SBI Magnum Gilt Fund

SBI Magnum Gilt Fund is an open-ended debt mutual fund scheme. It is a debt fund formed to earn returns for investors from investments in Government securities issued by the Central/ State Government(s). These securities carry the insignificant risk of default since their repayment is backed by the government(s) but are prone to volatile price fluctuations due to interest rate movements.

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The Fund has 41.36% investment in government or Reserve Bank of India issued securities, 47.38% in treasury bills and the balance 11.26% in cash and cash equivalents. The Fund objective is to earn capital gains through active management of securities price fluctuations, keeping in mind the interest rate movements.

SBI Magnum Gilt Fund is available in 4 categories:

  • Direct Plan-Growth
  • Direct Plan - IDCW
  • Regular Plan-Growth
  • Regular Plan - IDCW

While Direct plans are meant for those investors who acquire mutual fund units directly from the Fund, Regular plans are meant for investors who acquire mutual fund units through distributor agents.

Investment Details

Parameter Details
Fund Name  SBI Magnum Gilt Fund
Fund House SBI Mutual Fund
Launch Date  December 2000
Benchmark Scheme Benchmark: CRISIL Dynamic Gilt Index Secondary Benchmark: CRISIL 10—Yr Gilt Index
Type Debt; Open-Ended
Minimum Investment  Rs. 5,000/- Minimum Additional Investment: Rs.1,000/- Minimum SIP Investment: Rs.500/- Minimum SWP Investment: Rs.500/-
Lock-in Period None
Entry Load Not applicable
Exit Load NIL
Return Performance Above Average
Fund Consistency Moderate
Risk Level Moderate

Investment Objective

SBI Magnum Gilt Fund aims to provide returns to investors from investments in Government securities issued by the Central/ State Government(s). However, the investors need to be mindful that there is no assurance that the Scheme's investment objective could be achieved. The securities in the portfolio carry the insignificant risk of default since their repayment is backed by the government(s) but are prone to volatile price fluctuations due to interest rate movements.

The fund being open-ended provides a continuous window for investors to purchase the fund units at NAV based prices. It has offered above-average returns to investors over the past six years.

The Fund operates under the SBI Funds Management Pvt. Ltd. directives with three decades of varied experience in fund management. SBI Funds Management Pvt. Ltd. Aims to deliver value to its investors consistently. The fund house has the pedigree of its parent, State Bank of India - India's largest bank.

Fund Summary

  1. SBI Magnum Gilt Fund Direct Plan-Growth

      • Risk level-Moderate
      • NAV-Rs. 52.8307 as of 21.05.2021
      • Expense Ratio-0.47%
    • Fund Started-01.01.2013
  2. SBI Magnum Gilt Fund Direct Plan IDCW

      • Risk level-Moderate
      • NAV-Rs. 17.4291 as of 21.05.2021
      • Expense Ratio-0.47%
    • Fund Started-01.01.2013
  3. SBI Magnum Gilt Fund Regular Plan-Growth

      • Risk level-Moderate
      • NAV-Rs. 50.8764 as of 21.05.2021
      • Expense Ratio-0.95%
    • Fund Started-01.01.2013
  4. SBI Magnum Gilt Fund Regular Plan IDCW

      • Risk level-Moderate
      • NAV-Rs. 16.2144 as of 21.05.2021
      • Expense Ratio-0.95%
    • Fund Started-01.01.2013

    Fund Manager

    • Mr Dinesh Ahuja (since August 2014)

Fund Returns Summary

SBI Gilt Fund Direct Plan Growth-Returns Summary

Time Period Returns Per Year (Annualized)
6 Months 1.61%
1 year 5.40%
2 years 11.49%
3 years 10.83%
5 years 9.91%
Since Inception 10.32%

SBI Gilt Fund Regular Plan Growth-Returns Summary

Time Period Returns Per Year (Annualized)
6 Months 1.38%
1 year 4.90%
2 years 10.98%
3 years 10.28%
5 years 9.34%
10 years 9.87%
Since Inception 8.29%
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

SBI Gilt Fund Regular Plan IDCW- Returns Summary

Time Period Returns Per Year (Annualized)
6 Months 1.37%
1 year 4.91%
2 years 10.31%
3 years 9.39%
5 years 8.09%
10 years 8.35%
Since Inception 7.37%

SBI Gilt Fund Direct Plan IDCW- Returns Summary

Time Period Returns Per Year (Annualized)
6 Months 1.61%
1 year 5.40%
2 years 10.81%
3 years 9.95%
5 years 8.70%
Since Inception 8.70%

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Summative Pros and Cons Table

Pros Cons
Investors don’t need to worry about the borrower defaulting on the repayment. They have a sovereign guarantee as the Central/ State government issues the securities in the fund portfolio. Since the fund NAV is susceptible to volatile movements because of changes in interest rates, retail investors need to exercise caution before choosing to invest.
If the fund units are sold after 3 years from the investment date, then capital gains are taxed @ 20% after considering inflation indexation. If the fund units are sold within 3 years from the investment date, then the capital gain is added to the investor's taxable income, and tax is payable as per the applicable slab rate.
The Fund has earned slightly better returns in comparison to its benchmark since inception.

Benefits of SBI Magnum Gilt Fund

Investment in SBI Magnum Gilt Fund provides various benefits to the investors.

  1. Exposure to Government Securities

     Retail investors, who do not have direct access to investing in government securities, may gain exposure to such government instruments only through investing in funds such as SBI Gilt Fund. However, since the fund NAV is susceptible to volatile movements because of changes in interest rates, retail investors need to exercise caution before choosing to invest.

  2. Optimum Returns

    Investors, who have a handle on the interest rate cycle in the country, may consider investing in SBI Gilt Fund by entering when the interest rates are falling and redeeming when the interest rates start to rise. The investors may stand to earn double-digit returns without worrying about credit risk and issuer related payment defaults.

  3. Negligible Credit Risk

    Government bonds and treasury bills are considered to carry an insignificant risk of default since their interest payments, and repayments are backed by the central/ state government(s). Hence, an individual with a highly conservative investment approach may consider investing in SBI Gilt Fund for the long term (e.g. over five years). Over the long term, investors can withstand the interest rate cycles.

  4. Successful Track Record

     The Fund House has a successful track record of over three decades, with a good history of successful investing in various business cycles. The fund managers’ forte is their ability to harness the growth potential of Indian securities by managing complex portfolios and delivering excellent results. With judicious securities selection, analytical research, active tracking and monitoring, the Fund House’s dedicated team ensures optimum performance for investors through minimization of risks.

  5. Fund House Details

    SBI Magnum Gilt Fund is housed under the Fund House, SBI Mutual Fund, which is set up as a Trust with SBI Mutual Fund Trustee Company Private Limited as the Trustee of the Fund and holds the same in trust for the benefit of the unitholders. SBI Funds Management Private Limited (“the AMC”) is authorized by SEBI to act as Investment Manager to the Schemes of SBI Mutual Fund. 

    The Fund House is sponsored by State Bank of India, the largest bank in India, with 63% shareholding and 37% held by AMUNDI Asset Management through a wholly-owned subsidiary, Amundi India Holding. The Fund has a diversified product basket of over 60 schemes across the equity and fixed income investment spectrum. Each Scheme is managed by fund managers, who in turn report to Mr. R. Srinivasan (CIO – Equity) and Mr. Rajeev Radhakrishnan (CIO – Fixed Income).

The promoter shareholders of the Fund House are:

  1. State Bank of India: 63% holdings

    India's largest public sector bank, State Bank of India (SBI), is  headquartered in Mumbai. With total assets of Rs. 45,344 billion at March 31, 2021 and profit after tax Rs.204 billion for the year ended March 31, 2021. As at March 31, 2021, SBI had a branch network of 22,141 and 58,500 ATMs across India. It has a market share of 23% by assets and 25% of total loan and deposits. SBI is ranked as the 43rd largest bank in the world. It has nearly 250,000 employees.

  2. Amundi India Holding: 37% holdings

    Amundi India Holding is a wholly-owned subsidiary of Amundi Asset Management, France. With €1.729 trillion of assets under management at the end of 2020, it is the second-largest asset manager in Europe and one of the 10 biggest investment managers by assets under management in the world.

Who Should Invest in SBI Magnum Gilt Fund?

The objective of SBI Magnum Gilt Fund is to provide stable returns to its investors with negligible credit risk. It invests in low-risk fixed income instruments viz. government bonds and treasury bills, which ensure moderate returns as well as capital protection. It is an appropriate investment option for investors who are risk-averse and prefer steady income backed by the government.

An investor, who understands the interest rate cycles along with macro-economic factors, may look at investing in SBI Gilt Fund. Timing of entry is very crucial for investing in gilt funds, and one may stand to make robust returns by such tactical investments. However, individuals need to be cautious that predicting the interest rate cycle is easier said than done as there are multiple factors at play.

Conclusion

With little knowledge of interest rate movements, retail investors may avoid investing in SBI Gilt Fund to avoid the volatility in NAV. They should stay away from investing unless they receive guidance from an advisor on investing in SBI Gilt Fund and exit. An individual who has a highly conservative investment approach may consider investing in SBI Gilt Fund for the long haul, i.e. for over five years wherein they would withstand the interest rate movements. For example, in the case of SBI Gilt Fund, an investment of Rs.10,000/- on 30-Apr-2016 increased in value to Rs.15,611/- on 30-Apr-2021, which translates into a return of 9.3%. 

FAQ's

  • Q: When to invest in SBI Gilt Fund?

    Ans: The ideal time to invest is when the economy is expected to witness a slowdown. Usually, in times of slowdown, the Reserve Bank of India lowers interest rates to infuse liquidity in the economy. One would benefit from investing in funds like SBI Gilt Fund at such times. Thus, one needs to consider RBI’s monetary policy, interest rate curve, consumer price inflation, liquidity in the economy, etc., before investing in SBI Gilt Fund.
  • Q: What are the duration and its relevance to investing in a gilt fund?

    Ans: While investing in the Gilt Fund, the duration of the Fund is an important parameter to understand. Duration denotes the weighted average maturity of the securities in a portfolio. The average maturity refers to the average time taken for securities to mature and can be obtained from the Fund's fact sheet. The greater the average maturity of a security, the greater is its sensitivity to interest rate movement.  Since the movement of NAV of a gilt fund is susceptible to interest rate movements, the duration of the portfolio of a fund becomes an essential parameter for investing in a gilt fund.
  • Q: What are the other quantitative parameters that investors need to analyze before selecting the best Gilt Funds?

    Ans: A Gilt Fund that gives the most stable and consistent returns year-after-year is preferable, and a fund having lesser volatility would provide consistent returns. Volatility can be determined using the Beta and Standard Deviation. Beta indicates how much a fund’s return is sensitive to index movements. SBI Gilt Fund has a beta of 0.61 (Vs 0.76 for the category). A beta of less than 1 means NAV moves lesser than the benchmark.

    Standard Deviation is a statistical measure representing the volatility or risk of a fund. SBI Gilt Fund has a standard deviation of 3.83 (Vs 3.77 for the category). The higher the SD, the higher will be the volatility in the returns. As a fixed income investor, one should look for funds with a lower standard deviation. 

    The expense ratio is also one of the parameters to check the fund performance. It is preferable to choose a fund with a lower expense ratio within the same category. The lower the expense ratio, the better returns a fund is expected to deliver.

  • Q: Should I invest in SBI Gilt Fund as a lump sum or by way of a SIP?

    Ans: SBI Gilt Fund is a fixed-income fund that looks to earn capital gains through active management of price fluctuations, keeping in mind the interest rate movements. An investor looking to earn capital gains from interest rate movements is advised to invest in the Fund as a lump sum. An investor looking to invest for the long haul, i.e. for more than five years, may consider investing by way of the systematic investment plan.
  • Q: How do I check the performance of the SBI Gilt Fund?

    Ans: Investors may visit the official website for SBI Mutual Funds to find details such as Compounded Annualized Growth Rate Performance over 1/3/5 years and since inception. It also provides the performance of the SBI Gilt Fund in comparison to its benchmark, Crisil Dynamic Gilt Index.
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