SBI Equity Minimum Variance Fund – Should you invest or avoid?
SBI Equity Minimum Variance Fund Review
Mutual Fund AMCs keeps coming with different nomenclature to attract investors. Now its turn from SBI Mutual Fund. SBI MF has launched Minimum Variance Fund now. The SBI Minimum Variance Fund has opened for subscription on 2nd March, 2019 and it says this fund runs on thematic theme. This mutual fund invests in NIFTY50 stocks with minimum variance. Is SBI Equity Minimum Variance Fund is different from Index Fund? What are the negative factors in this SBI Equity Minimum Variance Fund New Fund Offer (NFO)? Should you invest in SBI Equity Minimum Variance Fund?
Also Read: Should you invest in L&T Finance NCD which opens on 6th March, 2019?
Features of SBI Equity Minimum Variance Fund
This is an open-ended mutual fund equity scheme.
This mutual fund scheme invests in a basket of stocks from NIFTY50 Index while aiming the portfolio volatility.
This scheme would open for subscription on 2nd March, 2019
This scheme would close for subscription on 12th March, 2019.
Since this is an open ended scheme, it would again open for subscription after 5 business days from the date of allotment of Mf units after the NFO period.
This scheme is available in both regular and direct plans.
This plan offers both growth option and dividend option.
This scheme is available for lump sum and SIP investment.
Minimum investment is Rs 1,000 and in multiples of Rs 1 there-off for lump sum investments.
Minimum investment is Rs 1,000 per month for monthly SIP and for a tenure of 6 months. Minimum investment is Rs 500 per month for monthly SIP and for a tenure of 12 months.
The NAV of the NFO is Rs 10 per unit now during initial subscription.
There is no entry load to invest in this mutual fund scheme.
If one wants to exit before 1 year from the date of investment, there is a 1% exit load.
This scheme is classified as high risk scheme.
Scheme total expense ratio (TER) is estimated up to 2.5% of the total assets on any day.
Who can invest in this mutual fund scheme?
1) Indian resident adult individuals, either singly or jointly (not exceeding three);
2) Minor through parent / lawful guardian;
3) Companies, bodies corporate, public sector undertakings, association of persons or bodies of individuals and societies registered under the Societies Registration Act, 1860;
4) Religious and Charitable Trusts, Wakfs or endowments of private trusts (subject to receipt of necessary approvals as required) and Private Trusts authorized to invest in mutual fund schemes under their trust deeds;
5) Partnership Firms constituted under the Partnership Act, 1932;
6) A Hindu Undivided Family (HUF) through its Karta;
7) Banks (including Co-operative Banks and Regional Rural Banks) and Financial Institutions;
8) Non-resident Indians (NRIs) /Persons of Indian Origin (PIO) on full repatriation basis or on non-repatriation basis;
Who is the Fund Manager of SBI Equity Minimum Variance Fund NFO?
The Fund Manager is Mr. RaviPrakash Sharma.
What is the benchmark for this scheme?
The benchmark for this scheme is NIFTY50 Index.
What is the investment objective and strategy of this SBI Equity Minimum Variance Fund?
The investment objective of the scheme is to provide long term capital appreciation by investing in a diversified basket of companies in the Nifty 50 Index while aiming for minimizing the portfolio volatility. However, there can be no guarantee or assurance that the investment objective of the Scheme will be achieved.
What is the allocation pattern in this mutual fund scheme?
This fund investment pattern is as follows:
1) It invests 90% to 100% in equity and Equity related Instruments in India from NIFTY50 Index. It might include derivatives. This risk profile in this segment is high.
2) It invests 0% to 10% in debt and money market instruments including units of mutual fund. This risk profile in this segment is low to medium.
4) It might invest include ADR/GDR/Foreign Securities / Foreign & Domestic Securitized Debt / corporate debt / bonds.
Can NRI invest in this MF scheme?
Yes, NRIs can invest in this Mutual Fund scheme. They can invest on repatriation or non repatriation basis.
What are the risks or negative factors involved in this fund?
One should consider some of these risk factors / negative factors before investing.
1) This scheme invests in a basket of stocks from NIFTY50 index that are high risk. Most of the large cap stocks are part of the NIFTY50 / SENSEX, hence any SENSEX market movement which generally fluctuates widely would impact the performance of the fund.
2) Investors should not assume any guaranteed returns from such mutual fund schemes that invests in NIFTY50 Index.
3) Since it is a new mutual fund scheme, there is no past performance, hence we would know how the fund would perform in the future.
4) It invests upto 10% in debt instruments where there is interest rate risk and the risk of corporate bonds where there could be downgrade in the ratings of such corporates.
How is the Performance of Index Funds in India?
Currently there are existing equity mutual funds that invest on NIFTY50 theme as well as ETFs that invests in this NIFTY50 Index. Let us see how they have been performing in the last 1-10 years.
1) HDFC Index Fund NIFTY 50 Plan: This fund was launched 15+ years back. It gave 15% annualized returns since launch. This fund gave 15% annualised returns in the last 10 years, 12.5% annualized returns in the last 5 years, 15.5% annualized returns in the last 3 years and 5% annualized returns in the last 1 year.
2) DSP Equal Nifty 50 Fund: This fund was launched 1.5 years back. This fund gave 3% negative returns since launch.
3) SBI NIFTY50 ETF: This ETF was launched 3.5 years back. It gave 16% annualized returns in the last 3 years and 5% returns in the last 1 year.
4) LIC MF Exchange Traded Fund NIFTY50: This fund too was launched 3.5 years back. Even it gave 16% annualized returns in the last 3 years and 5% returns in the last 1 year.
5) HDFC NIFTY50 ETF: This too was launched 3+ years back. Even it gave 16% annualized returns in the last 3 years and 5% returns in the last 1 year.
The above list indicates that Index Funds performs well in the medium to long term. One should not invest for short term gains.
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Should you invest in the SBI Equity Minimum Variance Fund?
Index Mutual Funds are similar to Exchange Traded Funds (ETF). However, ETF expenses are lower compared to mutual fund total expense ratio (TER). SBI Equity Minimum Variance Fund invests majorly in NIFTY50 Index, hence the returns reflects NIFTY50 returns. If NIFTY goes up, your returns would go up, if the stock market is down for few years, your fund returns would go down. There is no major role for the fund manager to choose stocks outside NIFTY50 here. If you are willing to invest in te Index Fund by considering these risk factors, you can invest in this fund. Alternatively, you can invest in some of the top performing Index funds / ETFs indicated in the above list.
SBI Equity Minimum Variance Fund NFO details can be downloaded from here.
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SBI Equity Minimum Variance Fund – Should you invest or avoid
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You said that there is 1% exit load if one come out from mutual fund deposit before one year. Pls. explain this by taking deposit amount of Rs 10000/- /
Hi Vinay, If you have invested Rs 10,000 and this amount is grown to Rs 12,000 (assume) before 1 year, then 1% i.e. Rs 120 need to be paid as exit load if you exit before 1 year.