Sundaram Tax Advantage Fund Series 3The defining feature of this Equity Linked Savings Schemes (ELSS) fund series is its 10-year lock-in. Standard ELSS funds have a three-year lock-in but ‘that’s not long enough’ is the implicit argument here. Note that SBI Mutual Fund also recently launched a 10-year close-ended ELSS fund (read our review here: SBI Long Term Advantage Fund (Series V) review: Invest and forget)

Protected from the threat of outflows, the fund manager of Sundaram Tax Advantage Fund Series 3, a new fund offer from Sundaram stable, is expected to perform well over his guaranteed long tenure.

How likely is this? It is too early to say with the first such fund only launched about three years ago in 2015. We give you their performance below.

Investment Strategy

ELSS are tax planning funds. As with standard ELSS schemes, this fund’s equity allocation can range from 80-100% with the rest going into debt. The fund will not target a specific market capitalisation and will be free to invest in large, mid and small caps.

Investors can draw some comfort from the seniority and experience of the fund managers in charge. S Krishnakumar is the head of equity at Sundaram Mutual Fund and he has worked with the company for nearly 15 years. He manages several equity schemes for the fund house. Dwijendra Srivastava is the Chief Investment Officer (Debt) at Sundaram Mutual Fund. He’s been with the company for about eight years, on the debt side. He will most likely manage the small debt component in the fund.

As mentioned above, the tenure of the fund is 10 years. However, for income tax purposes, the lock-in is only three years. This means that you can sell units of the fund on a stock exchange after this time period without incurring a tax liability. However, this liquidity on the exchanges for such types of transactions tends to be poor. It would also defeat the purpose of investing in a long maturity fund in the first place.

Track-Record

The Scheme being a new one has no track record. Ergo, we have to look at how its predecessors have performed.

Series I was launched in 2015 and Series II was launched in 2016. Both have a similar structure with a 10-year lock-in and the same fund managers. They are currently in existence and will mature in 2025 and 2026 respectively. However, so far, both have underperformed their benchmark (S&P BSE 500).

Sundaram Tax Advantage Fund
Date of Launch Return since launch Benchmark Return
Series I March 26, 2015 12.3% 14.4%
Series II March 21, 2016 24.1% 26.6%
Series III March 27th, 2018 (NFO Close Date) NA NA

Source: Sundaram Mutual Fund; Benchmark is S&P BSE 500;

RupeeIQ Take

You have to weigh the somewhat disappointing track record of the previous funds in the series against the fact that it’s simply too early to conclusively decide. If you are ok with a 10-year lock-in and believe that this will enable the fund to do better than its shorter lock-in peers, consider investing. Be conscious at all times of the risks associated with equity.

Key Details

Minimum Subscription: Rs 500

NFO Period: December 27th, 2017 to March 27th, 2018

Fund Managers: S Krishnakumar and Dwijendra Srivastava

Options: Growth, Dividend Payout and Dividend Sweep. Dividend Sweep will automatically move dividends to other open-ended schemes of Sundaram Mutual Fund.

Benchmark: S&P BSE 500

Tenure: 10 years

Also Read

NFO Review: Sundaram Emerging Small-cap Fund Series 1 launches 5-year fund

SBI Long Term Advantage Fund (Series V) review: Invest and forget

Author
Neil Borate

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