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Magnum Balanced Fund

Dhirendra Kumar

Magnum Balanced is an aggressive balanced fund from SBI Mutual Fund. The fund paid a bonus of 1:10 in November 1997 and another bonus and dividend of 1:2 and 30% in March 2000. While the guiding principal of the fund is to "balance the high-return, high-risk investment in equities with lower risk investments in debt", the fund has strayed away from this theme.

The annualised return of 8.95% since launch highlights the volatility of the fund. Starting off with a portfolio of quality equity instruments, the fund has little to offer in terms of return. Making a decisive turnaround in 1999, Magnum Balance made a higher allocation to equity and a tilt towards the growth sectors of Pharma, FMCG and Infotech. The fund's debt component has been rather static with not much to comment upon for want of disclosure regarding the maturity profile.

Though the rally in the growth sectors gave the fund a big push forward, the returns were also supplemented by holdings outside these sectors. Besides, the mid-cap stocks of the fund surged with the rising markets and the fund gained a whopping 192% for the calendar 1999 – far in excess of the Sensex yield of 64%.

    However with most of its technology bets peaking amid the ICE rally in early 2000, the fund lost its sense of balance – the equity exposure peaked in March 2000 at 79% of the corpus with allocation to ICE stocks at a whopping 63%. With the ICE rally and its mid cap stocks taking the fund to stellar heights, the gains simply vaporised in the ensuing downward spiral since March 2000. Since then, it has been a case of top winner turning a top loser with the fund shedding a whopping 30.5% in 2000!

With the fund following a very aggressive strategy for its equity component, the debt component has barely been able to offer protection against downside during the fall in equity markets and thus defeat the purpose of a balanced offer. Belated re-balancing has seen the fund mellow its aggressive stance with a diversified equity exposure and increased allocation to debt at 34%.

It has been the case of a late awakening for Magnum Balanced. With the fund badly bruised, it is now attempting to turn a new leaf by adopting the tenets of “balanced” philosophy. It remains to be seen whether the fund sticks to the diversification theme and comes down on the volatility scale.

Top Equity Holdings (31/03/2001)      Value (Cr)    % of Assets   S S I   6.52   5.70   BHEL   5.90   5.16   H C L Technologies   5.52   4.83   Corporation Bank   5.48   4.79   Cipla   5.39   4.71   I C I C I   5.36   4.69   Zee Telefilms   4.56   3.99   Mid-Day Multimedia   4.20   3.67   IPCL   3.24   2.83   Mukta Arts   3.07   2.68 Top Debt Holdings (31/03/2001)      Value (Cr)    % of Assets   ACC   5.32   4.65   I C I C I   5.20   4.55   IDBI   5.18   4.53   BPCL   5.02   4.39 Source: Value Research Money Fund File Tell us what you think of this report