Is it time to exit SBI Magnum Midcap Fund?

SBI Magnum Midcap Fund has been severely under performing for quite a long time. The scheme has underperformed its category and benchmark in the last three-year, five- and 10-year periods. Shockingly, in the last three-year period, the scheme could not even beat bank deposits.

For example, State Bank of India Offers 7 per cent on its three-year deposits. In the three-year period, the scheme's sharpe ratio stood at -0.0008. A negative sharpe ratio indicates that the scheme underperformed the risk-free returns. Scheme's three-year alpha stood at -4.61. The long-term underperformance of the scheme can be seen in the table below:

	3-year returns (%)	5-year returns (%)	10-year returns (%)
SBI Magnum Midcap Fund	4.12	12.55	14.2
Category	10.62	13.36	16.57
Benchmark (S&P BSE 150 MidCap TRI	12.09	14.49	14.57

CAGR returns as on June 12, 2019

SBI Magnum Midcap Fund was launched in March 2005 and manages AUM worth Rs 3,670 crore as on May 31, 2019. The scheme has given a return of 15 per cent since its launch.

Mutual fund advisors believe fund managers play a much bigger role in mid cap funds than large cap funds. They say fund managers have to take right calls at the right time to make gains for their investors.

“The portfolio of the scheme looks diversified. But since the scheme has become a long-time underperformer now, it falls on the fund manager who might have taken wrong calls which hit the scheme,” says Chokkalingam Palaniappan, Director, Prakala Wealth Management . The scheme has now for a long time settled in the third quartile of the mid cap funds category in terms of performance, he adds.

The scheme has invested around 79 per cent in mid caps, 18 per cent in small caps and around 3 per cent in large cap stocks.

Mutual fund advisors are asking their clients to exit the scheme and move to better performing funds in the mid cap category.

“As the scheme has been underperforming for a long time now, it will be better for existing investors to switch to better funds like Canara Robeco Emerging Equities or Axis Midcap Fund or HDFC Mid-Cap Opportunities Fund,” says Dinesh Rohira, Founder and CEO at 5nance.com .