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Suresh Parthasarathy

Investors can retain their holdings in Magnum Equity Fund. The fund’s performance over a five-year period is not heartening; however it has managed to return above the category-average and benchmark over a three- and five-year period.

The fund witnessed bad patches until 2005, but managed to turn the tide and started performing in the subsequent years to place itself in the top quartile of the diversified fund category in 2006 and 2007. In the above period, it also declared a dividend of 50 per cent, distributing profits made. But it has failed to sustain the momentum in 2008 and trailed the benchmark marginally despite moving to higher cash positions.

Since the fund’s mandate is to invest in growth stocks there can be a spike in its performance if the economy revives in full force. However any fresh investment can be put on hold until the fund’s performance shows better consistency across market cycles. Moreover, the scheme witnessed change in fund manager very recently; this also warrants a wait and watch approach. Given the fund’s track record of periods of superior performance, followed by underperformance, existing investors will be better off with the dividend option rather than opting for the growth option to help sweep profits and also realign their portfolio exposure to the fund.

Performance: The fund’s NAV has gained 7 per cent over a one-year period outpacing its benchmark BSE 100 by 10 percentage points. The fund scaled up its performance and outpaced the benchmark over a three-and six-month period. This is despite the fact that it held cash between 10-20 per cent and that one fourth of the assets were invested in defensive sectors such as consumer goods and pharma. In the past two years, on a rolling monthly return basis, the fund trailed its benchmark fifty per cent of the times.

Portfolio Overview: The fund held 30 stocks in the portfolio. A good 50 per cent of the assets were invested in the top ten stocks. Consumer goods replaced capital goods in terms of the most preferred sector .The top three sectors, consumer goods, energy and pharma, accounted for 37 per cent of the assets. Latest portfolio of the funds appears more balanced, but for the higher exposure to energy space. The fund took a cautious stand in cement sector and reduced weight by six percentage points to 2.4 per cent. Its lower portfolio turnover suggests that it has not been aggressive in churning the portfolio. It has not pruned its holding in some of the construction stocks it held despite steep erosion in value during last year’s correction. The fund predominantly held large-cap stocks while mid and small cap stocks(market capitalisation less than Rs 7500 crore) accounted for 20 per cent of the assets. It is managed by Mr Rama Iyer Srinivasan.

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