Returns Dilemma | Value Research SBI Magnum Global Fund boasts of an absolute return over five years of 872 per cent. If I had bought units during the new fund offer period for Rs 10, shouldn't the NAV be Rs 87.2?-Madhusudan Kulkarni
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Returns Dilemma

SBI Magnum Global Fund boasts of an absolute return over five years of 872 per cent. If I had bought units during the new fund offer period for Rs 10, shouldn't the NAV be Rs 87.2?
-Madhusudan Kulkarni

SBI Magnum Global Fund boasts of an absolute return over five years of 872 per cent. But the NAV is around Rs 45. If I had bought units during the new fund offer period for Rs 10, shouldn't the NAV be Rs 87.2? But since the NAV is quoting at Rs 45, how do these absolute return figures influence my investment? I want to invest in this fund, but the data is confusing.
-Madhusudan Kulkarni

To put things in context, Magnum Global was launched in September 1994, almost 13 years back. There are two reasons why the current NAV is not reflecting the kind of returns claimed by the fund house.
Firstly, Magnum Global has declared three dividends even under the growth option in the past four years. As a result, the current NAV does not reflect the total gains made by the fund.
The second flaw in your calculation is that you have assumed that the fund has not slipped below its offer price of Rs 10. Whereas during the meltdown over 2001-2002 Magnum Global Fund's NAV was quoting below its offer price of Rs 10. In fact Rs 8.18 was the highest that the NAV reached in 2002, that is a loss of 18 per cent for the investor from the NFO price. The units of the fund touched a low of 6.48 per cent in that year.
Taking these factors into consideration the fund has actually made an absolute return of 945.16 per cent between December 29, 2001 and 2006; whereas its return since launch till the end of 2006 is 591 per cent.
But the recent correction in markets has brought down these figures considerably. As of April 5, 2007 the 5-year absolute and annualised returns stood at 709 per cent and 51.91 per cent, respectively.
There is no doubt that the fund is an outperformer. You can invest in it keeping in mind the rest of your portfolio.

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