The high risk  high return investment proposition which mid cap stocks and funds offer has by now been adequately documented. In the 2004-05 period, mid cap stocks hit a purple patch and mid cap funds were the season's flavour. However it wasn't until the recent downturn in equity markets that investors were exposed to the high risk aspect of their investments. Mid cap stocks have surfaced as the biggest losers in the present meltdown and the same is mirrored in the performance of mid cap funds. However the performance of one mid cap fund i.e. Sundaram Select Midcap (SSM) has been noteworthy and merits mention.

Sundaram Select Midcap: Rock steady!

	NAV (Rs)	3-Mth (%)	1-Yr (%)	3-Yr (%)	Std. Dev. (%)	Sharpe Ratio (%)
SUNDARAM SELECT MIDCAP (G)	68.39	-4.3	63.7	75.6	7.85	0.62
SUNDARAM SELECT FOCUS (G)	43.94	-11.3	56.6	52.4	7.19	0.43
MAGNUM CONTRA (D)	20.58	-10.7	56.4	79.8	7.91	0.60
MAGNUM MULTIPLIER PLUS (D)	33.76	-17.2	54.2	69.8	8.32	0.51
KOTAK 30 (G)	50.92	-10.4	53.6	56.7	7.67	0.43
BSE MIDCAP INDEX		-19.1	23.9	-
MAGNUM GLOBAL (D)	22.94	-15.7	49.9	82.9	9.06	0.56
RELIANCE GROWTH (G)	186.36	-15.4	38.4	72.2	8.65	0.48
FRANKLIN INDIA PRIMA (G)	151.08	-20.5	20.3	57.2	8.05	0.40

(Data sourced from Credence Analytics. NAV data as on June 16, 2006. Growth over 1-Yr is compounded annualised)

Over the 1-Yr period, SSM emerges as the top performer in the diversified funds segment with a net asset value (NAV) appreciation of 63.7%. Sundaram Select Focus (56.6%) and Magnum Contra (56.4%) occupy distant second and third positions respectively. Over the 3-Yr period which is ideal for evaluating the performance of equity funds, SSM (75.6% CAGR) clocks an impressive performance and yet again features among the top performers. Over the 3-Mth period, the fund (-4.3%) has suffered lower losses vis-à-vis peers

To better gauge SSM's performance, we decided to find out how it has fared vis-à-vis mid cap peers like Magnum Global, Reliance Growth and Franklin India Prima. While SSM comfortably outscores its peers over the 1-Yr time frame, over the 3-Yr period, it is second only to Magnum Global (82.9% CAGR).

SSM has successfully outperformed its benchmark index i.e. BSE Midcap over the 3-Mth and 1-Yr periods.

Volatility control and risk-adjusted return
With a Standard Deviation of 7.85%, SSM pitches in a competent performance on the volatility control front. The fund scores better than all its mid cap peers. Sharpe Ratio is a measure of the returns delivered per unit of risk borne. SSM (0.62%) delivers a superlative performance and surfaces as the best performer.

Portfolio strategy
A large part of SSM's impressive showing can be attributed to its fund management style and stock picks. The fund has a propensity for holding a well-diversified stock portfolio. SSM generally holds between 70-75 stocks in its portfolio with no stock accounting for more than 5% of the corpus. This style of fund management helps derisk the portfolio especially while dealing with high risk investment propositions like mid cap stocks. Also the fund has not shied away from erring on the side of caution and holding a portion of its assets in cash/current assets for want of attractive investment opportunities. Clearly, the fund's portfolio management style has yielded attractive dividends.

At Personalfn, we have always maintained that the true test of a fund's performance is its ability to deliver across a market cycle i.e. during a bull run as well as a downturn. With an NAV appreciation of 75.6% CAGR over the 3-Yr period and the impressive performance in the recent past, Sundaram Select Midcap has proven its mettle on both fronts.

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