The Hindu Business Line : Magnum Contra Fund: Invest

Investments can be considered in Magnum Contra, an open-ended fund, based on its good three- and five-year track record. Contrarian funds invest in stocks that are currently out of market favour. But the investment pattern of this fund appears more that of a diversified than a strictly contrarian fund.

Magnum Contra has handled downside risks well. It has also comfortably outpaced its benchmark — the BSE 100, by a good margin during bull phases. The fund has generated a return of 70 per cent over a five-year time frame, higher than the benchmark by 24 percentage points.

Suitability: The fund, which had sizeable exposure to mid-caps during the early part of this bull run, has toned down exposure to mid-caps over the past few years, to 25-30 per cent of the portfolio.

Since the fund now predominantly invests in large-cap stocks, it is suitable for investors with moderate risk profile. It adopts a buy and hold strategy and does not aggressively churn its portfolio, providing comfort for investors.

Performance: The fund has comfortably outpaced the category average for the one-year period and its NAV has grown by 58 per cent, seven percentage points higher than its benchmark.

Comparable peers, Tata Contra and Kotak Contra, which have a track record of less than three years, consist of sectors that are contrarian to market favour.

Portfolio Overview: The fund has a well-diversified portfolio and consists of 57 stocks. Over the year, it has restricted exposure to individual stocks at below 7 per cent.In spite of its contrarian mandate, the fund has significant allocations to sectors that are currently in market favour. Capital goods and energy continued to corner a sizeable portion of assets over the past oneyear.

The top three sectors accounted for 40 per cent of assets. IT stocks, which have under-performed the broader markets, also saw accumulation.

This is in keeping with a contrarian strategy. Holdings in stocks such as Infosys Technologies and TCS have risen over the past six months, in contrast to most other equity funds. Ten per cent of the assets were invested in the auto sector during the last one year.

Fund facts: Magnum Contra Fund was launched in July 1999 and Mr Pankaj Gupta manages it. Under the dividend option, the fund has declared dividends for the past three years. The NAV per unit is Rs 58.30.

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