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Changing Fortune

Magnum Balanced had been its category’s worst performing fund until its fortunes changed in 2003

This fund has left behind its days of brashness to evolve into a stable offering. In its first seven years, it failed to impress, barring 1999 when it delivered 192.51 per cent, which was 100 per cent higher than the category average! It was even way ahead of the average diversified equity fund return of 127.78 per cent.

The fund was actually the worst performing fund of its category in a row for three years till 2002. But 2003 saw a change in its fortunes. Since then, it has consistently outperformed the category average and currently is the best fund under the hybrid equity-oriented category over the five year period ended January 31, 2009. Its annualised gain of 16.79 per cent over this period is ahead of its category by nearly 6 per cent.

Despite a mandate allowing it to go headlong into equity, the fund has never done so. In fact, its highest exposure has been at around 77 per cent. But within the equity allocation it can get quite aggressive and has the mark of a risk taker.

The fund may dabble in stocks which other fund managers prefer to stay away from. Such as being relatively overweight in the construction sector since 2005 with exposure to real estate companies like Nagarjuna, Akruti City, Unitech Ltd, IVRCL Infrastructure & Projects, and Puravankara Projects. Although, the exposure to the sector has been pruned down to nearly 7 per cent, it is still higher than the category average of around 3 per cent.

During the tech boom, exposure to technology went as high as 38.92 per cent. But such high allocations have been toned down over the years. Currently the fund looks fairly diversified with the top three sectors accounting for nearly 31 per cent, in line with its category. Also, earlier instances of a particular stock cornering more than 10 per cent of net assets too have been subdued in the recent years. The number of stocks, which at times has been around 25, has averaged at around 47 in the past year.

On the debt side, the fund sticks to high quality paper and prefers debentures and certificate of deposits of banks and financial institutions.

Investors get drawn to the fabulous performance during bull runs. But they must be prepared to sit tight when the market crashes. This fund does have an aggressive tilt and tends to get hit hard.