SBI Magnum Gilt Fund – Direct Growth Review & Analysis

SBI Magnum Gilt Fund is an open-ended Mutual Fund of the financial giant SBI. It is managed by Mr. Dinesh Ahuja since 2014 who has a total experience of 20 years in the field. Mr. Ahuja started his career in 1998 working part-time as a fixed income dealer and later went on to become the fund manager of the renowned L&T before joining SBI. This fund has shown remarkable returns in the past years. 

Before further ado, let’s get into the complete details of the same.

SBI Magnum Gilt Fund – An Overview

It is a debt scheme investing in government securities across maturity. It means that the fund invests in, but is not limited to government securities like Treasury bills, zero-coupon bonds, floating-rate bonds, capital indexed bonds, repo or reverse repo and derivative securities like interest rate futures(IRF), Interest rate options(IRO), interest rate swaps and credit default swaps. The objective of the scheme is to generate profits by securities issued by the central or state government. 

The total Assets Under Management (AUM) of this fund were recorded at Rs. 3692.42 crore as of 30th September, 2020. Simply, this means that the said amount of money was invested in the SBI gilt fund by investors all across the country. If we look at the portfolio holdings of this fund, we can see that 98.47% is under the Government of India, and the remaining 1.53% constitutes of cash and cash equivalents (as on 30 Sep 2020). This sectoral breakdown of the fund suggests that major, rather almost entire fund constitutes government securities only.  

The minimum amount required to invest in this scheme is Rs.5000 with an average maturity period of 13-14 years. 

Note that the exit and entry load in this fund is null. It means that no charge would be taken in case you want to redeem your money from the fund.

SBI Magnum Gilt Fund India – NAV or Net Asset Value

NAV or Net Asset Value of a fund at which the investors purchase the said fund or sell it back to the company. the NAV changes over time depending on the fund’s performance and the return it gets from the various investment avenues. This value is calculated by subtracting all of the company’s liabilities from its total assets. 

If we look at the NAV of the SBI magnum gilt fund for the past year, it can be seen that the NAV stood at Rs. 14.44 as of November 1st, 2019, and approximately 1 year later, as on October 1st, 2020 it stands on 15.63. It witnessed its highest point in August this year with a value of Rs. 15.78 per unit. The NAV of this fund shows consistency which can be taken as a positive attribute. 

However, this value differs according to different plans offered by the Mutual fund scheme. Let’s have a look at it:

Plan NAV (in Rs.)
Regular Growth 31.1901
Regular Plan Dividend 15.484
Regular Plan Growth 48.5875
Direct plan Dividend 16.5866
Direct Plan Growth 50.277

What are these plans though? Let’s understand each one separately.

You may also like to know the difference between Gilt funds and Debt funds in India.

SBI Magnum Gilt Fund – Plans and Schemes 

The debt mutual fund has 2 plans:

  1. Direct Plan
  2. Regular Plan

Under both of these, there is a growth and dividend option, Further, inside the dividend option, there are reinvestment, payout, and transfer facilities. Both of these plans work on the declaration that all the features of the fund shall remain the same including exit load, facilities, asset allocation patterns, and investment strategies. 

1. Direct Plan:

It refers to when an investor purchases the SBI magnum fund from the AMC itself and not via a distributor, broker, or advisor. the charges in this plan are according to the company discretion without a third party commission involved. Investment via this plan can be done by the various portals the company provides wherein the investor is in direct touch with the company. 

2. Regular Plan:

This plan is for the investors who wish to commute via a distributor or broker in the field. They prefer to take the advisory and investment services of a third-party and thus, have to pay a certain amount of commission for the same. You can choose to buy the SBI gilt fund via the regular plan by contacting your financial advisor. 

SBI Magnum Gilt Fund – History & Past Performance

SBI Magnum Gilt fund has managed to give a commendable rate of return since its inception in December 2000. These returns vary according to the type of investment. Was it a one-time lump sum or a monthly SIP? A question we need to ask before analyzing the returns of a specific fund.

So, here we have curated a chart showing returns of the SBI Magnum Gilt Fund in various time slabs and according to the different types of investments, below:

SBI Magnum Gilt Fund Last 1 year Last 3 years Last 5 years
Since inception (31.12.2000)
Annualized Growth Rate (Compounded) 10.76% 8.36% 9.18% 8.38%
Standard Investment of Rs.10,000 (Current Value as on 30.9.2020) 11076 12730 15523.56 49041.98

Note: The facts and figures given in this post are on an “as is” basis. Please check the respective fund site for any updates to the same.

SBI Magnum Gilt Fund in India – Risk Assessment 

When it comes to Mutual Funds in India, it is implied that a certain level of risk prevails. Being a debt instrument, the overall risk factor of this fund is “Moderate”. So, what are the risks that we can face with this fund? Let’s have a look at them:

1. Liquidity Risks:

There could be a scenario where the government can not afford to liquidate the fund due to the high demand volume. Let’s put that in simpler terms. Suppose 100 people have invested in this particular fund. Due to a market downfall, or any other reason, 90 of them want to redeem their money on the same day (chances are minimal). In this case, the fund managers would find it difficult to provide every investor their money which could lead to loss of capital.

2. Interest Rate Risks:

If the RBI changed its borrowing or lending interest rates, it will directly affect the price of government securities. The change in interest rate may occur due to any change in the economy, the introduction of new policies, or a new budget for the development of the nation. In such a case, the value of the SBI Magnum Gilt Fund could also fall, considering the 98% of government holding in its portfolio. 

3. Credit Risks:

Credit risks refer to when the company lends part of funds that have a high possibility of going into bad debts. The interest paid on such funds is low due to the involvement of not so reliable companies. However, the losses may be huge if a default occurs. This risk is dealt with, by investment in companies having a quality of management and up to the mark past performance. 

4.Volatility Risks:

This is the most common risk factor. As we all know the capital markets are highly volatile and may witness a sudden bearish phase. This may arise due to several economical and national factors such as change of ruling party, the outbreak of an epidemic, sectoral failure due to production mishaps, and many more. 

You may also go through What are Commodity Trading Risks? Ways to Manage them

How to Overcome These Risks?

The key to beating the stock market risk and creating wealth in it is DIVERSIFICATION. We can not stress this enough. Diversifying your portfolio with a variety of funds, with diverse holdings across industries is imperative to mitigate the above-mentioned risk factors. 

SBI Magnum Gilt Fund – Review

The SBI Magnum Gilt Fund constantly outranked its benchmark fund, CRISIL dynamic gilt index, and proved to be one of the highest return bearing debt funds with moderate risk. If you are planning to invest in this fund, make sure to stay invested for the medium to long term for healthy results. You should be a person seeking regular income and capital growth instead of one-time huge profits. 

Also, keep in mind the risks associated and it is advisable to consult your financial advisor before making any big investments. 

Are you interested in stock trading, don’t miss to have a look at Best Demat & Trading Account in India

Did you gain all the knowledge you needed bout this SBI Magnum Gilt Fund? In case you still have queries please feel free to comment down below. And yes, do share your feedback on different kinds of mutual fund and stocks, after all your opinions can help others take the right investment decisions.

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