SBI DYNAMIC BOND FUND This product is suitable for investors who are - - PowerPoint PPT Presentation

SBI DYNAMIC BOND FUND

This product is suitable for investors who are seeking:  Investment in debt and money- market securities  Regular income for medium term  Moderate risk

Disclaimer: Investors should consult their financial advisors if in doubt whether this product is suitable for them.

SBI Dynamic Bond Fund

SBI Dynamic Bond Fund Features

Instruments % of Net Assets (Min – Max.) Risk Profile Debt# Instruments including Government Securities and Corporate Debt 0 - 100% Medium Money Market Instruments 0 - 100% Low

#Debt Instruments may include securitized debt up to 40% of the net assets

 Actively managed fund with the flexibility to invest in overnight maturity papers to high duration papers, it may move across different asset types from money market to medium/long bonds and G-sec based on the fund manager’s

• utlook

 Average maturity is dynamically managed based on interest rate view, inflation & credit risk  The Fund is best suited in volatile markets as it endeavours to capture the best of duration play, interest rate movements& credit

• spreads. The fund focuses on generating

returns by way of market movements rather than through interest accrual

9.21 11.55 12.98 10.49 11.92 10.51 11.03 6.66 8.63 4.49 11.45 10.32

4 8 12 16 20

SBI Dynamic Bond Fund Performance

Past performance may or may not be sustained in future. Returns (in %) other than since inception are absolute, calculated for growth option of regular plan and in INR are point-to-point (PTP) returns calculated on a standard investment of 10,000/-. Additional benchmark as prescribed by SEBI for long-term debt schemes is used for comparison purposes.

31-Mar-2016 to 31-Mar-2017 31-Mar-2015 to 31- Mar-2016 31-Mar-2014 to 31- Mar-2015 Since Inception Absolute Returns (%) CAGR Returns (%) PTP Returns (INR) SBI Dynamic Bond Fund 13.62 5.57 13.69 5.65 20,600 Crisil Composite Bond Fund Index (Scheme Benchmark) 11.09 8.24 14.59 6.75 23,617 Crisil 10 year Gilt Index (Additional Benchmark) 11.87 7.97 14.57 5.80 20,995 Data as on March 31, 2017 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 31-Mar-2016 to 31-Mar-2017 31-Mar-2015 to 31-Mar-2016 31-Mar-2014 to 31-Mar-2015 Since Inception SBI Dynamic Bond Fund - Reg Plan - Growth Scheme Benchmark: - Crisil Composite Bond Fund Index Additional Benchmark: - Crisil 10 Yr Gilt Index

SBI Dynamic Bond Fund Competitive Advantage

Strategic Asset Allocation Tactical Asset Allocation

Change in systemic liquidity driven by factors such as credit deposit growth and currency in circulation. Policy rate actions. Short term – corporate

credit

Change in systemic liquidity driven by factors such as credit deposit growth and currency in circulation. Policy rate actions. The issuance calendar of bills. Short term – Govt Bonds Change in monetary stance. Assessment

• f

fiscal situation. Shape of the yield curve. SLR holdings of banks. RBI's

• pen

market

• perations.

Movement in commodity and forex markets . Long term – Govt Bonds Spread reversion w.r.t medium term levels. Changes in relative attraction between

• ffshore

and domestic funding avenues. Appetite from insurance co’s and PF's Movement in commodity and forex markets Long term – Corporate

Credit

• Change in systemic liquidity driven by factors such as
• Supply issues for all segments
• News flow
• Global developments
• Market positioning

SBI Dynamic Bond Fund – Competitive Advantage - Instances

Strategic Asset Allocation

Yield on March 10, 2012: Market analysis & call: (March 2012) With the commencement of borrowing by the government in the new financial year, government bonds were expected to underperform With demand for wholesale funds from banks & consequent year end tightness, money market rates were at elevated levels. 1 year CD’s during March were at 10.75-10.85%. The short end corporate bonds (2-3 yrs.) at 9.65-9.70% levels were also fairly priced vis-à-vis G-Sec considering moderate supply pipeline. On account of above we invested 90% of our assets in 1 year CD and balance in the ST corporate bond segment. Securities 1 Year 2-3 Year 10 Year G Sec 8.26 8.30 Corporate bonds 9.66 9.39 CD 10.80% Yield on April 21, 2012: Securities 1 Year 2-3 Year 10 Year G Sec 8.22% 8.58% Corporate bonds 9.46% 9.35% CD 9.80%

Source: SBIMF Internal Analysis & Bloomberg

Past performance may or may not be sustained in future.

SBI Dynamic Bond Fund – Competitive Advantage - Instances

Tactical Asset Allocation

Market analysis & call: (May- July 13) RBI policy guidance had stressed on external sector factors driving policy actions Weakening external sector variables had impacted Forex market trends, even as markets where anticipating additional policy cuts during this period The newly issued 10 year government bond yield which traded at 7.11% in end May closed at 8.17% on 31st July post the RBI measures. Considering the broad concerns on Forex trends and remote possibility of rate cuts, we had reduced duration in the fund during this period. Modified duration of the fund Date Average Maturity- Yrs End May 13 10.25 End June 13 7.43 End July 13 5.01

Source: SBIMF Internal Analysis Past performance may or may not be sustained in future.

SDBF aims to build mid and long term expectations on rate trajectory SDBF aims to actively react to tactical

• pportunities in

the market

SBI Dynamic Bond Fund – Current Strategy

• Lower GDP growth
• Monsoon Deficit
• Chinese Yuan

devaluation

• Fed Rate Hike

uncertainty

• Impact of Forex flows
• Effects of Geo-

political Events

Portfolio maturity has been increased through exposure to SDL’s and UDAY Bonds (35%), 10 year AAA corporate bonds (9%) and Gsec (35%.) Average maturity

• f the fund stands at 10.32years.

India Rates Snapshot for April 2017

• Indian bond yields rose dramatically in February as RBI changed its monetary policy stance from accommodative to neutral and

continues to stay high relative to the start of the year.

• Money market rates, too, inched up a bit in April, post the RBI’s decision to suck out nearly Rs. 1 trillion worth of liquidity via the

issuance of CMBs.

• Crude oil prices rose 2.1% over the month but remains flat on YTD basis.
• Rupee has appreciated sharply on YTD basis owing to massive FII inflows in the debt and equity market.

Source: Bloomberg, PPAC, SBIMF Research; NB: **Crude oil price is average $/barrel for the month, rest of the data are % month end; *Corporate bond rate is for AAA rated bonds ,*** Refers to PSU Banks CD rate; # INR and Oil price changes are % change

Feb-17 Mar-17 Apr-17 m-o-m change (in bps) Change YTD (in bps) 1 Yr. T-Bill 6.33 6.17 6.21 31 8 3M T-Bill 6.20 6.20 6.10 40

• 2

10 year GSec 6.52 6.41 6.87 28 45 3M CD*** 6.28 6.33 6.38 5 7 12M CD*** 6.63 6.55 6.93 15 13 3 Yr Corp Bond* 7.29 7.07 7.27 16 30 5 Yr Corp Bond* 7.37 7.33 7.54 14 34 10 Yr Corp Bond* 7.58 7.57 7.83 8 32 1 Yr IRS 6.19 6.20 6.42 11 34 5 Yr IRS 6.26 6.32 6.70 18 56 Overnight MIBOR Rate 6.25 6.25 6.05

• 119
• 7

INR/USD 67.9 67.9 66.7 0.9 5.7# Crude Oil Indian Basket** 52.7 54.2 54.8 2.1

• 0.2#

• Monetary Policy Committee (MPC) kept the repo rate unchanged at

6.25% in its latest meeting on 6th April 2017.

• It has however narrowed the policy corridor from 50bps on either

side of the repo rate to 25bps to now. Accordingly, the reverse repo rate stands at 6% (5.75% before) and the rate under the marginal standing facility stands at 6.5% (6.75% before).

• The narrowing of the corridor has been done in response to the

benign liquidity conditions which had led short-term rates to fall below the policy rate. The rate on the 3mth T-bill rate had fallen to almost 50bps below the repo rate in March. The narrowing of the band will increase the lower bound of the yield curve to 6% and also lower the volatility in short-term rates.

• The central bank has indicated that going forward, it will continue to

use its existing bouquet of instruments (LAF, term repos, cash management bills, MSS) to manage the excess liquidity in the near-term.

• Looking ahead, the RBI remains cautious on the inflation trajectory

and believes that achieving the 4% mark will not be easy. Seemingly, the central bank remains wary of upside risks to inflation more even though it highlighted that risks are evenly

• balanced. On the other hand, it expects the growth to improve in

FY18 on the back of government spending, higher consumer spending and transmission of earlier rate cuts.

• In our opinion, given the current outlook on inflation and growth,

additional policy rate cuts are unlikely in 2017.

Policy Rate Outlook

Source: RBI, CSO, SBIFM Research 4.00 5.00 6.00 7.00 8.00 9.00 10.00 Jun-05 Feb-06 Oct-06 Jun-07 Feb-08 Oct-08 Jun-09 Feb-10 Oct-10 Jun-11 Feb-12 Oct-12 Jun-13 Feb-14 Oct-14 Jun-15 Feb-16 Oct-16 Repo Rate (mth end, %)

• Indian bond yields rose dramatically in February as RBI changed

its monetary policy stance from accommodative to neutral and has continued to stay elevated there since.

• As of April end, 10 year G-sec yield stands at 6.87%, up 45bps

from 6.41% in March. Massive foreign inflow during March and April (due to attractive valuations) also led to the increased demand for Indian G-sec and consequent fall in yields.

• Going forward, as US Fed is expected to hike rates and Indian

inflation is expected to inch up, this attractiveness will likely reduce.

• Further, with surplus liquidity, no RBI OMO purchases and neutral

policy stance, the yield curve would remain steeper in the coming months.

• For FY18 as a whole, supply-demand dynamics of the

government bonds, liquidity situation of the banks once the pace

• f currency withdrawal normalized, bank credit outlook and,

global outlook will take prominence in guiding the bond markets trajectory.

• We remain constructive, but with a slightly longer term approach

as average CPI settle lower and government’s measures to widen the tax base leads to structural improvement in the fiscal balance. Accordingly, we keep taking tactical calls in duration at the

• pportune time (like last two months) .

Debt Market Outlook

Source: Bloomberg, SBIFM Research 4.00 5.00 6.00 7.00 8.00 9.00 10.00 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 10 year GSec yield (mth end, %) Repo Rate (mth end, %)

Investment Objective & Internal Guidelines Sector Yield Curve Credit Duration Trading Quantitative Analysis Portfolio Construction Top Down Analysis Bottom Up Security Selection Risk Management

Investment Process

The portfolio construction process is a combination of top-down analysis and bottom up security selection done within the framework of internal risk control system

Performance of other schemes managed by Mr. Dinesh Ahuja

Past performance may or may not be sustained in the future. Returns (in %) other than since inception are absolute calculated for growth

• ption and in INR are point-to-point (PTP) returns calculated on a standard investment of 10, 000/-. Additional benchmark as prescribed by

SEBI for long-term and short-term debt schemes is used for comparison purposes only. Performance calculated for regular plan.

*Returns for scheme benchmark index I Sec and Li-BEX is calculated using CRISIL Fund Analyser

*Returns for scheme benchmark index Isec and SI-BEX is calculated using CRISIL Fund Analyser Managing since January, 2011

31-Mar-2016 to 31-Mar- 2017 31-Mar- 2015 to 31- Mar-2016 31-Mar- 2014 to 31- Mar-2015 Since Inception

Absolute Returns (%) CAGR Returns (%) PTP Returns (INR)

Magnum Income Fund

12.71 5.86 13.09 7.86 40,132

Crisil Composite Bond Fund Index

11.09 8.24 14.59 N.A. N.A.

Crisil 10 year Gilt Index

11.87 7.97 14.57 N.A. N.A.

Managing since January, 2011

31-Mar- 2016 to 31- Mar-2017 31-Mar-2015 to 31-Mar- 2016 31-Mar-2014 to 31-Mar- 2015 Since Inception Absolute Returns (%) CAGR Returns (%) PTP Returns (INR) SBI Magnum Gilt Fund

• Short Term - Growth

11.96 8.93 13.20 7.97 34,711

I Sec Si-BEX*

8.38 9.06 9.75 N.A. N.A.

Crisil 1 Year T-Bill Index

7.15 7.69 8.74 6.31 26,994

Managing since January, 2011

31-Mar- 2016 to 31- Mar-2017 31-Mar- 2015 to 31- Mar-2016 31-Mar-2014 to 31-Mar- 2015 Since Inception Absolute Returns (%) CAGR Returns (%) PTP Returns (INR) SBI Magnum Gilt Fund

• Long Term - Growth

14.74 5.90 21.34 8.36 36,894

I Sec Li-BEX*

12.47 7.26 19.88 N.A. N.A.

Crisil 10 Year Gilt Index

11.87 7.97 14.57 N.A. N.A.

31-Mar- 2016 to 31-Mar- 2017 31-Mar- 2015 to 31- Mar-2016 31-Mar- 2014 to 31-Mar- 2015 Since Inception Absolute Returns (%) CAGR Returns (%) PTP Returns (INR) SBI Regular Savings Fund

13.29 6.67 16.18 8.06 28,221

Crisil MIP Blended Index

12.30 5.67 16.45 8.13 28,483

Crisil 10 Yr Gilt Index

11.87 7.97 14.57 5.72 21,074

• 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. 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.

Biographies

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) Registered Office: 9th Floor, Crescenzo, C-38 & 39, ‘G’ Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051 Board line: +91 22 61793000 Fax: +91 22 67425687

Call: 1800 425 5425 SMS: “SBIMF” to 56161 Email: customer.delight@sbimf.com Visit us @ www.facebook.com/SBIMF www.sbimf.com Website Visit us @ www.youtube.com/user/sbimutualfund