Mid Cap Mutual Funds are equity-oriented mutual funds that invest in mid-sized companies that have a market cap of more than Rs 5,000 but less than Rs 20,000 crore.

Mid Cap Mutual Funds have the potential to deliver superior returns because mid-sized companies are usually in their growth phase. Historical data suggests that Mid Cap Mutual Funds have the ability to outperform Large Cap Mutual Funds over the long term.

SBI Magnum Midcap Fund is a Midcap Fund that has bounced back with strong gains in the last couple of years and has moved far ahead of its peers and the benchmark in terms of risk-adjusted returns.

Graph 1: Growth of Rs 10,000 if invested in SBI Magnum Midcap Fund 5 years ago

Past performance is not an indicator of future returns
Data as on January 03, 2022
(Source: ACE MF)  

Launched in March 2005, SBI Magnum Midcap Fund aims to invest in a well-diversified basket of equity stocks of mid-cap companies. With a track record of over one and a half decades, SBI Magnum Midcap Fund has generated returns at a CAGR of 16.5% since its inception. However, the journey of the fund has not been smooth. Since its inception, the fund has been through many ups and downs, right from being a top category performer to a category laggard. Between CY 2011 to 2016, the performance of the fund picked up significantly, which helped it find a place among the category toppers. However, SBI Magnum Midcap Fund witnessed a prolonged dull phase between 2016 and 2019, wherein it trailed the benchmark and many of its peers by a noticeable margin. Nonetheless, SBI Magnum Midcap Fund managed to limit the downside during the 2020 market crash to stand strong among its peers. Moreover, the fund also stood among the top performers in the category during the ensuing bull phase, thereby witnessing a complete turnaround. This highlights SBI Magnum Midcap Fund’s ability to reward investors reasonably over longer time frames. In the last 5 years, SBI Magnum Midcap Fund has grown at a CAGR of 11.9%, which is nearly in line with its benchmark Nifty Midcap 150 – TRI. An investment of Rs 10,000 in the fund five years back would now be worth Rs 17,507.

Table: SBI Magnum Midcap Fund’s performance vis-á-vis category peers

Scheme Name	Corpus (Cr.)	1 Year	2 Year	3 Year	5 Year	7 Year	Std Dev	Sharpe
Quant Mid Cap Fund	1,273	20.91	36.14	39.10	21.52	18.85	24.36	0.37
PGIM India Midcap Opp Fund	7,577	-0.16	28.76	36.13	18.05	17.51	24.49	0.37
SBI Magnum Midcap Fund	8,436	2.24	25.46	27.22	11.85	14.04	24.83	0.28
Edelweiss Mid Cap Fund	2,478	3.90	25.40	26.49	13.26	16.56	24.74	0.28
Mirae Asset Midcap Fund	8,953	5.46	26.08	26.16	—	—	24.52	0.27
Motilal Oswal Midcap Fund	3,657	10.65	32.67	25.47	14.21	15.25	25.20	0.26
HDFC Mid-Cap Opportunities Fund	36,158	13.37	26.24	25.14	12.46	16.19	24.34	0.26
Kotak Emerging Equity Fund	23,224	6.07	25.65	24.83	14.32	17.69	24.07	0.26
Nippon India Growth Fund	13,861	6.14	25.25	24.59	13.26	16.05	24.63	0.26
UTI Mid Cap Fund	7,345	-0.69	19.97	24.56	10.97	13.97	23.58	0.26
Nifty Midcap 150 – TRI		3.71	23.87	24.46	11.49	15.92	25.93	0.25

Returns are point to point and in %, calculated using the Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on January 03, 2022
(Source: ACE MF)
*Please note, this table only represents the best-performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully. Past performance is not an indicator of future returns. The percentage returns shown are only for indicative purposes.

SBI Magnum Midcap Fund was once a top-performing midcap fund that went through a bad phase and recorded a prolonged underperformance. However, it has shown a significant recovery in performance in the last couple of years. In the last 2-year and 3-year time periods, SBI Magnum Midcap Fund has outperformed the benchmark Nifty Midcap 150 – TRI by a margin of around 1.5-3 percentage points and also outpaced most of its peers. Over the longer time period of 5 years and 7 years, the fund has managed to generate returns nearly at par with the category average.

The volatility registered by the fund is slightly higher than the category average, though lower than the benchmark. SBI Magnum Midcap Fund has rewarded investors with noteworthy risk-adjusted returns. The fund’s Sharpe ratio (0.28) is currently the best in the category and far ahead of the benchmark.

Investment strategy of SBI Magnum Midcap Fund

SBI Magnum Midcap Fund is a mid-cap fund that is mandated to invest at least 65% of its assets in equity and equity-related instruments of mid-sized companies. SEBI defines mid-cap stocks as companies ranking 101st to 250th in terms of full market capitalisation. The fund also has significant exposure to stocks in the small-cap segment along with minor allocation in stocks of large-sized companies. SBI Magnum Midcap Fund follows a blend of growth and value styles of investing. It follows a bottom-up approach to stock-picking in order to choose high-growth companies across sectors.

SBI Magnum Midcap Fund aims to focus on fundamentally sound companies that have solid management and sound business models and those that have the potential to grow and become leaders of tomorrow. The fund manager aims to create a diversified portfolio and holds each of stock holding with high conviction. It usually stays invested in around 60-65 stocks at any point in time and holds them with a long-term view. The fund follows a buy-and-hold approach; accordingly, it has recorded a low turnover rate of 10-30% in recent months.

Graph 2: Top portfolio holdings in SBI Magnum Midcap Fund

Holding in (%) as of November 30, 2022
(Source: ACE MF)  

SBI Magnum Midcap Fund’s portfolio is usually diversified across 60 to 65 stocks spread across sectors. As of November 30, 2022, the fund held 60 stocks in its portfolio, with the top 10 stocks accounting for around 37.9% of its total assets. Page Industries, Tube Investments of India, CRISIL, Sheela Foam, and Schaeffler India are the stocks that currently form part of the fund’s top holdings. Some of these stocks have been part of the fund’s portfolio for over 2 years now.

The fund has benefited the most from its holdings in Cholamandalam Investment & Finance Co., Carborundum Universal, Schaeffler India, Sheela Foam, Page Industries, Happiest Minds Technologies, and Thermax that contributed over 30% to its absolute gains in the last two years.

SBI Magnum Midcap Fund’s portfolio is well-diversified across Cyclical, Defensive, and Sensitive sectors. The fund holds higher exposure to stocks in the Engineering, Financial, and Consumer Durables sectors that collectively form 42.4% of its assets. It also holds substantial exposure to Textile, Auto Ancillaries, Cement, Construction, and Consumption having allocation in the range of 4-7%.

Suitability

SBI Magnum Midcap Fund holds a long-term track record of nearly 18 years, during which it has witnessed bouts of outperformance as well as underperformance. The fund stands out for its ability to stem losses during the bearish phase, wherein it has managed to outpace the benchmark as well as many of its peers. However, SBI Magnum Midcap Fund is not a great bull market performer and may underperform the benchmark and many of its peers. Despite facing bouts of underperformance, SBI Magnum Midcap Fund has managed to perform well over complete market cycles and reward investors for their patience.

The fund has shown strong growth in performance in the last couple of years to recover past losses and find a place among the top performers in the Mid Cap Fund category. Despite facing bouts of underperformance, SBI Magnum Midcap Fund has managed to perform well over complete market cycles and reward investors for their patience.

SBI Magnum Midcap Fund is suitable for aggressive investors looking to benefit from the market leaders of tomorrow over an investment horizon of at least 5 to 7 years.

This article first appeared on PersonalFN here