SBI OPTIMAL

Alternative Investment Funds

EQUITY FUND
Category III Alternative Investment Fund
Table of Contents
Background
Risk adjusted returns
SBI Optimal Equity Fund - Key Characteristics
Asset allocation
Investment strategies, philosophy & framework
Investment & risk processes
Fund terms
Executive summary
BACKGROUND
 Exception vs. the norm

LINEAR RALLY - NIFTY 50 TRI MOVEMENT

Mar-22
25,118.14

The unidirectional rally witnessed

in the past ~24 months is an
exceptional scenario, largely
Mar-20
12,105.66
fueled by global liquidity
Mar-20 Jul-20 Nov-20 Mar-21 Jan-21 Nov-21 Mar-22

LONG TERM REWARDS ALBEIT WITH INTERIM VOLATILITY

NIFTY 50 TRI MOVEMENT
An investor should expect a more
21-Sep-01
-38.394% normalized market scenario in the
28-Oct-02
-32.72%
25-Apr-03
-32.36%
27-Oct-08
-59.50%
long term, which has potential to
09-Mar-09
23-Mar-20
-38.27% deliver meaningful returns in the long
-58.54%
term, albeit comes with its share of
phases of drawdown as well
Mar-04

Mar-08
Mar-05
Mar-00

Mar-06

Mar-09
Mar-03
Mar-02

Mar-20

Mar-22
Mar-07

Mar-14

Mar-18
Mar-15
Mar-01

Mar-10

Mar-16

Mar-19
Mar-13
Mar-12

Mar-21
Mar-17
Mar-11

Source: Bloomberg, Internal

 Current Scenario – Influx of Liquidity

Policy Rate 2019 2020 2021 2022

Japan 25.9 (Till 31st March)
UK 18.9 China 4.35 4.35 4.35 4.35
Israel 16.93 India 5.15 4.00 4.00 4.00
Chile 14.72 South Korea 1.25 0.50 1.00 1.25
US 13.6 Indonesia 5.00 3.75 3.50 3.50
Philippines 9.31 Taiwan 1.38 1.13 1.13 1.13
Brazil 8.98 Thailand 1.25 0.50 0.50 0.50
Thailand 7.95 Malaysia 3.00 1.75 1.75 1.75
Indonesia 6.63 Philippines 4.00 2.00 2.00 2.00
Malaysia 5.74 Russia 6.25 4.25 4.50 20.00
Turkey 5.48 Turkey 12.00 17.00 19.00 14.00
India 4.74 South Africa 6.50 3.50 3.50 4.25
Russia 3.18 Brazil 4.50 2.00 2.75 11.75
Mexico 2.85 Change in Central Bank Asset Size (as Mexico 7.25 4.25 4.00 6.50
South Korea 2.80 % of GDP) - Between Mar 2020 to Argen�na 45.00 29.00 34.50 30.00
Taiwan -0.02 Mar 2022 Colombia 4.25 1.75 1.75 4.00
South Africa -0.35 Chile 1.75 0.50 0.50 7.00
China US 1.75 0.25 0.25 0.50
-0.92
Eurozone 0.00 0.00 0.00 0.00
Argentina -4.58
UK 0.75 0.10 0.25 0.75
-10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Japan 0.10 0.10 0.10 0.10

Global Central banks flushed with liquidity in the interim, Once the liquidity dries off, markets are
however, now, with normalization in the offing & rising expected to return to a more normalised
inflationary concerns, most economies looking at hiking rates. trajectory.
Select Central Banks such as Russia, Brazil, Mexico, South Africa,
South Korea, among others have hiked rates.
Source: Bloomberg, SBIFM Research
 India real GDP likely to grow by 7%, nominal growth expected to be around 13%

We expect Real GDP to grow by 7% y-o-y in FY23; Nominal GDP to rise by 13%

25
19.9

18.0

13.0
20

14.4

13.8

13.0

11.8
15

11.0
11.0

10.5
10.5

8.9

7.0
7.8
8.0
8.5

8.3
10

7.4

6.8

6.5
6.4
5.2

5.5

3.7
5

-5

-3.0
-10

-6.6
-
FY11

FY17
FY12

FY21
FY13

FY19
FY15

FY16

FY18
FY14

FY20

FY23 E
FY22 E
Real GDP growth (in %) Nominal GDP growth (in %)

Domestic demand expected to recover.

While global growth appears to be weakening, benign financial conditions and stronger balance sheets remain positive factors supporting growth.

While Indian macro fundamentals are supportive, global developments are turning adverse for growth prospects.

The rapid turn in global interest rate cycle, moderating liquidity, higher inflation, weakening global trade, and growth prospects are key risks to Indian
growth trajectory.

Source: CMIE Economic Outlook, SBIFM Research

 Absolute earnings continue to trend towards recovery in Q4FY22 and FY23

Extremely low corporate profits to GDP makes

Earnings recovery likely to be healthy in FY23
a strong case for mean reversion

1,000 40

861
900 35

730
7.2
8.0 800 30

6.8

564
7.0 LTA: 3.3% 700 25

5.7

5.6
5.4

5.3
6.0

5.1
600 20

481
4.5

402

462
461
5.0

435
4.0
500 15

3.8

402
3.7
3.6

380
3.5
3.3

3.3

351
350
4.0
2.9

321
400 10

2.7
2.6
2.6
2.5

252
3.0

249
2.1

2.1

239
2.0

2.0

219
1.8

1.8

300 5
1.6
1.5

1.4

164
2.0

1.2

152
126
200 0
1.0
100 -5
0.0
0 -10
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21

FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23 E
Corporate Profit (% GDP)
NIFTY EPS (in Rs.) % growth- RHS

FY92-FY20 data is based on a sample of ~30,000 and FY21

data is for 12,142 listed unlisted companies in CMIE (includes
both financial and non financial companies)

Source: CMIE Economic Outlook, SBIFM Research

 Inflationary pressures are rising

Core inflationary pressure intensifies, likely to rise further as manufacture pass on cost increases

India Core CPI (CPI ex food ex fuel )

Change in Domes�c 10 yr yields
7.0
9.7 24.4
6.5 30
6.7
12.9 12.5 20
6.0 3.7 8.3 7.5 8.1 9.1 7.1
7 4 4.5 2.3 10
5.5 0
0.7 0
5.0 -2.3 -3.8 -10
4.5 -5.3 -20
4.0 -8.3 -30

6 month

10 Year

15 Year

30 Year
1 Year

2 Year

3 Year

4 Year

5 Year

6 Year

7 Year

8 Year

9 Year
3 Month
3.5
3.0
Change in Mar vs. Feb(bps) - RHS Yields as of 31st Mar 2022(%)
Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22
May-15

May-16

May-17

May-18

May-19
Nov-15

May-20

May-21
Nov-16

Nov-17
Jan-16

Jan-17

Nov-18

Nov-19
Sep-15

Jan-18

Jan-19

Nov-20

Nov-21
Jul-15

Sep-16

Sep-17

Jan-20

Jan-21
Jul-16

Jul-17

Sep-18

Sep-19

Jan-22
Jul-18

Jul-19

Sep-20

Sep-21
Jul-20

Jul-21
Yields as of 25th Feb 2022 (%)

Source: CMIE Economic Outlook, SBIFM Research

 Inflationary pressures are rising

Core inflationary pressure intensifies, likely to rise further as manufacture pass on cost increases

US CPI
Change in US 10 Yr Yields
10.0
3.0 219 215 240
8.0
2.5 163 200
6.0 2.0 160
125
4.0 1.5 92 120
1.0 62 80
2.0 40
0.5 40
0.0
0.0 0

10Y

20Y

30Y
2Y

3Y

5Y

7Y
-2.0

-4.0 Change in yields (bps) - RHS Yield as of 30 Sep 2021 (%)

Feb-01
Feb-02
Feb-03
Feb-04
Feb-05
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Feb-17
Feb-18
Feb-19
Feb-20
Feb-21
Feb-22
Yields as on 31-Mar 2022 (%)

Change in Yield between Sept’21 & Mar’22

Source: CMIE Economic Outlook, SBIFM Research

 “OPTIMAL”
ADJECTIVE
UK / OPTIMAL / US

The best or most effective possible in a particular situation

PRESENTING
SBI OPTIMAL EQUITY FUND
Long term strategy - Risk adjusted returns

MANAGEMEN
ISK T
R

MAXIMISING DOWNSIDE
RETURNS PROTECTION
High conviction portfolio, Focus on achieving
with a focus on generating optimal asset
long term alpha allocation for limiting
downside risks

N T
RE E
TUR C E M
N ENHAN
Hope for the best but prepare for the worse – the rule is extremely pertinent
for wealth creation in the long run!
 SBI OPTIMAL Equity Fund

A critical part of the strategy is the net allocation maintained

1
by the fund that will ensue superior risk adjusted returns
ASSET
ALLOCATION
HIGH
CONVICTION The long only strategy of the equity will be a concentrated
PORTFOLIO 2 portfolio, investing in high conviction ideas.

SBI Derivatives strategy will predominantly be used for downside

DERIVATIVE protection, however, the strategy may also be tactically used
OPTIMAL STRATEGY
3
EQUITY for return enhancement

Given the duality of strategy, there is focus, not only on

LOWER 4 generating returns, but also limiting downside, hence the
VOLATILITY fund is expected to have relatively lower volatility
HIGH
CONVICTION
PORTFOLIO
The fund has the flexibility to optimise returns basis allocation
5
in absolute & relative returns strategy
ASSET ALLOCATION
 Investment strategy

ASEET ALLOCATION MODEL

LONG ONLY EQUITY DERIVATIVES

ALLOCATION STRATEGY
Dynamic allocation between long
Static allocation within a range
& short positions

LONG ONLY PORTFOLIO

0% 65% 130%

UNFAVORABLE INDICATORS FAVORABLE INDICATORS

Ability to go up to 0% net exposure through short positions Ability to go up to 130% net exposure through long positions
 Asset Allocation – Key Parameters

CHEAP VALUATIONS + PESSIMISTIC

SENTIMENT = AGGRESSIVE EQUITY ALLOCATION

Long-term measure
Shiller earnings yield minus
Valuations bond yield Contrarian
Trailing earnings yield minus Indicator
bond yield

Mid-term measure
Multiple parameters used to
Sentiment determine such as :
Contrarian
Breadth of the market
Indicator
Retail participation
Primary market activities, etc.

Short -term measure Asymmetric

Volatility State High Volatile state indicates a Indicator
‘Risk Off” environment

EXPENSIVE VALUATIONS + EUPHORIC SENTIMENT + HIGH VOLATILITY = CONSERVATIVE EQUITY ALLOCATION

 Equity Valuations

Trailing Earning yield (S&P BSE Sensex)

minus Bond yield (10 Year G-Sec)
4.0%
3.0% average -3.2%
2.0% current -2.1%
1.0% percentile 81%
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
Normalized Long Term Earnings (S&P BSE Sensex)
Mar-03

Mar-05
Mar-02

Mar-04

Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Based Yield Spread (10 yr G-Sec)
current -3.8%
Sensex trailing earnings yield minus bond yield (%) 3.0%
average -2.9%
1.0% percentile 68%
-1.0%
EQUITIES -3.0%
CHEAP -5.0%

-7.0%
BONDS

Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
CHEAP
Shiller earnings yield minus bond yeild (%)

Source: Bloomberg, SBIFM Research

 Valuations

Normalized earnings based yield spread with prospective equity returns

60%

50% R² = 0.6359

40%

30%

20%

10%

0%
-7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0%

-10%

Earnings yield based valuation measures have shown a strong relation to longer term forward
returns even as they may have limited short term timing value

Source: Bloomberg, SBIFM Research. The above data is based on Quarterly Sensex data from Dec 2001 to September 2018 & 10 year G Sec Yield. Returns are prospective 3 year CAGR.
 Equity market sentiment

Earnings sentiment index suggest optimism in the equity market but has fallen from the peak levels

Sentiment Index vs forward 12m returns ESI vs fwd 12m returns

2.50 80% 100%
2.00 60% 80%
1.50 60%
40%
1.00
20% 40% R² = 0.3692
0.50
0% 20%
0.00
0%
Nov-06
Jul-07

Nov-08
Jul-09

Nov-10
Jul-11

Nov-16
Jul-17

Nov-18
Jul-19

Nov-20
Jul-21
Mar-06

Nov-12
Jul-13

Nov-14
Jul-15
Mar-08

Mar-10

Mar-18

Mar-20

Mar-22
Mar-12

Mar-14

-0.50 Mar-16 -20%

-2.00 -1.00 0.00 1.00 2.00
-20%
-1.00 -40%

-1.50 -40%
-60%
-2.00 -60%
-80%
ESI
-2.50 forward 12m Nifty returns ESI

Be greedy when others are fearful and vice versa. Market sentiment is a good contrarian indicator at extremes. Our inhouse equity
sentiment index has fallen back to neutral from the exuberant readings of 2HCY21, suggesting that the corrective action of the past few
months has helped clear the froth in equities.

Source: Bloomberg, SBIFM Research

INVESTMENT STRATEGIES,
PHILOSOPHY & FRAMEWORK
 High Conviction – Long only portfolio

01 02

CORE – The core part would be the
predominant part of the long portfolio. The
portfolio will invest in quality stocks be with
a long-term view where the fund manager
has a long-term conviction. This will
primarily be driven by three key factors –
1. Business,
2. Management &
3. Valuations
SATELLITE – The satellite part of the portfolio is constructed
based on tactical opportunities in the medium term
(ideally 3 -4 years) basis of emerging sector or macro
themes. It may be complemented with a relative return
framework based on the following factors: 1. Incremental
Fundamental Change 2. Rising Market Expectations 3.
Momentum 4. Relative Valuations.
This part of the portfolio will have a clearly defined exit
strategy, as there will be a tactical upside expected from
this opportunity/ situation

HIGH CONVICTION CONCENTRATED BOTTOM-UP LONG TERM

STRATEGY 20 – 30 BETS STRATEGY ALLOCATION
Investment philosophy

BUSINESS MANAGEMENT VALUATION

Economic Moat Integrity Discounted Cash Flow
Size of Opportunity Track Record Relative Valuations
Return on Capital Skin in the Game Exclusions – ‘Bigger
Pricing Power Transparency and Fool’, Market Timing,
Accountability Technical Analysis
Capital Intensity
Risk of Disruption
Investment framework (1/2)

ABSOLUTE RETURN RELATIVE RETURN

FRAMEWORK FRAMEWORK
Businnes Incremental fundamental
Management change
Valuations Rinsing Market
Expectations
Momentum
Relative valuations

TIME TIME TIME

 Investment framework (2/2)

RELATIVE
RETURN MID AND
SATELLITE PORTFOLIO

CORE PORTFOLIO
SMALL CAPS

LARGE
CAPS ABSOLUTE
RETURN
 Illustrations of CORE portfolio

Footwear Major
Relaxo S&P BSE 200 TRI
3000 Relaxo Footwears Ltd.
2500 Relaxo is play on the footwear category which
is expected to grow in mid-teens in the near
2000 future and maintain double digit growth over
the next few decades
1500
The company has doubled market share
1000 from 1.5% to over 3% over the last 15 years and
gains should continue because of movement
500 from unorganised to organised; distribution
expansion; and premiumization
0
Amongst the best in class in terms of
Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

Dec-21
profitability and cash generation which
allows the company to invest in growth
Stock prices & Index values rebased to 100

The above is for illustration purposes only to give an idea about the investment philosophy. These stocks may / may not be part of the portfolio. The fund manager will
take appropriate call at the time of construction of the portfolio. It should not be considered as investment advice in any aspect. Please consult your financial advisor
before taking any decision of investment
Data for the period 1st Jan 2014 to 13th Dec 2021

Source: Bloomberg, SBIFM Research

 Illustrations of CORE portfolio

Pharmaceuticals
Divis Lab S&P BSE 200 TRI
Divis Laboratories Ltd.
1000
Divis commands a strong positioning in the
800 global pharmaceutical outsourcing market
with a proven track record.
600 Generics offers sustainable growth while
custom synthesis is the high margin segment.
400
Strong track record of growth and profitability
200 along with judicious capacity expansion; shift
from China an aided tailwind.
0
Dec-16
Dec-13

Dec-14

Dec-15

Dec-17

Dec-18

Dec-19

Dec-20

Dec-21
Stock prices & Index values rebased to 100

The above is for illustration purposes only to give an idea about the investment philosophy. These stocks may / may not be part of the portfolio. The fund manager will
take appropriate call at the time of construction of the portfolio. It should not be considered as investment advice in any aspect. Please consult your financial advisor
before taking any decision of investment
Data for the period 1st Jan 2014 to 13th Dec 2021

Source: Bloomberg, SBIFM Research

 Illustrations of SATELLITE portfolio

Abrasives
Grindwell Norton S&P BSE 200 TRI Grindwell Norton
1600 The company is the market leader with more than 25% share in
1400 a oligopolistic abrasive industry.
1200
Very strong pricing power & operates like a consumer company
1000 with a long term growth of ~20% CAGR in profits & ROIC of >25%.
800
Leveraging on its technology niche, it is diversified into
600
specialty, ceramics & plastics for healthcare market, which
400 could accelerate the long term growth.
200
Beneficiary of “Make in India” policies of the government,
0 wherein cheaper Chinese imports were discouraged through
Dec-15

Dec-18

Dec-21
Dec-13

Dec-14

Dec-16

Dec-17

Dec-19

Dec-20
non-tariff barriers & increased vigilance for tax evasions. This
improved its competitiveness.
Stock prices & Index values rebased to 100
Market finally recognized its improved growth prospects and its
consumer nature of the business by the rerating of the stock.

The above is for illustration purposes only to give an idea about the investment philosophy. These stocks may / may not be part of the portfolio. The fund manager will
take appropriate call at the time of construction of the portfolio. It should not be considered as investment advice in any aspect. Please consult your financial advisor
before taking any decision of investment
Data for the period 1st Jan 2014 to 13th Dec 2021

Source: Bloomberg, SBIFM Research

 Illustrations of SATELLITE portfolio

Auto Ancillaries
Wabco India S&P BSE 200 TRI

450
Wabco India Ltd.
400 Wabco India (WIL) is the leader in the Indian CV
350 braking industry with a market share of >85%.
300 Increasing content per vehicle helps beat industry
250 growth; New product introduction in safety and
comfort driven by electronic architecture facilitated
200
by BS6 engines as well as regulatory changes
150

100
Exports the consistent growth driver; Wabco’s export
revenues accounted for c.43% of total income in FY21
50

0
WIL has progressed significantly up the value chain
from being a supplier to domestic OEMs to designing

Dec-20
Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

Dec-21
and mfg. of subsystems for global OEMs

Stock prices & Index values rebased to 100

The above is for illustration purposes only to give an idea about the investment philosophy. These stocks may / may not be part of the portfolio. The fund manager will
take appropriate call at the time of construction of the portfolio. It should not be considered as investment advice in any aspect. Please consult your financial advisor
before taking any decision of investment
Data for the period 1st Jan 2014 to 13th Dec 2021

Source: Bloomberg, SBIFM Research

 Derivatives strategy

Net Exposure range Short position – up to -65%, Long – up to +65%

Predominantly through index futures, however,may

Long strategy
selectively be used to access high conviction stocks as well.

Exposure will be taken only through index, predominantly

Short Positions
for downside protection. as well.

The leverage undertaken by way of derivatives in the

Gross Exposure
Scheme will not exceed 2 times of the NAV.

Allocation to derivative strategy is basis the guidance of the asset

allocation framework and not for situationally
 Different scenarios
Attractive Markets
During upward trending markets,
the fund would endeavor to
benefit by maximizing long
positions, thereby adopting a
return enhancing strategy.
Stretched markets
The strategy should typically
experience lower drawdowns
in correction phase in the
market due to a lower net
exposure.
Neutral
Strategy generally out-perform
the market through the high
conviction portfolio holdings
with a combination of core &
tactical satellite allocation.
BACK TESTING
Back Testing

Equity alloca�on- Median of 78%

20,000 140
18,000
120
16,000
14,000 100
12,000 80
10,000
8,000 60
6,000 40
4,000
20
2,000
0 0
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Nifty Equity allocation (RHS)

Long term correlation of Nifty and long short strategy is negative thus promising
diversification benefit when combined. Importantly, the correlation turns hugely
negative in falling markets, helping reduce portfolio drawdowns.
 Back Testing

Drawdown- Portfolio vs Ni�y. Max of -35% vs -60% for Ni�y Rolling correla�on- L/S vs Ni�y. Long term avg of -0.12
Drawdown 20,000 1.00
18,000 0.80
0% 16,000 0.60
-10% 14,000 0.40
-20% 12,000 0.20
-30% 10,000 -
8,000 -0.20
-40%
6,000 -0.40
-50% 4,000 -0.60
-60% 2,000 -0.80
-70% 0 -1.00
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21

Feb-05
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Feb-17
Feb-18
Feb-19
Feb-20
Feb-21
Ni�y Backtest Nifty Correlation Nifty vs L/S (RHS)

The illustration shown here is purely to explain the concept of dynamic allocation based on changing market conditions. In any manner, it does not indicate the future
results or asset allocation. The above illustration does not take into consideration any associated expenses and cost. Depending on the varied nature and combination
of filters and methodology, the results and conclusion drawn thereof may also differ accordingly. Any calculations made are approximations meant as guidelines only,
which need to be confirmed before relying on them. Please consult your financial advisor before investing.
 Back Testing

Returns Volatility (std dev)

Back testing SBI Large & Nifty 50 TRI Backtest Backtest

Results Mid Cap Fund
Large & Nifty
(with no tax on (with 42.7% tax MiD
3yr 23.8% 23.7% 20.6% daily returns) on daily L/s returns)
5yr 17.2% 16.3% 15.6%
1yr 12.9% 11.1% 13.7% 15.4%
10yr 15.7% 18.4% 13.7%
3yr 14.6% 12.7% 18.9% 22.0%
15yr 14.5% 15.0% 11.4%
5yr 13.2% 11.5% 16.7% 18.4%
since inception
18.8% 20.1% 13.8% 10yr 12.9% 11.3% 15.8% 17.3%
(Mar'04-Oct'21)
15yr 14.7% 12.7% 18.9% 22.3%
rolling 12 months, 14.4% 15.6% 13.4%
median since inception
16.0% 13.7% 19.8% 22.6%
(Mar'04-Oct'21)
Returns
rolling 12 12.2% 11.2% 16.0% 17.2%
months,median
downside standard deviation 12.1% 16.2% 18.4%
worst 12 months -31.7% - 57.5% 56.8% - 42.7% has been assumed to be the Maximum Marginal Rate
worst drawdown -34.9% - 61.0% 59.9% - of Tax considered for computation of tax on Long short
Covid drawdown -21.2% - 36.4% 38.4% - portion. Please refer disclaimer on slide 43.
INVESTMENT &
RISK PROCESS
 Investment Universe

Listed Universe These are all the companies that are

listed in the Indian stock exchange.
(~5300 stocks)

These are stocks that are traded Traded Universe

in the stock exchange. (~3100 stocks)

This universe consists of all stocks which are

Active and Passive meaningfully part of major indices, peer set or
Unvierse (~700 stocks) optionally included by the analyst or which Fund
Manager wants to buy.

Active universe are those stocks where SBI Active Universe

FM Research Team has an earnings model,
target price, recommendation and (297 stocks)
meeting notes.

Portfolio Stocks which are part

(20-30 stocks) of the portfolio.
 Our Investment Ethos

MACRO + ASSET
ALLOCATION
1

BOTTOM UP
RESEARCH
2
INVESTMENT
UNIVERSE
ESG + FORENSIC 3

QUANTITATIVE
MODELS 4

AS THE CORE OF OUR INVESTMENT PROCESS, EACH STOCK IN OUR INVESTIBLE

UNIVERSE GOES THROUGH A RIGOUROUS MULTI STEP ANALYSIS
 Investment Process

Portfolio
Idea Generation Analysis Management Maintenance
1. Monthly Quant-Q score 1. Template
Model 1. Earnings Model 1. Update
2. Buy / Sell Decisions
2. Screeners 2. Value Framework 2. Review the
3. Risk Management recommendations
3. In-house Research 3. Moats
4. Portfolio Sizing 4. Reinforce in meetings
4. Channel Checks 4. Cross Pollination
5. Analyst Portfolios 5. Peer Review
5. Sell-side Research

2 4 6
1 3 5 7
Execution Maintenance
Investment Execution
Scuttlebutt
Thesis
1. Rationale 1. Market Intelligence
1. Competitors 2. Price Volumes /
2. Target Price
2. Customers Trade offs
2. Recommendations
3. Suppliers 3. Technicals
3. Checklist
4. Management
4. Best Ideas
5. Risks
 Our Investment Ethos

Committee through its expertise

An internal committee actively
engages to carry out detailed
discussion on the finding of
various propriety macro,
valuation and sentiment driven
framework
ASSET
across domains helps see
through the noise as well as take
early views on evolving trend
before it gets reflected in data.
These inputs are used to make
tweaks to model allocations

ALLOCATION
COMMITTEE
Data and signals from the
Active discussion on the need
model can sometime be noisy.
to improve the model in light
Committee engages to see
of new fundamental
through transient trends and
developments.
noisy signals.
 Risk Management – Integral Part of Investment Process

Continuous portfolio monitoring

Formulation of to maintain consistency with Portfolio Reviews
investment processes and Controls
Investment
strategy
Risk strategies: setting of risk budgets Performance and risk analysis: risk
in the portfolio mandates / templates attribution and performance attribution
Regulatory
Relevant Risk indicators: to track market, guidelines Performance and risk vis-a-vis peer-set:
credit, liquidity, concentration risks Attribution analysis, ex-post TE, IR
Contractual
Regulatory and Client guidelines constraints Portfolio liquidity, concentration
Operational Risks: Market errors, IT Assessment of positions: global
related, Business Continuity Internal exposures; concentrations, cash
limits

Internal Audit Compliance Risk Management Investment Team

Monitoring adequacy Enforcement of regulatory rules Team of 10 professionals CIO, fund managers
& conformity of risk and professional standards Dedicated interfaces in each First Level Control
procedures Validation of marketing and Department
other documents Setting of Risk Policy parameters
and tools
Second Level Control

WELL DEFINED RISK MANAGEMENT MECHANISM

 Fund Terms

Minimum Investment INR 1,00,00,000 (Rupees one crore).

Drawdown 100% upfront

Liquidity Weekly (on each Friday of the week, provided the same is a business day, else the next business day)

Class Management Fees (as a % of the

average AUM) Performance Fees

A1 Nil 25%
Management
Fees A2 2.00% p.a. Nil
A3 1.50% p.a. 15%
A4* 0.50% p.a. 10%

Hurdle rate For class A1 & A4 – 7%; For class A3 – 12%, pre-applicable Taxes (including withholding Taxes)

For All class A units: Within 1 (one) year from the date of the first Portfolio Investment made by Scheme – 5% . For class A1 & A4:
Post 1 (one) year from the date of the first Portfolio Investment made by Scheme but within 1 year from date of allotment of Units
- 2%; Post 1 (one) year from the date allotment of Units – NIL. For class A2 & A3: Post 1 (one) year from the date of the first Portfolio
Exit Load
Investment made by Scheme but within 1 year from date of allotment of Units – 3%; Post 1 (one) year from the date allotment of
Units but within 2 (two) years from date of allotment of Units – 2%; Post 2 (two) years from the date allotment of Units but within 3
(three) years from date of allotment of Units – 1%; Post 3 (three) years from date of allotment of Units – NIL.
 Executive Summary

FOCUS ON RISK ADJUSTED RETURNS

1 In the long run, risk adjusted returns are most

critical for wealth generation. Hence, while
enhancing returns is important, protecting
downside is also equally of the essence.
UNPARALLELED EXPERTISE

4
This strategy essentially combines the two of our
strongest suits – Bottom-up stock picking & Asset
Allocation. As an asset manager, we have several
successful strategies being managed basis high
conviction stock picking as well as asset allocation .
ASSET ALLOCATION
SBI FUNDS
MANAGEMENT 2 Achieving the ‘optimal’ asset allocation between
a mix of long only equities & derivatives strategy is
the key to manage volatility & maintain lower cor-
relation with the broader markets
GLOBAL INFRASTRUCTURE

5
SBIFM has, over the years created a world class
infrastructure including a robust, risk manage-
ment framework as well as strong compliances
team.
TEAM STRENGTH

3
SBIFM has a strong team of over 63 professionals
with an average experience of 15 years. This
includes expertise across sectors as well as
dedicated teams for macro economics
research, quantitative investing as well as ESG.
 Team Biography
Gaurav Mehta
CFA – CIO Alternates, SBIFM
Gaurav has a B.Tech (Chemical Engineering) from IIT
Bombay and holds a post graduate diploma in
Management from IIM, Lucknow.
Work profile
Gaurav has moved to the AIF vertical as CIO- Alternatives.
At SBIFM, Gaurav has been the Chief Equity Strategist & Fund
Manager managing mutual fund schemes including SBI
Retirement Benefit Fund, SBI Multi Asset Allocation Fund and SBI
Balanced Advantage Fund.
Prior to joining SBIFM, Gaurav was managing Ambit’s Good &
Clean, Emerging Giants and Risk Optimizer funds.
Gaurav has also been in Ambit Capital where he was a rated
equity Strategist in the Institutional Equities business
Gaurav was previously associated with Edelweiss Capital where
he managed a trading team with specialization in options
trading at the proprietary desk
Vishal Saraf
CFA
Vishal is a Commerce graduate from Nagpur University and
became a qualified Chartered Accountancy from ICAI in
2003
Work profile
Vishal joined in 2007 as an analyst in mutual fund team and
was responsible for analyzing and recommending stocks
across multiple sectors such as automobiles, capital goods,
utilities and materials. He moved to the AIF (alternative equities)
funds since the inception of the vertical in 2015 and has been
one of the key members of the AIF team, assisting the fund
manager in various fund management activities such as
formulation of investment strategy, stock evaluation and
selection, portfolio rebalancing and dealing.
Vishal was previously associated with Motilal Oswal Securities
as an analyst, where he Analyzed investment ideas and
prepare financial models and reports. He also Identified and
recommend investment ideas across sectors primarily for mid
and small cap companies.
 Strong Established Partnership

Strong Indian presence: extended international reach

India’s premier and largest bank with over 200 years € 2.000 trillion in Assets under Management, largest
experience (Estd: 1806) asset manager in Europe
Ranked 43rd among the top banks globally in terms 6 investments hubs in key international financial
of assets; asset base of USD 694.20 bn* centres and offices in 35 countries
Second largest footprint globally, ~22,253 branches Over 100 million retail, institutional and corporate
and 64, 216 ATM’s as at end of December 2021 clients worldwide
Servicing about 459.2 million customers 5,300 team members and market professionals

62.63*% 36.78%

*Source: Fortune Global 500 List; SBI Analyst Presentation as on December end. 1 USD = INR 74.5823
Source : Amundi website as on December end 2021
*SBI along with its nominees. The nominee shareholders hold only 2000 shares in the Company.
Individuals hold 0.59% of shares of the company which are shares allotted under ESOP 2018.
 SBI Funds Management

Broad AAUM INR 6,47,067 Crores* AAUM in mutual funds

Investor 6,47,067 Crores
Base Asset management across mutual funds, segregated managed
accounts, domestic advisory & offshore advisory business

Multiple asset classes ranging from equities and debt, money

market to ETFs and structured funds
Wide Experienced Investment team of ~63 professionals with strong track record
Distribution Investment
Network Team Broad customer base with ~12 million folios related to individual,
corporate and institutional investors

Extensive SBI Mutual Fund: India’s first bank sponsored Mutual Fund
Product
Range
 SBI Funds Management

Financial products, instruments and investments are subject to market risks and returns, yields liquidity from these may vary depending on different factors that affect
financial markets. There is no assurance or guarantee that the objectives SBI OPTIMAL EQUITY FUND will be achieved. Investors are not being offered any guaranteed or
assured returns. Past performance of the financial products, instruments, particular investments, portfolios and the Investment Manager, its affiliates and group entities
do not necessarily indicate the future prospects and performance. The name of SBI OPTIMAL EQUITY FUND or any of its Schemes does not in any manner indicate either
the quality of the products or their future prospects and returns. Certain market related disclosures are only estimates and could be materially different from what
actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Investors/Potential Investors shall be
fully responsible/are liable for any decision taken on the basis of these disclosures. All investors/potential investors should before dealing and or transacting in any of the
products referred to should make their own investigation, seek appropriate professional advice including advice from their tax consultants. The investments discussed
in various communications may not be suitable for all investors and persons subscribing to or investing in any product/financial instruments should do so on the basis
of and after verifying the terms attached to such product/financial instrument, including assessing the risk applicable to such products/ investments. The Trustees SBI
Mutual Fund Trustee Company Private Limited (including its affiliates and group entities), the Investment Manager SBI Funds Management Limited (including its affiliates
and group entities) and any of their officers, directors, personnel and employees, shall not be liable for any loss, damage of any nature, including but not limited to direct,
indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of these disclosures in any manner. The disclosures
contained is for information purpose only and should not be treated as constituting an invitation for offer to avail the services of, or to invest in any portfolios or products
advised /managed by SBI Funds Management Limited (SBIFML) or its subsidiaries.

These disclosures may contain certain forward looking information and statements, which are based on current estimates/projections/assumptions/information
currently available. Such forward looking information and statements are subject to risks, uncertainties and assumptions. These disclosures are prepared basis
information, already available in publicly accessible media or developed through internal analysis of SBIFML. SBIFML does not guarantee or warrant that the information
herein is accurate, complete and current. Where performance data has been provided it does not guarantee future performance/results. SBIFML reserves the right to
make modifications and alterations to these disclosures including forward looking statements as may be required from time to time.

This document is neither a prospectus nor an invitation to subscribe to Units. The recipient of this material is advised to refer the Private Placement memorandum (PPM)
and consult their financial, legal and tax advisors before taking any decision on investment. In case of any inconsistency between this presentation, the PPM and the
Contribution agreement, the Contribution agreement shall prevail. Recipients of this information should exercise due care & caution and read the Private Placement
Memorandum/ Offer Document (if necessary, obtain the advice of financial/tax/legal/other professionals) prior to taking any decision based on this information.