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SBI Corporate Bond Fund

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Page 1: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

SBI Corporate Bond Fund

Page 2: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 3: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 4: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 5: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 6: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 7: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 8: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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, %)

Page 9: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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.

Page 10: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

Credit Evaluation Mechanism

Page 11: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 12: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 13: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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.

Page 14: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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.

Page 15: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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.

Page 16: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

About Us

Page 17: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 18: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 19: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 20: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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

Page 21: SBI Corporate Bond Fund - SBI Mutual Fund leaflet and brochure/sbi... · SBI Corporate Bond Fund . Product Snapshot * Corporate Debt securities will include Debenture and Bonds issued

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]

Visit us @ www.facebook.com/SBIMF

www.sbimf.com Website

Visit us @ www.youtube.com/user/sbimutualfund