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Fund Pick: Sundaram Growth Fund

Background

Sundaram Growth Fund an open-end fund since February 1999, was initially launched as a five-year term closed-end fund in March 1997. Normally, the fund will invest up to 95 per cent in equities but can maintain up to 35 per cent in fixed-income securities and up to 25 per cent in money markets. The fund was launched at the time when the markets were depressed and other mutual funds had opted for regular income schemes.

The killer instinct of the fund got a severe beating when in the falling markets, the fund barely managed to guard its assets. Though the fund outperformed the Sensex, it lagged behind its peers launched at the same time and was very volatile. The mediocre performance was due to the exposure of the small sized fund over a large number of stocks that lacked a clear direction. Besides, the portfolio comprised of a sizeable portion of debt instruments and the equity component, of companies of only reasonable valuation.

However, in the market slide between June and September 1998, its performance was impressive as it fell by only 7.4 per cent as against a whopping 21 per cent fall in the Sensex. The fund also announced its maiden dividend of 20 per cent in September this year.

Performance

The fund has gained momentum since the beginning of this calendar year with the markets turning bullish. As on October 31, 1999 the fund has gained 68.8 per cent over the past one year and since inception given an annualised return of 25.71 per cent. Sundaram Growth Fund has posted these performance numbers with a well-diversified portfolio without any concentration in a single stock or sector. The fund has a low portfolio turnover.

As on October 22, 1999, the fund is spread over 53 stocks and overweight on the sectors of FMCG, auto and software, which in aggregate accounts for 39.44 per cent of the net assets. The top 20 holdings account for 55.6 per cent of the portfolio with Grasim Industries at the top. The fund has newly acquired Satyam Computers, Hughes software, Polaris Software, Knoll Pharma, Hero Honda and Godfrey Phillips. Besides, the fund also has a debt component of 1.3 per cent and money market instruments comprising 9.9 per cent of the net assets.

Outlook

The portfolio of the fund has a large to mid-cap orientation with companies having good potential for growth. As a result the fund has a limited downside. Besides, the adequate diversification, across different sectors, debt and money market instruments, is unlikely to witness wild gyrations. The fund is an attractive option for steady growth through equities.

Mutual Funds

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