VR Logo

Challenges Ahead

The man behind this fund's success has left the fund house. The new manager faces a huge challenge to maintain the fund's trailblazing recent performance

Sandip Sabharwal, who removed the label of mediocrity from the fund during his eight-month stint last year, has left the fund house. As should be done in all such cases, investors need to be watchful about whether the new manager will be able to fill Sabharwal's shoes adequately. At this point in time, Sabharwal will be a hard act to follow.

In pre-Sabharwal era, the fund's performance was patchy. It used to perform well on occasions but an inconsistent show resulted into below average returns for its investors. However, things changed under Sandip Sabharwal. He turned the tide in favour of Magnum IT last year by overhauling the portfolio completely. Large-cap stocks, which used to form the core of the fund, made way for small-caps--exposure to small-cap stocks increased consistently from 12.06 per cent per cent in January last year to 57.41 per cent in November 2005. Though this strategy resulted into higher volatility, it worked well for the fund--for the first time, Magnum IT earned the top slot by delivering 65.40 per cent return in 2005, much more than the 54.20 per cent gain of the second best fund in the category.

Magnum IT has a chequered long-term record, though. Even as the timing to launch the fund could not have been better, it failed to capitalise on the early gains that the fund had made. It had a dream run during the quarter ended December 1999 when it delivered its best returns of 130.10 per cent. However, this gain was negated in the next two years 2000 and 2001 when the fund lost 46.15 and 47.59 per cent, respectively during the worst phase of the technology sector. The bad run for the fund continued in the year 2002 as well when the fund returned only 1 per cent against the category average of 10.34 per cent. The performance improved in the next two years but the fund continued to trail behind the peers.

The fund is still far from becoming the pick of the technology funds. Though it flourished last year on back of some crucial changes brought about by Sandip Sabharwal, it finds itself at a crossroad now. It would be interesting to see how the new manager manages the concentrated small-cap portfolio. Don't get surprised if the fund shifts its focus to large-caps once again.