SBI Fund house is coming up with new fund and they term it as SBI WISE fund where WISE stands for Winning Investment Strategies in Equities. So lets do a Review and Analyze and get into finer details of the New Fund Offer from SBI Fund House and see if this is something just named as WISE or is something unique and wise for investors.

Basics

The initial investment required for SBI WISE Fund is Rs.10,000 for the lumpsum investment, and Rs. 12,000 for the SIP purchase. As expected there would be no entry load, but there is an exit load of 1% if you exit within one year of allotment. This fund would invest 90% – 100% of its assets in equity and 0% – 10% of its assets in debt and money market instruments.

Analysis

Official Document filed at SEBI has quite a few unique things and one of them is investment objective and I quote

The objective of the scheme would be to provide investors with opportunities for long-term growth in capital through investments in equity and equity related instruments. The Scheme will invest in stocks which are the constituents of SGI WISE India Index, an index based on a quantitative model.

However there is no guarantee or assurance that the investment objective of the scheme will be achieved. The scheme doesn’t assure or guarantee any returns.

There is one interesting thing in the objective apart from no guarantee of returns and that is SGI ( (Société Générale Index ) WISE Index and as per the doc its defined as

Level 1: Screening of the Stock Universe

The universe is all the stocks listed on the NSE (National Stock Exchange). The screening is based on the following two parameters: -

• Market Capitalization: – The market capitalization of the stock chosen should be greater than INR 2500 crore
• Liquidity: – The 60-day average daily volume of the stock selected should be greater than INR 5 Crore

This screening results in a list of stocks which are primarily large cap and consists of the eligible potential Index constituents.

Level 2: Scoring Model/Methodology
After the screening, the resulting list of stocks is scored on the basis of the two sets of selection criterias: -

• Stock spot performance /earnings momentum – This would include stock specific aspects like price momentum of the stock, short term variation in the stock holdings by professional investors, future earnings momentum, etc.
• Fundamental/valuation parameters – This would include aspects based on a company’s Balance sheet & profit & loss account. The parameters are cash flow growth (estimated), Earning before Interest tax, Earning per share (EPS), Price to earnings ratio (PE), Enterprise Value etc

After every stock has been given a score, stocks which comprise the final Index constituents are selected from the top 33% of the stocks with the highest averaged score. The Investment Manager intends to make investments in constituents of SGI Wise India Index on an equal weighting basis.

Final Thoughts

Sounds something unique to investor but there are 2 things which worries me. First is of course there is nothing about the guarantee and capital preservation and secondly The SGI WISE India Index is the exclusive property of Société Générale (the “Index Sponsor” or “Société Générale”) and is to be licensed for use non-exclusively and so fund have to to pay fees. They have estimated the fees as 2.5% of the weekly average net assets of the scheme as expenses which investor would need to pay.