Since its launch in 2002, Sundaram Select Focus Fund has outperformed its benchmark, even during the 2008 correction. Swapnil Suvarna recommends the fund as a rewarding long term investment for those willing to overlook short-term aberrations
Launched in July 2002, Sundaram Select Focus Fund is benchmarked under S&P CNX Nifty. The investment objective of the fund is to provide investors with a concentrated portfolio of bluechip stocks with high liquidity and cash calls. The fund strategy is to take concentrated bets for 50 to 70 per cent on two or three themes at a time and a maximum of 50 scrips. Further, at least 85 per cent of the AUM on an average would be invested in large cap stocks and the remaining in the mid cap space. The fund is being managed by Srividhya Rajesh since launch.
Performance
Over the years, the fund has registered a Compounded Annualised Growth Rate (CAGR) of 27.53 per cent against its benchmark which recorded a CAGR of 21.93% during the same period. However, the fund’s cautious approach in taking cash calls based on the fund manager’s assessment of the market outlook has negatively impacted the short term performance of the fund at times. During the 2008 slump, the fund maintained an average of 23.56 per cent exposure in cash and was able to curb its losses and outperform the benchmark index. However, at the beginning of the 2009 rally, it was quick to shift gears and reduce its cash exposure exceptionally.
Also, the fund’s focus on large-caps has impacted its overall performance during the mid- and small-cap rally. Overall, it has provided better downside protection than its peers.
|
Period |
NAV (Rs) |
S&P CNX Nifty |
|
Since Inception |
27.53% |
21.93% |
|
5-yrs |
11.89% |
11.51% |
|
3-yrs |
3.07% |
4.50% |
|
2-yrs |
11.42% |
13.81% |
|
1-yr |
7.67% |
10.94% |
|
Returns as on June 2, 2011. Returns less than 1 year are absolute, while greater than 1 year are annualised. | ||
Although the fund portfolio is mainly large cap and emerging mega cap oriented, the fund has consistently favored cash calls over less liquid mid cap calls. The fund management follows the combination of top-down approach to identify sectors and bottom-up approach to identify specific stocks within the identified sectors in order to outpace the benchmark. Also, true to its objective, the fund has maintained least exposure in illiquid mid and small cap space.
Over the years, the fund has maintained a quality portfolio with energy, IT/software, engineering, banks and metals being its important constituents. Till date, the fund continues to remain underweight on real estate, healthcare, FMCG and shipping & logistics space.
Since August 2010, considering the global economic uncertainties, the fund has been cautious in its approach by preserving cash. The idea behind preserving cash is to facilitate investments in the more liquid large cap space, an ideal bet in a sideways market. This approach has helped moderate the volatility in returns in spite of substantial churning in the fund portfolio.
Recommendation
The fund management’s knack of shuffling portfolio and contain losses during unforeseen market conditions along with consistency in its approach towards asset allocation makes it a good long term investment product to your investors.
