The Hindu Business Line : Magnum Global Fund: Invest

The fund's strategy and track record suggest that it is ideally suited to investors willing to assume a high degree of risk for superior return potential.

Mid-cap stocks are now trading at a significant valuation discount to large-caps, after the sustained appreciation in the latter's prices over the past few months. With several stocks in the mid-cap space now available at a reasonable asking price, there is a good opportunity for investors to take exposures in equity funds focused on mid-cap stocks.

Magnum Global Fund, a diversified equity fund that is focused on mid- and small-cap stocks, seems a good investment option given its strong performance record. The fund recorded a 54 per cent return over the past year and a compounded annual return of 57 per cent over the past five years, which compares favourably to most other mid-cap-oriented funds.

The fund's investment style is aggressive. About 85-90 per cent of the portfolio is consistently invested in mid- and small-cap stocks (market capitalisation of less than Rs 5,000 crore). The fund's exposures are also quite focused on its top sectors and stocks.

Capital goods and construction, the two overweight sector positions in recent months, each account for 15-20 per cent of the assets. The top ten stocks usually account for 40-45 per cent of the assets.

The focused exposures, in addition to the predominance of mid/small cap stocks in the portfolio, may contribute to higher volatility of returns, with the possibility of magnified downside to the NAV in the event of a market meltdown.

A break-up of the fund's returns over a volatile two-year period shows that it has outperformed its benchmark, BSE-100, in 16 out of 24 months, but generally registered sharper declines during corrective phases, such as the one in May-June 2006.

The investment style and the fund's track record suggest that it would be ideally suited to investors willing to assume a high degree of risk for superior return potential.

The portfolio shows that despite the focus on smaller and mid-sized companies, Magnum Global has usually stuck to the better- known names in the sectors it fancies. Choices such as IVRCL Infrastructures, Ansal Properties and Jaiprakash Associates in the construction and infrastructure space, Shree Cement and India Cements in the cement space and Thermax and Crompton Greaves in engineering appear to be evidence of this.

The quality of portfolio choices made so far suggests that downside risks to performance may be contained over a long holding period.

Fund facts: Magnum Global Fund was launched in September 1994. Despite its name, the fund is a plain vanilla diversified equity fund focused on mid- and small-cap stocks. It is managed by Mr Sanjay Sinha.

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