Delivering quality

FUND PICK: Magnum MIP-G

Background: Magnum MIP-G was launched in March 2001. There is no entry load, but the fund charges an exit load of 0.5 per cent for investments up to Rs 10 lakh if redeemed before six months.

Performance: The fund may not have topped the performance chart but investors seem to be impressed by its decent long-term performance with great stability. The fund's focus on quality debt and large-caps mostly explains its low volatility, making it a suitable offering for conservative investors. The fund's one-year return of 15.48 per cent as on March 31, 2004, has been in line with its category average. In 2003, it delivered a return of 14.91 per cent, outperforming the category average of 14.1 per cent.

Portfolio: The fund's quality consciousness can be seen from the fact that in the past three years, it has not invested in below AA+ rated bonds. Initially, it invested heavily in AAA-rated bonds (average 75 per cent). Moreover, it had one of the highest average maturities among its peers - nearly three years. But it had marginal equity exposure and no gilt allocation and remained an average performer.

The fund bought gilts for the first time in August 2002. Till February 2003, it had an average 2.5 per cent gilt exposure and its average maturity was on the lower side in the category. Though this worked in its favour in the volatile first quarter of 2003, the fund was unable to ride the debt market rally in the last quarter of 2002. In the past one-year, however, the fund has increased its gilt exposure. Consequently, its average maturity is also on the higher side in the category.

 

Top holdings
As on March 31, 2004	Value (Cr)	Net assets (%)
GoI 2011 10.95%	45.76	22.88
HDFC	22.69	11.35
GoI 2010 7.55%	13.66	6.83
GoI 2008 11.4%	12.64	6.32
GoI 2013 7.27%	11.57	5.79
Rural Electrification Corp	10.30	5.15
Export-Import Bank	10.25	5.12
Others	7.72	3.86
GoI 2011 9.39%	6.30	3.15
Kotak Mahindra Bank	5.05	2.53
NTPC	5.02	2.51
Citifinancial Consumer Finance	5.02	2.51
Tata Sons	4.13	2.06
Ranbaxy Laboratories	2.80	1.40
SBI	2.67	1.33
Cholamandalam Inv and Fin	2.19	1.10
Infosys Technologies	2.05	1.02
ONGC	1.80	0.90
Hindalco Ind	1.70	0.85
ITC	1.56	0.78

The fund's cautious strategy is also reflected in its equity portfolio which has largely been dominated by large-caps. Interestingly, the fund did not have equities for most of its tenure. It started investing in equities in January 2002 and its investment was confined to a few stocks, accounting for just 3.75 per cent of its total allocation through 2002. This helped the fund outperform the category when equity markets tanked in the second and third quarters of 2002.

Post-May 2003 when equities rallied, the fund quickly raised its exposure to nearly 12 per cent in June 2003 from 5.7 per cent in May. And since then, its equity exposure has been in a high band of 9-13 per cent. Gains in its large-cap picks like SBI, Bhel and Maruti Udyog has helped it outperform the category in the last two quarters of 2003.

Outlook: Investors who don't want to maintain a high-risk portfolio can look forward to Magnum MIP-G.