Sundaram Select Midcap Fund

S Krishnakumar - Head of Equities, Sundaram Mutual

AUM Rs.1688 Crore ....................................................................... AS ON MARCH 31, 2014
NAV Rs.232.18 ..................................................................................... AS ON MAY 27, 2014

With a powerful government coming into power at the center, the equity investment is expected to shift to riskier investments such as mid-cap and small-cap stocks, expecting out-performance from the large-cap stocks. So taking a cue from the latest political and governmental happenings, in this issue we are recommending Sundaram Select Midcap Fund to our readers who have high risky appetite and want to earn better returns over market returns with long-term time horizon.

Sundaram Select Midcap Fund (the scheme) has an objective to achieve a capital appreciation by investing in mid-cap stocks. Further, the fund house defines mid-cap stock as a stock whose market capitalization shall not exceed the market capitalization of the 50th stock (after sorting the securities in the descending order of market capitalization) listed on the NSE. The scheme is one which had proved its mettle in generating better returns as compared to its peers as well as its benchmark since its inception from July 2002. The performance is well appreciated by the investors and is reflected in the growth of its assets under management (AUM) that has increased by 22 per cent on a CAGR basis for the last ten years to stand at Rs 1688 crore as of March 31, 2014.

Looking at the scheme portfolio, the top five sectors constitute 60 per cent of the portfolio. The top five sectors are Financial (18.52 per cent), Engineering (13.99 per cent), Automobile (10.08 per cent), Healthcare (9.24 per cent) and Textiles (8.22 per cent). This sectoral asset allocation clearly exhibits the scheme’s exposure to riskier sectors which are expected to be market outperformers going forward. The top five stocks that form part of portfolio are Ipca Laboratories (8.28 per cent), FAG Bearings India (6.48 per cent), Bosch (4.71 per cent), SRF (4.05 per cent) and Bajaj Finance (3.72 per cent). Out of 58 constitute companies, Mid-cap and small-cap companies constitute 88.53 per cent of the AUM while the rest is held by exposure to some large-cap stocks.

The scheme is managed by S Krishnakumar who is the head of equities at Sundaram Asset Management Company. With his 16 years of experience in equity markets, the scheme has managed to outperform the benchmark S&P BSE Mid Cap index by 1250 basis points over last one year. Interestingly, over last 3 and 5 years, the scheme too managed to give extra 827 and 775 basis points respectively over returns given by the benchmark index during the same period. Further, over a long period of 10 years too, the scheme showed a handsome out-performance by 1040 basis points over the benchmark index.

Considering the portfolio, the scheme’s asset allocation is oriented towards high beta sectors and possess a high possibility of good returns over a long run. Though the scheme portfolio constitutes high risky stocks, the proper diversification in 58 stocks gives opportunity to minimize the risk. On the cost front, the expense ratio of the scheme stood at 2.29 per cent as on March 31, 2014. Considering the portfolio constituent companies and track record of the fund manager, the scheme should definitely find a place in high risky investors’ mutual fund portfolio as the revival in economy and recent strong political stability minimizes risk of under-performing by mid-cap and small-cap stocks in coming future.