst and infrastructure

[00:07:19] analyst cement analyst these guys in the wrong senior guys in our team now how do you and we

[00:07:26] want to start about how to assimilate or decentralize decision making to ensure that we optimize

[00:07:33] the best of the individual brilliance and investment process which comes with a lot of rigor

[00:07:40] analytics so here we've been working on this for quite a few years we already ran a sector

[00:07:46] agnostic fund and this one is proposed to be a high conviction portfolio driven or originated

[00:07:53] by the analyst so it is unique in that sense I must ask you this sir I'm accepting the uniqueness

[00:07:58] but how does an analyst decide what is a high conviction idea for him and then of course he has

[00:08:03] to come and present it to you I mean what are the gradations what makes a high conviction idea

[00:08:09] so we have like 15 analysts right covering sectors across IT and consumer infrastructure

[00:08:14] usca he has a set of stocks that he covers so let's say I as an analyst cover around 30 stocks now

[00:08:20] within those 30 stocks I lie certain stocks I don't lie certain stocks within the stocks I like

[00:08:27] I lie certain stocks more which is a function of the framework that you apply for stock selection

[00:08:34] it could be based on incremental fundamental and rising expectations relative valuations

[00:08:40] right we look at a lot more for example we have a very cliché philosophy where

[00:08:45] basically what we're trying to do is buy a strong business model run by good people at

[00:08:49] reasonable valuations but each of these buckets there is a detailed discussion that goes on

[00:08:54] to analyst he knows he all these factors he applies that and then he says these are my top picks

[00:09:01] game is better than me when he ranks them he also puts a confidence score which is based on the

[00:09:06] volatility of his expectation because we are in the business of predicting the future which cannot

[00:09:11] be predicted but that is an occupational hazard so if there is anything I will not tell you because

[00:09:16] of the underlying nature if there is anything I will tell you right so basically he will also apply

[00:09:22] a confidence score and that will determine the price of this stock then we will pass stock

[00:09:28] stock both percent that is mobile now he will rank that in that price so I have a

[00:09:33] today we have a universe of like 360 odds stocks within that right now as I am talking because

[00:09:41] we've been doing this for the last couple of years we have a by-list of around 81 odds stocks

[00:09:46] now I will curate that and reduce it to around 3035 depending on the size of the fund that we

[00:09:53] very well and those 3035 up purely high conviction ideas that an analyst has come to you with

[00:09:58] saying I am fully convinced about this yes but the analyst could actually think of

[00:10:04] okay which is where this is analyst driven and that analyst then drives this high conviction

[00:10:09] ideas to you and that is the collection that goes into the SPI so the idea generation is from

[00:10:13] the analyst or fund management man you make money from sizing so he actually he actually

[00:10:22] he is the man I made five coins in it but I did not have a conviction

[00:10:28] correct so how much money you make is based on what money you put to sizing fund manager

[00:10:36] they are and this is an interactive process where you have to figure out and this this whole process

[00:10:41] cannot become stale so we discuss the monthly basis the best idea why something is ranked higher

[00:10:46] why something has a higher confidence score then we have huge disagreements and then we debate that

[00:10:50] that kind of fine tunes the whole that much fair enough and and that's actually quite important

[00:10:57] because I could we've seen a booming market and yes for an individual investor he'll without

[00:11:04] applying his or her mind to it will allocate exactly the same amount of money to all stocks so

[00:11:09] 10 10 10 10 thousand as an individual investor I have no concept of this one is going to do better

[00:11:16] or I am highly convinced about this so I will hedge my bets and put equal amounts in all stock

[00:11:22] here you have a bunch of analysts coming to you with high conviction ideas and then there is a

[00:11:27] separate layer which also decides okay now how much money to be putting into it in terms of should

[00:11:32] I be over committing to this or not and that's a decision that gets made after rigorous research

[00:11:38] yes and there is ownership this is what I want to bring out analyst in a lot of houses even

[00:11:44] in our earlier out there long back and list have an advisory kind of role

[00:11:49] in advice what is there I also say this is good okay when you have to put your money

[00:11:54] in it when you have to put your money by your mouth is then the whole opinion the view changes

[00:12:00] depending on how much money you will put up if I call you that you are the salary so let you are a

[00:12:05] stock picker and you tell me that boss boss and these stocks too will be very big again I said

[00:12:10] that your savings are 90% will stock me down

[00:12:13] feel pretty much the view kind of you back no no I am not going down there I will just take a

[00:12:17] look suddenly the conviction comes out when you have to put real money so here we are going to

[00:12:22] implement these decisions real money will be put in those stocks that they are recommending I think

[00:12:27] that kind of bridges the advisory role it makes it a lot more ownership based which is the

[00:12:34] positive aspect when there is a fund manager because fund manager because he manages

[00:12:39] his name is there and his performance is there is clearly ownership in this case

[00:12:45] we will have to we will ensure that the analyst has ownership into whatever ideas are bought

[00:12:49] into this one absolutely now as an answer when we look at you know your large caps your mid caps

[00:12:55] your small caps all of that one sector will invariably outperform the other sector or one type of

[00:13:01] fund will outperform the other type of fund invariably a multi cap fund sort of takes care

[00:13:06] of that situation now correct me if I am wrong the SPI multi cap fund we are looking at 25% each in

[00:13:13] large cap mid cap and small cap right how you strategizing the balance 25% so erhythmically

[00:13:21] actually it is going to be 25% to regulatory limit we will have some buffer because stocks are

[00:13:27] volatile so they will keep moving from one bucket to the other so let's assume that we will have at

[00:13:31] least 27% on an average in each of these buckets 27 up to 81% to 1 year typically we will have if

[00:13:40] we running a high conviction portfolio charge faster cash to over so you have to have 86%

[00:13:45] if I look at the high conviction list there I have right now I have two stocks there which are not

[00:13:51] Indian stocks they are global stocks we have alphabet and we've got Netflix so I will do that

[00:13:56] assuming that I have a global stock which is the analyst I can see in the ocean I will do that

[00:14:01] from there I have charged you know you saved it 5 years so the 4 4 5% is left so where

[00:14:08] you will save but having said that even assuming that this 457 or becomes 15% assuming that I have no

[00:14:15] international stocks this 15% will be this I will decide where to put it or the team will decide

[00:14:23] based on the strength of the idea that's up there is no predetermined bias fair

[00:14:28] we are not going to distinguish between cash we will buy the stock that seems the best

[00:14:38] subject to liquid and because you have that flexibility we're hoping that's what will be your

[00:14:42] outperformers. You outperforming so stocks elections you have even within the 25% 27%

[00:14:48] Benchmark will go to you will go to you in the middle of the

[00:14:53] fair and we're sincerely hoping that will happen you made an interesting point there's going

[00:14:57] to be within this multi-cap fund investments also made in global stocks what kind of markets are

[00:15:03] you looking at now I remember you already mentioned a Netflix and an alphabet but over time I'm

[00:15:07] sure that will change will it only be US markets or is the world your oyster. So technically

[00:15:12] the world is oyster but we Philhal are coverage is limited so we have hardly five six stocks at

[00:15:19] the coverage and we will expand this as time goes resource constraint there Philhal

[00:15:25] but the idea is to ensure that we have fair enough from a research point of view.

[00:15:30] Yes I mean Indian universe I told you that it's the Indian passive universe is close to 700

[00:15:35] outstops we have an active universe of clear than 66 stocks the active will on us may we have

[00:15:40] a target price earnings model we have a recommendation we have these updates and we have to do

[00:15:45] these channel checks and meet management across right to both side of things to stock in the

[00:15:51] international maybe we may have to take this up to 50 or 100 we have nowhere goes we're just buying

[00:15:58] the better ones based on the preliminary screener but we will expand this as time goes.

[00:16:04] Excellent and since I let me come back to you since we're on focusing on multi-cap funds right now

[00:16:12] does a multi-cap fund have a different holding period from another mutual fund or even direct

[00:16:18] equity if you will. Now before I respond to your question Jagu I think now you will understand

[00:16:23] the analogy of my multi-specialty hospital better why call it a multi-specialty hospital.

[00:16:28] Yes absolutely. The way Vasan has explained it the kind of hard work the kind of going

[00:16:35] go giving ownership like a doctor who wants to do the surgery his ownership period so that's why I

[00:16:42] call it and now without charging any air fee okay that's exactly right.

[00:16:58] Large-cap fund or another diversity fight fund.

[00:17:06] And there's a general tendency when I am investing was I'm investing there will at some point

[00:17:11] of time I would need money so we have seen on an average the cycle is three to four years

[00:17:17] I generally people tend to withdraw tend to redeem and then put in some other asset class but one good

[00:17:23] thing has happened over the period of time that the choice between the different asset cost is

[00:17:27] very very limited if you look at the options available today the real estate as an investment

[00:17:36] category has gone down drastically so people don't have an option who's ever is buying a flat or

[00:17:43] anything they are buying for their usage nobody's putting money. Nobody is proud of having five

[00:17:47] flats or seven flats or eight flats I'm talking about the rich people okay then gold also the interest

[00:17:53] is coming down a bit so it has to be in the equity it will continue to be there people keep on

[00:17:58] changing depending on their their advices with the get-own the period of time but generally

[00:18:03] the period holding period will more or less will remain same but if somebody satisfies it could

[00:18:09] be little longer also fair enough you also have interesting SIP and STP options if I'm not mistaken

[00:18:16] within the SPI mutual fund universe yeah I believe there is something called the Mitra SIP and the

[00:18:23] smart switch STP could you just briefly explain that to us yeah the Mitra SIP and smart basically we

[00:18:28] are saying there's a there's a everybody's life there's a demolition stage and there's a

[00:18:33] decomolition stage man I'm in a convolution stage suppose I'm investing for my retirement or

[00:18:41] the time and I don't work and I have to use the money which I am during a compilation period it will

[00:18:47] keep on collecting it will give him getting topped up year-on-year basis and once you reach a

[00:18:52] particular point of time it will start going into the decomolition stage go to the safer funds

[00:18:59] and then you can have a regular flow so it will be part of it's like a solution giving a solution

[00:19:04] if you want to put in for 10 years put in for 10 years so next 10 years you will keep

[00:19:09] and the best part in this is it's known that you can put only that much amount if at any point

[00:19:14] of time you have something actually you can put the money in the same for you suppose I'm putting

[00:19:19] 20 thousand rupees per month in some particular mother got born as or I've got some went for

[00:19:24] I can put five lakh rupees more and I can change same lesson and I can change it everything being done

[00:19:30] digitally so this is this is like a solution which we are providing it may not have much

[00:19:36] takeer at this point of time but over the period of time because it's a fund which is going to

[00:19:42] remain there for perpetuity it's not for one year or two year or three year fund over the period

[00:19:47] of time it makes sense I'll give you an example now we have a you are we were talking about

[00:19:53] the aggressive hybrid fund which is being managed by Basan by the way that fund used to be 500

[00:19:59] crores fund five years ago today this fund is 50 thousand crore fund

[00:20:04] they've got 50 thousand rupees in this fund so this has become at that point I'm in first

[00:20:08] small I'll give you one happening it is the dynamic stage but we are giving the solution which

[00:20:13] is good for investors absolutely and we're looking forward to that and to a successful NFO and

[00:20:19] Mr. Shini Basan Mr. Singh thank you so much for doing this taking out the time and walking us through

[00:20:24] your new NFO the SPI multi-cap fund much appreciated thank you so much thank you Jagu thank you very much

[00:20:31] our pleasure and Talien of course feel free to follow the podcast also to share the

[00:20:35] podcast there's a whole bunch of knowledge to be cleaned as a whole bunch of information to be

[00:20:39] cleaned from this we're looking forward to also hearing from you in our comments section

[00:20:44] and any feedback that you have is more than welcome thank you so much for listening

[00:20:48] thank you so much wonderful doggy day thank you

[00:20:52] as we are multi-cap is an open-ended equity scheme investing across large-cap mid-cap small-cap

[00:20:59] stocks investment under the scheme shall be at a very high risk mutual fund investments are subject

[00:21:05] to market risk read all scheme related documents carefully