Sundaram Mutual Fund has launched a new close-ended fund called ‘Sundaram Emerging Small Cap Series II.’ The subscription period commenced on 19th March 2018 and will conclude on 2nd April 2018. It will invest primarily in small-cap stocks and will have a tenure of five years, just like its immediate predecessor – Sundaram Emerging Small Cap Series I. This fund was launched on 5th March 2018, and has given a negative return since launch (-1.32%) as the market had been going through a correction.
The Series II fund can allocate between 65% and 100% of its corpus in small-cap equities and must park the rest in either larger company stocks or debt. The S&P BSE 250 will be the benchmark for the scheme. This is a major departure from its predecessors, which had the S&P BSE Small Cap Index as their benchmark. The shift towards the BSE 250 (the smaller companies in the BSE 500) may mark a shift towards larger companies in the fund than its predecessors. The fund will be managed by the same fund managers as Emerging Small Cap Series I, S Krishnakumar and Dwijendra Srivastava.
One way of evaluating this NFO is to look at how previous close-ended small and micro-cap funds by Sundaram have performed. Out of 16 such funds, we find that only four have outperformed their benchmarks. Many of these funds are recent launches and hence the time period may not be long enough to make this a conclusive finding. However, the results, as they stand, are not promising.
|Sundaram Smallcap Fund Series|
|Series||Launch Date||% Since inception (annualized)||% Benchmark||Outperformance?|
|Sundaram Select Microcap Fund Series|
|VI||1st October 2014||22.1||17.8||Yes|
|VII||31st October 2014||22||17.3||Yes|
|VIII||21st October 2015||23.8||21.9||Yes|
|IX||5th November 2015||24.1||24.4||No|
|X||7th December 2015||24.7||23.2||Yes|
|XI||28th December 2016||23.7||45.1||No|
|XII||8th February 2017||22.1||32.6||No|
|XIV||28th April 2017||14.8||18.7||No|
|XV||31st May 2017||12.2||21||No|
|XVI||30th August 2017||6.1||14.5||No|
|XVII||13th October 2017||1.4||7.2||No|
Source: Sundaram Mutual Fund. Figures as at the end of February 2018.
Close-ended funds compromise on your liquidity. They also depend on the market performing well in an arbitrarily chosen time period (3 years or 5 years). The market can rally at any point and a rally say 3 years 1 months down the line or 5 years 4 months down the line will not be captured by such funds.
On the other hand, freed from the pressure of rapid inflows and outflows, a fund manager can outperform. But the past returns on Sundaram close-ended funds do not make this advantage apparent.
NFO Key Details:
Period: 19th March to 2nd April
Term of Fund: 5 years
Minimum Investment: Rs 5,000
Investment Options: Growth, Dividend Payout and Dividend Sweep. Dividend Sweep moves a dividend declared by this scheme into another open-ended Sundaram Fund of your choice.
Fund Manager(s): S Krishnakumar and Dwijendra Srivastava
Entry and Exit Load: None
Benchmark: S&P BSE 250