Sundaram Focused Fund: Aiming to Capture Best Ideas Across Market Cap

Sundaram Focused Fund is a small-sized Focused Fund that has shown turnaround performance in the last few years and rewarded investors with decent risk-adjusted returns.

Past performance is not an indicator of future returns
Data as on July 12, 2022
(Source: ACE MF)

Sundaram Focused Fund's historical long-term performance looks encouraging. In the last 3-year and 5-year period, the fund has maintained a significant lead of around 1 to 2 percentage points CAGR over its benchmark and has outpaced the category average as well by a similar margin. Over the longer 7-year period the fund's performance has been nearly in line with the benchmark and the category average. Notably, Sundaram Focused Fund's superior performance in the last few years has helped scale up its long-term returns.

More importantly, the fund's superior performance has come at a far reasonable risk when compared to the benchmark and the category average. Its Standard Deviation of 20.95% is much lower than the benchmark as well as the category average. Sundaram Focused Fund has shown significant improvement in its risk-adjusted returns (as denoted by the Sharpe ratio) and has outperformed its benchmark as well as many of its peers.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get 'Daily Wealth Letter' and Exclusive Updates on Mutual Funds

Investment strategy of Sundaram Focused Fund

Sundaram Focused Fund is a focused fund having the mandate to invest in a maximum of 30 stocks and holds flexibility to invest across market capitalisation and sectors. The fund's portfolio strategy revolves around investment in a high conviction concentrated portfolio of companies across market capitalisation and sectors to achieve its stated investment objective of long-term capital growth. It predominantly invests in equity and equity-related instruments of large-cap companies along with significant exposure to mid-caps and some allocation to small caps.

The fund follows a process-based investment strategy and long-term investment philosophy and applied the 6 Pillar investment framework filter process to pick quality stocks across schemes. It includes

1. Business Dynamics (Size, scalability, and Longevity)

2. Quality of Growth (Management quality and business model)

3. Operating Matrix (Operational Efficiencies)

4. Capital Allocation (Efficiency and Distribution of Capital)

5. Profitability (Quality and sustainability of profits)

6. Valuation (Price the Value and not Value the Price)

Sundaram Focused Fund aims to participate in the all-round growth of the economy. For this, the fund managers aim to identify suitable stocks that will benefit from economic growth. The fund follows a bottom-up approach towards investing/identifying individual stocks and a top-down approach towards investing/identifying sectors so that the resultant portfolio is well diversified. Sundaram Focused Fund invests in companies based on various quantitative and qualitative criteria like sound financials, professional management, track record, industry scenario, industry and company growth prospects, etc.

As of June 30, 2022, Sundaram Focused Fund held 29 stocks in its portfolio spread across sectors. The top 10 stock holdings constitute mainly of top large-cap names like ICICI Bank, Reliance Industries, Infosys, HDFC Ltd., SBI, etc. having an allocation in the range of 4% to 8%. The top 10 stocks accounted for 50.8% of its portfolio. Many of these stocks have been part of its portfolio for about 2 years. It occasionally churns a portion of its portfolio holdings to replace them with attractive opportunities.

In the last one year, Sundaram Focused Fund benefitted from its holdings in Reliance Industries, ICICI Bank, Bharat Electronics, and SBI. However, its holdings in Samvardhana Motherson International, Shree Cement, HDFC Bank, Infosys, HDFC Ltd., among others eroded some of its gains.

Among sector holdings, Sundaram Focused Fund's portfolio is skewed towards Banking and Finance forming around 30.5% of its portfolio allocation. Engineering and Infotech are the other major holdings having an allocation of around 8.5% in each, along with diversification to Auto & Auto Ancillaries, Petroleum, Retailing, Telecom, Pharma, Chemicals, Healthcare, Power, Cement, among others. The top 5 sectors in Sundaram Focused Fund's portfolio together accounted for around 55.4% of its assets. Though the fund's portfolio is predominantly invested in cyclical and sensitive sectors, it is fairly diversified to defensive sectors as well.

Suitability

Sundaram Focused Fund is a process-driven fund that has distinctly outperformed the benchmark, as well as most of its large-sized peers in the last few years. It has achieved this feat without exposing the portfolio to undue risk. The fund appears to be well placed in terms of generating reasonable returns and has the potential to reward investors willing to stay invested in the fund for the long term.

Despite being a Focused Fund, Sundaram Focused Fund holds a portfolio that is fairly diversified at the stock level. The cautious approach followed by the fund manager has helped the scheme do well to limit losses during market corrections, as seen during the market crash of 2020.

Sundaram Focused Fund is suitable for investors looking for a fund that invests in high conviction stocks, particularly in the large-cap and mid-cap segment and can help generate decent alpha in terms of returns.

PS: If you are looking for quality mutual fund schemes (including Equity-linked Saving Schemes) to add to your investment portfolio, I suggest you subscribe to PersonalFN's premium research service, FundSelect. PersonalFN's FundSelect service provides insightful and practical guidance on which mutual fund schemes to Buy, Hold, and Sell.

Currently, with the subscription to FundSelect, you could also get Free Bonus access to PersonalFN's Debt Fund recommendation service DebtSelect.

If you are serious about investing in a rewarding mutual fund scheme, subscribe now!

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

1. Money Simplified Services Private Limited;

2. PersonalFN Insurance Services India Private Limited;

3. Equitymaster Agora Research Private Limited;

4. Common Sense Living Private Limited;

5. Quantum Advisors Private Limited;

6. Quantum Asset Management Company Private Limited;

7. HelpYourNGO.com India Private Limited;

8. HelpYourNGO Foundation;

9. Natural Streets for Performing Arts Foundation;

10. Primary Real Estate Advisors Private Limited;

11. HYNGO India Private Limited;

12. Suresh Lulla;

13. I V Subramaniam.

1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

1. The Research Analyst has not served as an officer, director or employee of the subject Company.

2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013