SBI Corporate Bond Fund with moderate risk invests predominantly in corporate debt securities and aims to generate regular income over medium term. Mutual Fund investors can invest in this mutual fund via SIP or lump sum. Know more about this debt fund on SBI Mutual Fund website page https://www.sbimf.com/Products/DebtSchemes/SBI_Corporate_Bond_Fund.aspx
2. This product is suitable for investors who are seeking:
Investment in debt and money-
market securities
Regular income for medium term
Low risk
Disclaimer: Investors should consult their financial advisors if in doubt whether this product
is suitable for them.
SBI Corporate Bond Fund
3. 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
4. Current Portfolio Structure
Portfolio AA+ & AboveBelow 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 :
64.46%*
Current Exposure :
29.19%*
*As on August 31, 2016
CP, 8.6%
CD, 2.1%
NCD, 80.0%
ZCB, 3.0%
Cash, 6.4%
5. Current Portfolio Quality
Data as on: August 31, 2016
InterestRateSensitivity
Credit Quality
High Medium Low
High
Medium
Low
Issuer % Of NAV
TATA REALTY INFRASTRUCTURE LTD. 7.96
RURAL ELECTRIFICATION CORP LTD 7.01
EQUITAS FINANCE LTD. 6.21
HALDIA ENERGY LTD 6.09
SHAPOORJI PALLONJI INFRASTRU CAPITAL CO.
PVT. LTD. 5.62
MANAPPURAM FINANCE LIMITED 4.34
AU FINANCIERS (INDIA) LIMITED 4.10
L&T METRO RAIL (HYDERABAD) LIMITED 4.01
ADVINUS THERAPEUTICS LIMITED 3.75
NATIONAL BK FOR AGRI & RURAL DEVPT 3.49
Total 52.58
Top 10 Holdings
Duration Bucket %
9% 9% 9%
17%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1 week 30 days 45 days 90 days
6. The BREXIT event has dragged down the bond yields across the globe as
investors expect growth jitters and further elongation of easy monetary
policy in most economies.
The government bond yields have touched record lows and there is a
widening basket of bonds trading in negative territory (particularly in Europe
and Japan). In the US, the benchmark yield has inched up marginally post
the hawkish commentary from policymakers at Jackson Hole symposium.
Nevertheless, they are still soft.
Locally too, domestic bond yields have eased since second-half of June on
the back of easing global yields and easing of domestic liquidity conditions.
The 10-year G-sec yield was at 7.11% by August end. The announcement
of Urjit Patel as the succeeding RBI governor left the markets largely
unperturbed.
The central bank has resolve to pro-actively address any potential liquidity
deficits and to move the system to a structurally neutral liquidity position
over time. The OMO purchase announcement (in latest policy meet) at a
time when seasonality has led to recent surplus liquidity conditions
effectively demonstrates the commitment to be proactive on the liquidity
front.
Given that liquidity looks comfortable over next couple of months, there may
still be marginal steam left in bond yields. But the gradual re-building of
inflationary pressures leave very limited scope for further deep rate cuts at
the current juncture and consequently the policy rate driven rally in the bond
market.
In the money market, liquidity conditions finally turned into the neutral zone
by the end of June . Government’s cash balances came back into the
system and RBI conducted Rs. 905 billion of OMO between April-August to
diffuse liquidity into the system. This has led to considerable easing in the
short term rates as well.
Curve steepening remains the medium term expectation even as there
could be tactical opportunities given the current market sentiments.
Market Outlook
Source: RBI, Bloomberg, SBIFM Research
6.00
6.50
7.00
7.50
8.00
8.50
9.00
9.50
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
10 year GSec yield (mth end, %) Repo Rate (mth end, %)
Average spread between G-sec
and Repo in last 10 years: 75bps
7. Why More AA Rated Bonds in the Portfolio
Source: Bloomberg as on August 31, 2016
Spreads between AA & AAA 3 year corporate bonds are above the 2 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
8. 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 2.99 years and the current
weighted average portfolio yield is 8.72%.
Tactical exposure towards long AAA rated corporate bonds has been initiated with a positive
bias on interest rates.
10. 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
11. 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
ManagementManagement
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
12. 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.
13. 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.
14. 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.
16. 16
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
17. 17
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
18. 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
19. 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
20. 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)
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