The Hindu Business Line : Magnum Midcap: Hold

Despite lagging quite a few diversified funds, its report-card inspires confidence given the under-performance of mid-cap indices in the latter part of 2005.

Investors can retain their holdings in Magnum Midcap. The fund has returned 90 per cent since its launch in March 2005. Despite lagging a few diversified funds, its report-card inspires confidence given the under-performance of mid-cap indices in late 2005.

Mid-cap stocks are susceptible to taking a harder hit during market a downturn. Further, Magnum Mid-cap is yet to negotiate various phases of the market unlike funds such as Franklin Prima. These factors enhance the risk profile. Investors can avoid fresh exposures to the fund now.

IMPROVED SHOWING

Of the several mid-cap funds launched over the past year, Kotak Mid-Cap and Magnum Midcap have attracted attention for performing well despite the bumpy journey of mid-cap stocks. While Kotak Mid-Cap has shown more consistency in terms of returns since its launch, Magnum Midcap has improved its performance over the past six months. A distinct feature of this fund compared to peers such as and Franklin Prima is the number of stocks held.

A number of mid-cap funds typically hold more stocks in their portfolio to combat risks related to low liquidity in the small- and mid-cap space. While the above established funds have diversified their holding over about 70-80 stocks, Magnum Midcap has restricted its holding to about 35 stocks despite having an asset base comparable to Sundaram Select Midcap. The concentrated bet has yielded returns superior to other new launches such as UTI Midcap and Tata Midcap. The fund has, however, invested about 40 per cent of the assets in stocks with a market capitalisation of over Rs 2,000 crore. This is likely to mitigate risks related to liquidity.

Engineering, construction and metals account for 50 per cent of the fund's assets. These themes are in line with the broad market flavour. Eighteen of the 35 stocks held in February have been in the portfolio for close to a year. IVRCL Infrastructures, Maharashtra Seamless and Crompton Greaves have delivered manifold returns and are part of the portfolio with partial profit booking.

Fund facts: Magnum Midcap has Rs.355 crore of assets under management. Mr. Sanjay Sinha replaced Mr Sandip Sabharwal as the fund manager in November 2005. The fund has maintained its performance even after the change in fund manager.

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