Magnum LIF

Dhirendra Kumar

Magnum Liqui Bond Income fund (Magnum LIF), is an open-end debt fund that seeks to invest upto 25 per cent in call and money market instruments. In its dividend option, the fund has paid a total dividend of 12.95 per cent in the past one year. While entry into the fund is at NAV, redemption within 6 months attracts an exit load of 0.5 per cent.

Since launch, Magnum LIF has given an annualised return of 11.31 per cent. This fund which has seen a secular growth of corpus has emerged as a large sized debt fund. With the growing corpus, the fund has also hiked its exposure to Gilts, which have been around 30-35 per cent on an average. While triple A papers including gilts account for 75-80 per cent of the portfolio, the fund also has a reasonable exposure to double A paper, with an average exposure of 20 per cent. These double A instruments, bring in higher interest income, for the higher degree of accompanying risk.

Returns posted by fund also depend on the interest rate outlook and interest rate and bond prices move in opposite direction. The gains from a fall in interest rates are more for longer dated papers. Magnum LIF has been actively managed to take advantage of interest rate movements. The consistently falling interest rates till April 2000 saw the fund progressively increase its maturity profile and this boosted the returns posted by the fund.

In the past few months however, the fund has actively pruned the maturity profile to 2.96 years amidst tightening of interest rates. Despite active management the fund has still remained in the medium end of the market and the fund lost 0.68 per cent in July when RBI hiked interest rates to stem the fall in rupee. The loss is more than the Value Research Medium-term Debt Fund average of 0.25 per cent in July, 2000. The recent under-performance turned the fund to a below average performer.

The large size of the fund would impart it a fair degree of stability guarding it against any sudden redemption pressure. However, a volatile debt market and frequent management change (the fund has seen three fund managers in the last 3-months) has adversly impacted the fund.

Fund Basics
Objective	Size (Cr)	NAV:7/08	Exit Price	Entry Price	Total Returns(%)
Income	766.00	12.07	12.07	12.07	11.31%
Benchmark Comparisons (%)					31/7/2000
	1M	3M	6M	1Yr	3Yr
Fund	-0.68	0.01	3.25	10.03	—
I-Bex Tot.	-0.19	-0.99	4.50	13.78	12.62
Obj Avg	-0.25	0.80	4.35	10.82	12.12
Top Holdings (1/7/2000)					Net assets (%)
G O I					32.9
I C I C I					6.36
Indian Oil Corpn. Ltd.					5.29
IDBI					4.42
Reliance Industries					3.92
HDFC					3.52
Gujarat Ambuja Cements					3.27
Tata Chemicals					3.09
BPCL					2.93
TISCO					2.47
Larsen & Toubro					2.2
Nirma					2.12
TELCO					2.12
HPCL					2.1
ACC					1.65

Source: Value Research

Fund File

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