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This technology fund has the temperament of delivering exceptional returns but it tests investors patience with every market fall

Magnum IT has a record of rewarding investors handsomely, but not without its volatility-driven concerns. This mid- and small-cap dominated fund offered best returns in the category in 2005 (65.40 per cent) and the second-best in 2006 (51.17 per cent).

The fund remained a large-cap oriented till early-2005, when Sandip Sabharwal took up the reins. Before this, the fund put up an average performance delivering decent but highly inconsistent returns, resulting into average gains for its investors. But all this was to change with the arrival of Sabharwal. During his eight-month stint, his focus on small-cap companies generated exceptional returns for the investors.

However, since then the fund has seen several manager changes and a change in orientation too. Though the large-cap allocation has remained more or less the same over the past one year, the fund has cut exposure to small-cap companies to focus more on mid-cap scrips. The small-cap allocation has come down from 67.23 per cent in March 2006 to 29.31 per cent by the end of February 2007. Companies like Infotech Enterprises, Infosys, KPIT Cummins have been part of its portfolio for a long time.

This technology fund has the temperament of delivering exceptional returns but it tests investors patience with every market fall. The fund with a high standard deviation, the second-highest in the category, saw wide fluctuations in quarterly performance last year - varying form a negative 7.53 per cent in the June quarter to 29 per cent in the quarter ended December. But on an overall basis, it outperformed the category of technology funds by a margin of 5 per cent during the year 2006.

Given its volatile nature, investors need to take a longer term view to get the best out of this fund.