SBI Funds ESG
SBI Funds PMS | Equity | | PMSIME's View on SBI Funds ESG
Strategy
ESG-focused Strategy
Investment Fund
We typically do not recommend Thematic funds to investors, since it requires getting in and out of the theme at the right time. Typically a strong contra approach (investing in themes when they are out of favour, and getting out when they are popular) leads to better performance, but this is very hard to actually implement in practice given strong behavioural instincts against such an approach (investors often end up entering themes post a run-up, which can often be the worst time to invest). In our view, thematic funds are primarily suitable for more astute investors who have a deep underlying understanding of the investment merits of the theme.
Fund's Strategy View
Clear differentiation in strategy given their focus on ESG. ESG investing has been gaining investor interest in recent years and this strategy offers investors the ability to invest in companies that are environmentally friendly, socially responsible and have good governance. Not only would this have interest amongst investors seeking more to invest in more ethically run companies, but the fund flows towards ESG funds can also help these companies perform well in the markets.
Fund Performance
The fund has outperformed peers in the last 5 year trailing returns. In terms of longer-term annual performance, performance has been consistent, with the fund having outperformed it's benchmark in over 60% of annual calendar years.
IME's View on SBI Funds PMS
View on AMC
We do not recommend MF-promoted PMS's, as they are often a side-business of the larger MF with uncertain long-term stability of the investment team. While mutual fund strengths may help PMS scale, it may not be valuable for investors seeking alternative investments. SBI PMS is still in early stages compared to other MF-promoted PMS providers.
AMC's Pedigree
SBI Mutual Fund is a leading asset manager in India, but its PMS division has not yet established itself as a credible standalone entity due to limited scale in retail discretionary equity assets.
AMC Team
We do not usually recommend Mutual Fund promoted Portfolio Management Services (PMS) because it is often seen as a secondary focus compared to the main Mutual Fund business. This is evident in the case of Aparna Shekra, a PMS veteran, who was transferred to the Mutual Fund's international business, while a less experienced analyst was moved to the fund management team.
Investment Philosophy
SBI PMS has a broad investment philosophy, with a more clearly defined strategy in their Growth with Values Portfolio.
SBI ESG Strategy
- SBI ESG is a multi cap Strategy-- spanning across Large, Mid and Small cap
- Focusing on investing in companies that meet positive standards of ESG responsibility.
- Selecting companies that are disproportionate beneficiaries of Economic growth at a reasonable price
Investment Philosophy
SBI ESG is a multi-cap strategy that predominantly looks for companies based on specific ESG criteria. It aims to buy good businesses run by great people at attractive prices.
Key Aspects of the Philosophy
- Management: Looking for companies that have integrity, long-term vision, a good track record, have efficient capital allocation, and are transparent and accountable
- Business: Companies are chosen that can take advantage of the size of the opportunity, Return on Capital, Pricing Power, Capital Intensity, and risk of disruption.
Valuation: Look for businesses by looking at discounted cash flow and relative valuations.
ESG Compliant
Investing companies efficiently based on their ESG compliant which is defined based on:
- Environment (E)- complying with Climate change, carbon emission, natural capital, water stress, and renewable energy.
- Social (S) - Efficient utilization of human capital, good labor standard, product liability, privacy, and data security
- Governance (G) - Companies that have good corporate governance by having an Independent Board, Pay, Accounting, Business Ethics & Minority shareholder protection
Investment Process
- Step 1 Qualitative Factors: While selecting companies to invest looks at qualitative factors by analyzing Business model, the impact of Macro-economic variables on their business model, Company is also analysed based on Porter's five force and consider sell-side research interaction.
- Step 2 External Analysis: Analyse Geopolitics and its impact on business, have a thorough channel check, meet the management for better understanding of the company, and visit the workplace or Plant.
- Step 3 Forensic Analysis: Examine company based on ROE, ROIC, Earnings risk and debt repayment capabilities to study the quality score of the business.
- Step 4 Investment Thesis: Analyse financial statements for the last 5 years and build an investment thesis and valuation model.
- Step 5 Investment Decision: Investment decision is finally made based on the target price, if its attractive based on potential upside and if the stock is a strategic fit with other stocks in the portfolio.
Avoid
Companies that are impacted by excessive leverage.
PORTFOLIO CONSTRUCTION
- Universe: 1) Active coverage- 330-340 companies, 2) Passive coverage- 220+ companies
- Active research universe: Analyst preference, stock coverage, Inhouse financial model.
- ESG Filter: Positive standards of ESF and exclusion screener
- SGVP Universe: Stocks with profitable growth, capital efficient, sustainable multifold growth
- SGVP Portfolio: Best fit- opportunity and valuation and PM’s conviction.
Trailing Performance
| 1yr | 3yr | 5yr | Since Inception | |
|---|---|---|---|---|
| SBI Funds ESG | -8.7 | 11.9 | 23.4 | 14.8 |
| S&P BSE 500 | -6.6 | 14.7 | 19.2 | 13.8 |
| Alpha over Broad Mkt BM | -2.1 | -2.8 | 4.2 | 1 |
Performance as of: 30-Sep-25 | Inception Date: 08-Jul-16 | Performance are post-fees, pre-taxes. Global funds denominated in USD or fund currency.
Investment team
Gaurav Mehta | 2-star rated FM
CIO- Alternatives | 17 yrs Experience | 4 yrs at current firm
Past Experience: Analyst & Fund manager(SBI mutal fund)
Gaurav Mehta joined SBI Funds Management (SBIFM) in November 2018 as an Equity Analyst in SBI Mutual Fund and subsequently moved to having fund management responsibilities as well. With effect from October 2021, Gaurav is now CIO – Alternatives where he is responsible for managing equity portion of the Portfolio Management Services & Alternative Investment Funds business. Gaurav has over 15 years’ experience in Indian Financial Markets having worked with Ambit Investment Advisors, Ambit Capital, and Edelweiss Capital. Gaurav has completed B.Tech (Chemical Engineering) from IIT, Bombay and holds a post graduate diploma in Management from IIM, Lucknow. Gaurav is also a Charter holder of the CFA Institute, USA
