Sundaram Equity Plus Fund

An Open – Ended Equity Scheme

Summary

Type	Open-ended Equity Scheme	Benchmark Index	CRISIL MIP Blended Index (85%) + Price of Gold (15%)
Min. Investment /Add. Investment	5,000(for lump sum) and 250 (for monthly SIP) / 10 per unit	Face Value	10 per unit
Entry Load	Nil	Exit Load *	1%*
Issue Opens	May 04, 2011	Issue Closes	May 16, 2011

* An exit load of 1.0% will be charged if redeemed within 1 year from the date of allotment of units.

Investment Objective*

The scheme seeks capital appreciation by investing in equity and equity-related instruments listed in India to the extent of at least 65% and in gold-ETF up to 35%.

 

Investment in overseas markets, if any, shall not exceed the permissible limit net of existing usage of the mutual fund's entitlement. Exposure to overseas securities shall also not exceed 35% of assets.

 

*Source: Scheme Information Document

Is this fund for you?

A "hybrid fund" is an investment strategy wherein investments are made in different asset classes. Such funds can invest in asset classes like equity & equity related instruments, debt & money market instruments and gold. Exposure to different and least co-related securities offers the benefit of diversification and thus helps in managing the returns during turbulent times.

 

Equities enhance the value of portfolio by providing a chance to earn an income through dividends and capital appreciation over a period of time whereas debt instruments provide the safety and stability of regular income from coupon payments. However, it is noteworthy that in times of market uncertainty, equities can get very volatile which may negatively affect the overall portfolio returns.

 

To counter such volatility due to equities, investments will also be made in gold (through Gold ETFs) to improve diversification and hence, aim to enhance performance. Predominantly, gold has a low or negative correlation (gold price changes are independent of price changes in other asset classes) with most other asset classes (including equity), which makes it one of the most favourable candidate for investment in order to hedge one's portfolio against inflation. Adding gold provides the fund manager with the flexibility to tilt the allocation made between asset classes so that the fund is positioned to take full advantage of prevailing market conditions.

 

Sundaram Equity Plus Fund (SEPF) is an equity oriented hybrid fund which will invest in equity, gold ETFs and fixed income instruments. Thus SEPF offers an interesting investment proposition by providing exposure to 2 major asset classes (Equity and Gold) with slight exposure towards Debt.

 

SEPF is suitable for investors who have a moderate risk appetite and who have a time horizon of at least 3 years keeping in mind the potential to add value to their portfolio under different market conditions, thus enhancing their portfolio returns.

 

Portfolio Strategy

SEPF endeavours to invest in equity and gold ETF as primary asset classes in order to seek capital appreciation. Gold is a store of value and acts as an effective hedge against inflation. It has proved to be a stable asset class over a period of time. The scheme is mandated to provide gold exposure through Indian Gold Exchange Traded Funds.

 

Equity, on the other hand, is a preferred destination to invest in order to generate high returns. It is considered to be a risky asset class being subject to volatility in market, political risk and various other macro economic factors.

 

SEPF will primarily focus on large cap stocks, defined as stocks with a market captitalisation not below the 50th stock by value on the National Stock Exchange and aim to create a fairly diversified portfolio with a maximum of 30 stocks. The fund manager will take active calls while investing in sectors and stocks. Further, stock picking activity will consider various factors like macro economic environment – global and local, prospects for industries and specific companies and market conditions.

 

The investment strategy of SEPF is as follows:

 

Instruments	Indicative Allocation Range (% to Total Assets)		Risk Profile High/Medium/Low
	Minimum	Maximum
Equity and equity related instruments listed in India	65%	85%	High
Gold Exchange Traded Funds	15%	35%	Medium to High
Fixed Income & Money Market Instruments	0	20%	Low to Medium

(Source: Scheme Information Document)

 

Benchmark

A custom benchmark which is a blend of the following:

 

Asset Class/ Instruments	Benchmark Index	Percentage
Equity & equity related securities	S&P CNX Nifty Index	65%
Gold Exchange Traded Funds	INR Price of Gold	35%

Fund Manager Profile

For Investments in Domestic Markets::

 

Ms. Srividhya Rajesh, Fund Manager – Equity, is a CFA Charter Holder and a management graduate from BITS Pilani. She has also done specialized courses in equity research & financial applications from ICFAI. Ms. Rajesh is having a total experience of more than 15 years in fund management and equity research. Prior to joining Sundaram Asset Management Company Limited in 1996, she was associated with the broking arm of Kotak Mahindra.

 

For Investments in International Markets:

 

Mr. S. Bharath, Fund Manager – Overseas Securities, is an ICWA Graduate and has done his B. Com. and MBA. He has over 9 years of total experience in finance. Prior to joining Sundaram Asset Management Company Limited, he was associated with Navia Markets Limited.

 

Fund Outlook

Given the funds positioning as equity fund with diversification through gold ETFs, SEPF's investment across different asset classes with low correlation brings in distinctly different risk/return characteristics. With major exposure towards equity, SEPF's performance will be closely linked to the movement in equity instruments, while its exposure to gold and debt will help provide stability in returns to its investors. Gold being negatively correlated to other asset class like equity and debt, the fund is built to perform across varying market conditions. SEPF's performance in turn, will mirror the combined performance of equity and gold.

 

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Comments
abhishek_pankaj00@rediffmail.com May 10, 2011 Excellent Fund that gives you the Upside Potential of Large Cap Equity & Stability of Gold with the Tax Advantage of investing in Equity Schemes. This will be a very good Buy.
skdonweb@sify.com May 12, 2011 Doesn't seem to be a very attractive option if we look at cost element. Fund has mentioned 2.5% charges plus there will be additional costs due to Gold ETF (another 1% or so). So the overall cost will be higher than a regular diversified Equity fund or a gold ETF. Will work to advantage if both equities and gold gain significantly in coming months.

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