Mid-cap stocks and mid-cap oriented mutual fund schemes are like a double-edged sword. While they can make one super rich in market rallies, they can also throw one flat on the face in the downturn. Investors of Magnum Mid-cap have also faced this harsh reality in the past five years since the time fund was launched in March ‘05. Thus, despite the fund doing fairly well in recent times, the assets managed (AUM) by this fund today stand relatively lower than what it used to manage in 2006-07. The fund is currently managing about Rs 330 crore of investor money.
PERFORMANCE: To summarise the fund’s performance in brief, Magnum Mid-cap has had a fantastic performance in some of the most bullish years of the market in the last five years, like in 2006 and 2007 and then again in 2009; while the meltdown year of 2008 saw the fund’s net asset value (NAV) going virtually down the drain. In fact, by mid-December ‘08, the fund was trading at an NAV, below its face value of Rs 10 per unit, implying that it notionally lost all what it had made in the previous three years since its launch in 2005.
The timing for the launch of this mid-cap oriented fund, at the beginning of one of the wonderful rallies that the Indian equity markets have ever witnessed, could not have been better. It returned a whopping 52% gain in the very first year of its launch, outperforming its benchmark, the CNX Midcap’s 38% returns by extremely good margins. The following years of 2006 and 2007, that witnessed the market’s rally at a stupendous pace, saw Magnum Mid-cap put up an impressive performance with 47% and 71% returns respectively in these two years against CNX Midcap’s 29% and 77% respectively.
In 2008 however, Magnum Midcap was lifted off its ground as its NAV declined by almost 72% as against the decline of about 60% in the CNX Midcap in that single year alone. This was a big shot in the back for investors of this scheme as the fund plunged to its all-time low rankings after this disastrous performance.
However, to the relief of most investors, the fund was quick to recover most of its losses in the following year 2009, as it returned about 104% against the recovery of about 99% made by the CNX Midcap. By the end of 2009, Magnum Mid-cap was trading at an NAV of Rs 21.8, a much desired recovery after its NAV fell to almost Rs 9 per unit in December ‘08.
As far as the performance in the current calendar year is concerned, so far, the fund has delivered about 12% returns since January this year, which appears quite decent in light of the extreme volatility that the broader market indices have faced this year. The fund’s benchmark, the CNX Midcap Index, has however returned about 18% returns so far in the current calendar year.
PORTFOLIO: A mid-cap oriented fund, with just about 30 stocks in the portfolio, raises the risk quotient of the fund. Currently, the top ten holdings of the fund alone account for nearly 50% of the fund’s equity portfolio, making it suitable for investors with a relatively higher risk appetite. As far as the sectoral allocation is concerned, the fund has a fairly high exposure in the FMCG space with GSK Consumer Healthcare alone accounting for about 6.5% of its FMCG composition. With mid-cap FMCG and healthcare sectors doing reasonable well for quite some time now, the fund has already made a neat 20% gain on this stock alone since the time it invested in this stock in February ‘10.
As far as healthcare is concerned, while the fund currently has about 8% exposure in this sector, the same has been increased only recently, May ‘10 onwards, and thus, this sector is yet to reap in gains for this fund. Its stocks under this sector include Cadila Healthcare, Dishman Pharma and Ipca Labs.
Given its mid-cap orientation, the fund has more of an opportunistic approach towards investment rather than a long-term holding strategy. It is thus quite proactive in churning its portfolio with most of its current holdings less than a year old. The only exception to this investment strategy is its investment in GMDC, which it has been holding since February ‘07 and Elecon Engineering, invested in in May ‘06. Of these, the fund has made a neat kill in GMDC with nearly 175% absolute gains in the last three and a half years of its investment in this stock.
OUR VIEW: A mid-cap fund with relatively high exposure to select stocks takes Magnum Mid-cap a bit high on the risk scale. Moreover, notwithstanding the fund’s decent performance in market rallies, it has failed to cushion its fall in the downturn. While those who had invested into this fund right at its NFO stage in 2005, have made around 146% gains from this scheme till date, these gains appear belittled when compared with CNX Midcap’s absolute gains of 199% during this period. Magnum Mid-cap is thus yet to prove its mettle before it can be rated at par with some of the better performing mid-cap schemes of the MF industry.
Source: http://economictimes.indiatimes.com/features/investors-guide/Fund-Review-Magnum-Midcap-high-on-risk/articleshow/6395373.cms
PERFORMANCE: To summarise the fund’s performance in brief, Magnum Mid-cap has had a fantastic performance in some of the most bullish years of the market in the last five years, like in 2006 and 2007 and then again in 2009; while the meltdown year of 2008 saw the fund’s net asset value (NAV) going virtually down the drain. In fact, by mid-December ‘08, the fund was trading at an NAV, below its face value of Rs 10 per unit, implying that it notionally lost all what it had made in the previous three years since its launch in 2005.
The timing for the launch of this mid-cap oriented fund, at the beginning of one of the wonderful rallies that the Indian equity markets have ever witnessed, could not have been better. It returned a whopping 52% gain in the very first year of its launch, outperforming its benchmark, the CNX Midcap’s 38% returns by extremely good margins. The following years of 2006 and 2007, that witnessed the market’s rally at a stupendous pace, saw Magnum Mid-cap put up an impressive performance with 47% and 71% returns respectively in these two years against CNX Midcap’s 29% and 77% respectively.
In 2008 however, Magnum Midcap was lifted off its ground as its NAV declined by almost 72% as against the decline of about 60% in the CNX Midcap in that single year alone. This was a big shot in the back for investors of this scheme as the fund plunged to its all-time low rankings after this disastrous performance.
However, to the relief of most investors, the fund was quick to recover most of its losses in the following year 2009, as it returned about 104% against the recovery of about 99% made by the CNX Midcap. By the end of 2009, Magnum Mid-cap was trading at an NAV of Rs 21.8, a much desired recovery after its NAV fell to almost Rs 9 per unit in December ‘08.
As far as the performance in the current calendar year is concerned, so far, the fund has delivered about 12% returns since January this year, which appears quite decent in light of the extreme volatility that the broader market indices have faced this year. The fund’s benchmark, the CNX Midcap Index, has however returned about 18% returns so far in the current calendar year.
PORTFOLIO: A mid-cap oriented fund, with just about 30 stocks in the portfolio, raises the risk quotient of the fund. Currently, the top ten holdings of the fund alone account for nearly 50% of the fund’s equity portfolio, making it suitable for investors with a relatively higher risk appetite. As far as the sectoral allocation is concerned, the fund has a fairly high exposure in the FMCG space with GSK Consumer Healthcare alone accounting for about 6.5% of its FMCG composition. With mid-cap FMCG and healthcare sectors doing reasonable well for quite some time now, the fund has already made a neat 20% gain on this stock alone since the time it invested in this stock in February ‘10.
As far as healthcare is concerned, while the fund currently has about 8% exposure in this sector, the same has been increased only recently, May ‘10 onwards, and thus, this sector is yet to reap in gains for this fund. Its stocks under this sector include Cadila Healthcare, Dishman Pharma and Ipca Labs.
Given its mid-cap orientation, the fund has more of an opportunistic approach towards investment rather than a long-term holding strategy. It is thus quite proactive in churning its portfolio with most of its current holdings less than a year old. The only exception to this investment strategy is its investment in GMDC, which it has been holding since February ‘07 and Elecon Engineering, invested in in May ‘06. Of these, the fund has made a neat kill in GMDC with nearly 175% absolute gains in the last three and a half years of its investment in this stock.
OUR VIEW: A mid-cap fund with relatively high exposure to select stocks takes Magnum Mid-cap a bit high on the risk scale. Moreover, notwithstanding the fund’s decent performance in market rallies, it has failed to cushion its fall in the downturn. While those who had invested into this fund right at its NFO stage in 2005, have made around 146% gains from this scheme till date, these gains appear belittled when compared with CNX Midcap’s absolute gains of 199% during this period. Magnum Mid-cap is thus yet to prove its mettle before it can be rated at par with some of the better performing mid-cap schemes of the MF industry.
Source: http://economictimes.indiatimes.com/features/investors-guide/Fund-Review-Magnum-Midcap-high-on-risk/articleshow/6395373.cms
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