| Type |
Open ended
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Nature |
Diversified (Equity)
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| Min. Investment |
Rs 5,000 |
Face value |
Rs 10 |
| Entry Load |
2.25% (waved off for IPO) |
Exit Load |
Nil (2.25% if redeemed within 6 mths from IPO) |
| Issue Opens |
Jan 03, 2005 |
Issue Closes |
Jan 24, 2005 |
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To achieve capital appreciation by investing mainly in small and midcap stocks in a diversified manner.
| Instruments |
Normal Allocation |
| Equity |
upto 100% |
| Cash/Money Market |
upto 15% |
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The fund will find favour with investors who have a 'high risk' appetite. It will be predominantly invested in small and medium-sized companies. These companies are generally under-researched and information on them is not as widely available vis-à-vis large-sized companies. There is also lower liquidity in small/medium-sized companies. However, these companies do have the potential to deliver above-average growth going forward. That is why we categorise the fund as a high risk - high return investment.
In our view, investors should first look at getting invested in a well-managed large capitalisation (i.e. companies in Sensex and S&P CNX Nifty) diversified equity fund. They can then consider investing in a fund that specifically invests in mid-sized and small-sized companies. Given that mid-cap funds have been launched regularly over the last 2 years and investor interest in such funds continues to grow significantly, there could be a likelihood that you already own a mid cap fund.
In such a scenario, to invest in another small cap fund makes sense only if there is a clear demarcation between the investment universes of both mutual fund schemes. Sundaram Mutual Fund has internally demarcated the investment universe for both its funds i.e. Sundaram Midcap and Sundaram S.M.I.L.E; there is no overlap between the 2 funds. Sundaram SMILE also has the option to invest a portion (upto 35%) of its assets in large-sized companies (Sensex, Nifty companies for instance).
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The fund has indicated that it will invest at least 65% of its net assets in a combination of small capitalisation and large, mid capitalisation companies. The fund has defined small capitalisation companies as those with a market capitalisation of less than Rs 2 bn (Rs 200 crores) and mid capitalisation companies as those with a market capitalisation of over Rs 18 bn.
The fund can also invest upto 35% of assets in large capitalisation companies; it can also invest in cash/money market instruments upto a maximum of 15% of net assets. The fund manager proposes to hold about 50 stocks in its portfolio. There will be a 5% cap on investments in each stock, an investment trait inherent in most Sundaram equity-oriented funds.
The fund has a reasonably well-defined investment universe for stock selection. It seeks to be well-diversified across the spectrum in terms of market capitalisations. This will ensure that it is well-diversified at all times. Typically, equity-oriented funds from Sundaram Mutual Fund are well-diversified across stocks and sectors and this fund is expected to be managed in the same manner.
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Mr. Anoop Bhaskar manages Sundaram Select Midcap Fund. He is an MBA in Finance and was associated with Franklin Templeton/Pioneer ITI and Shriram Financial Services before joining Sundaram Mutual. Mr. Bhaskar also manages the equity portfolio of Sundaram Balanced Fund and Sundaram Monthly Income Plan.
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With more than 65% of the fund's assets exposed to small and medium sized companies, the fund will be exposed to above-average risks that are typically associated with such stocks. However, the fund will also invest in large cap stocks, which to an extent will blunt volatility linked to small/mid caps. The fund's overall stock/sector diversification will also help in curtailing volatility. In terms of returns, the fund can be expected to deliver above-average growth given that such companies do have the potential to deliver higher returns. But this comes at higher risk and investors must factor this as well.
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