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Shanthi Venkataraman

INVESTORS can retain their holdings in Magnum Emerging Businesses Fund. Barely eight months since its launch, the fund has turned in a splendid performance. The fund's investment strategy envisages selecting companies that have an export orientation or outsourcing opportunities or companies that are globally competitive.

This focus appears to have paid off handsomely for the fund. On a three-month and six-month basis, the fund figures in the top three of the performance charts.

Since its launch in September, the fund has delivered a return of about 60 per cent, beating even the yearly returns of several diversified funds; on an average, diversified funds have returned between 35 and 40 per cent over the past year. But this impressive performance would have to be sustained over a longer period, before further exposures could be contemplated in this fund.

The fund is also more suitable for those with a higher risk appetite. The portfolio comprises predominantly of mid-cap and small-cap stocks. About 60 per cent of its assets are invested in companies with a market capitalisation of less than Rs 1,000 crore.

This gives its portfolio a riskier profile when compared to a typical diversified equity fund. Secondly, the top ten holdings of the fund account for as much as 70 per cent of the assets.

Given its relatively small asset base, the portfolio is not tightly packed, with only about 20 stocks.

Any sharp swings in the prices of the top ten stocks would have an impact on the performance of the fund.

The portfolio also takes focused exposures to sectors.

Engineering and construction sectors figure prominently in the fund's holdings.

But the aggressive management style has, however, worked in its favour so far.

These sectors have enjoyed the fancy of investors over the past year. Stocks such as KEC International, Praj Industries, Sintex Industries and Nagarjuna Construction, which are among its top ten holdings, have seen their prices double since the time the fund was launched.

Fund facts: Magnum Emerging Businesses Fund was launched in September 2004.

The fund has an asset base of about Rs 160 crore.

The minimum investment amount is Rs 2,000.

The fund offers dividend and growth options.

The fund manager is Mr Sandip Sabharwal.

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