The Hindu Business Line : Magnum Contra: Invest

An investment can be considered in Magnum Contra. The fund's strategy of going against the market has delivered a return of about 9 per cent over the past year. While its performance beats the category average, it may not appear as impressive as some of the top ranking funds. There are, however, few funds that have built a track record of beating the market through contrarian investing in the manner this fund has. Moreover, such strategies typically take longer periods to pay off and require investors to take a long-term view. Magnum Contra has witnessed more volatility over the past year. During this period, stocks that were not in market favour cane under further pressure during corrective phases. For those who used systematic investment plans to build their exposure to the fund, however, the returns are likely to have been far superior.

Assuming a monthly investment of Rs 1,000 was made beginning end of April 2006, investors would have earned a return of 22 per cent (excluding interest earned from money in the bank)! The fund's performance also appears to have picked up pace over the past 6 months.

As heightened volatility is expected to be the norm in the markets henceforth, investing in phases or through SIPs may be an appropriate strategy for more conservative investors. Magnum Contra has demonstrated an ability to compensate investors for risk. Its monthly returns over the past five years have outpaced that of the BSE 200 two-thirds of the time. We compare its performance to the BSE 200 as it captures some of the action in the mid-cap space.

The fund was heavily biased towards mid-caps until 2005, after which it shifted to large-cap stocks. Since then, it has also toned down its aggressive exposures to stocks and capped investments in any single stock to about 5 per cent. Such measures do not appear to have affected performance.

Portfolio overview: In terms of sector exposure, Magnum Contra resembles that of several other diversified funds with engineering stocks figuring in its top holdings. Most of the funds that figure in the top of the performance charts now sport a tilt towards energy stocks, which again form a chunk of its holdings.

However, software stocks, which have propped up the returns of most diversified funds, are conspicuous in their absence from the portfolio. This could explain some of its underperformance.

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