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SBI Balanced Advantage Fund marked its 3rdanniversary with a commendable top quartile performance over 3 yrs and 120 bps alpha over peer group average. Performance over the last 12 months has however slipped to 3rd quartile, as the model driven fund wound down net equity exposure to 30% (vs 40-50% of peer group) to minimize downside risk in a market that now offers very little valuation comfort.
Dinesh is very happy with the fact that the fund has generated healthy mid-teens returns over this 3 year period, but more importantly, has restricted drawdowns in market downturns better than most – which is exactly what a typical BAF investor wants. He has no plans to try and play catch up on near term performance and is happy to stay with 30% net equity in a market where downside protection is now perhaps more important than chasing alpha – especially in a BAF.
He is bullish on the power and energy spaces as a combination of demand exceeding supply and clarity and stability in Government policies set the tone for healthy earnings across all verticals in this space.
He finds significant value in private sector banks which have thus far underperformed the market – setting up what he believes is a platform for an imminent mean-reverting rally in this segment.
Capital goods/industrials spaces look vulnerable now as valuations have got very stretched as market exuberance on long term prospects have perhaps run too far ahead.
The goal of the fund is to deliver decent returns but focusing on downside protection. Equity allocation is conservative. Power,Oil prices, Banks, Capacity utilisation, Rate cuts, IT Services, Hits & Misses, Valuation growth of small cap stocks are all discussed in this comprehensive discussion. Private sector banks are favourites of the fund manager as the valuations are now attractive. Investors need to temper their expectations on this BAF. Excellent conversation indeed.
