It is said that old is gold and this fund certainly holds the saying true. Launched in 1995, Magnum Balanced has been a star performer of the hybrid equity-oriented category. The fund intends to provide capital appreciation by balancing its investments between equity and debt. The fund has chosen the CRISIL Balanced index as its benchmark.
In the past five years, Magnum Balanced has lived up to its reputation by delivering an average of 34 per cent returns. In the bull run, the fund manages to comprehensively beat the category and the benchmark but its weaknesses come out in falling markets. In the last six months, Magnum Balanced has fallen by as much as 32 per cent. Its category fell by only 10 per cent during this period. Even in 2001, when the tech bubble burst, the fund went down by 47 per cent, 20 per cent more than the category.
Magnum Balanced is a well diversified fund with exposure in almost all sectors. However, at times the fund has been very aggressive with its sector allocations. It increased its allocation to technology stocks durng the tech boom to as much as 56 per cent and applied the same strategy with construction stocks. Currently, its top holdings are in technology (11.78 per cent), energy (10.9 per cent), construction (9.28 per cent) and financial services (7.33 per cent).
Traditionally, the fund has kept a focused portfolio of around 43 stocks, which has been increased steadily in the past six months to minimize the downside risk. Currently, the portfolio is made up of 49 stocks. The fund manager likes to bet big, which is understood by its very high allocation to a few stocks like Aftek Ltd, Ramco Industries Ltd and PVP Ventures Ltd at different points of time. After the market crashed in January 2008, the fund went into some of the real estate stocks like Akruti City Ltd and Unitech Ltd., in which it had till then refrained from investing.
Over the years, the fund has always kept a very high allocation to equity; even now it has got 68 per cent exposure to equity compared to its historical average of 63 per cent. In its debt portfolio it has invested primarily in high quality short-term papers mostly issued by the finance companies.
Magnum Balanced has both the pedigree and the rich history to warrant a place in any investor's portfolio. But investors should not mistake this fund as a low risk investment and would be better off if they treat this as any equity diversified fund.
This article was originally published on October 22, 2008.
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