NFO Review: Sundaram Emerging Small-cap Fund Series 1 As the name suggests, this is a small-cap-focused fund with small caps constituting at least 65% of its portfolio. It can place the balance 35% in either larger companies or in debt instruments/ money market securities. It defines small caps as the companies that are smaller than the top 250 listed companies by market capitalisation.

Various studies have shown that small caps can deliver higher returns than large caps over the long term. However, the risk associated with them is also correspondingly higher. There is also a lack of liquidity in these companies and this is where a closed-ended structure helps. A fund manager does not have to worry about a spurt of sudden outflows.

However Sundaram’s previous funds have not capitalised on this advantage, it would seem. Out of a long range of previous Sundaram funds dedicated to small and micro caps, all the funds in the Sundaram Small Cap series (five funds in all) failed to beat their benchmark and half of the Select Microcap Series (12 funds in all) failed to beat their benchmark. This benchmark, the BSE Small Cap Index, common to both series, is incidentally the same for this fund as well.

Sundaram Select Small Cap Series
Series Launch Date Benchmark Return % since inception Benchmark Return Outperformance?
II 21/11/2014 S&P BSE Small Cap 14.4 18 No
III 31/03/2015 S&P BSE Small Cap 15.9 22 No
IV 17/04/2015 S&P BSE Small Cap 16.1 19.6 No
V 23/06/2017 S&P BSE Small Cap 5.4 22.4 No
VI 17/07/2017 S&P BSE Small Cap 2.6 18.2 No

Source: Sundaram Mutual Fund, Viewed on 22nd Feb 2018. Returns greater than one year are annualized and those less than one year are in absolute terms.

Sundaram Select Microcap Series
Series Launch Date Benchmark Return % since inception Benchmark Return Outperformance?
V 1st September 2014 S&P BSE Small Cap 28.1 19.8 Yes
VI 1st October 2014 S&P BSE Small Cap 24 19.4 Yes
VII 31st October 2014 S&P BSE Small Cap 24.1 18.9 Yes
VIII 21st October 2015 S&P BSE Small Cap 26.7 24.4 Yes
IX 5th November 2015 S&P BSE Small Cap 27.1 27.1 Yes
X 7th December 2015 S&P BSE Small Cap 27.9 26 Yes
XI 28th December 2016 S&P BSE Small Cap 31 53.3 No
XII 8th February 2017 S&P BSE Small Cap 29.1 39 No
XIV 28th April 2017 S&P BSE Small Cap 19.7 22.5 No
XV 31st May 2017 S&P BSE Small Cap 16.3 24.9 No
XVI 30th August 2017 S&P BSE Small Cap 10.5 18.2 No
XVII 13th October 2017 S&P BSE Small Cap 5.1 10.7 No

Source: Sundaram Mutual Fund, Viewed on 22nd Feb 2018. Returns greater than one year are annualized and those less than one year are in absolute terms.

Rupeeiq Take

Small-cap closed-ended funds by Sundaram haven’t beaten the benchmark. There is little reason to believe that this one will be different. However, as it’s known, past performance is not an indicator of future performance.

Key Details

NFO Period: 9th Feb 2018 to 5th March 2018

Scheme Type: Close-ended for five years

Benchmark: S&P BSE Small Cap Index

Minimum Investment: Rs 5,000

Fund: S Krishnakumar and Dwijendra Srivastava

Options: Growth, Dividend Payout and Dividend Sweep (this option automatically moves the dividend declared into an open-ended scheme of Sundaram MF, selected by the investor).

Riskometer: Moderately High

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Note: Mutual fund investments are subject to market risks. Read all scheme related documents carefully. Talk to your financial advisor before investing.

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.