Sundaram Select Focus is suitable for conservative investors seeking a relatively safe investment portfolio with just about decent returns
LAUNCHED in 2002, Sundaram Select Focus aims to generate returns by investing in a few selected stocks. It is broadly a large-cap equity fund that invests in about 30-35 stocks at a time each with a market capitalisation of more than 500 crore. It is the second most popular scheme of Sundaram's equity basket bagging almost 1,100 crore asset under management (AUM).
PERFORMANCE:
Though the fund was among the top performers in 2006-07, its performance has recently slipped to the last rung of the ranking.
Given its large-cap orientation, Sundaram Select Focus has earned decent returns during market rallies and has performed at par with its benchmark index S&P CNX Nifty in the downturn.
An analysis of the yearly performance indicates that till 2008, the fund outperformed the major market indices such as the Sensex and the Nifty either marginally or significantly. However, the year 2009 bought the downfall for this fund. Even when the markets were improving, the fund could not replicate it. The fund generated only 65% absolute returns, while the Sensex and the Nifty generated 81% and 75% returns, respectively. The high cash holdings in the initial quarter of 2009 were the prime reason for the low returns.
In the current calendar year too, the fund has put up a fairly decent performance so far, delivering about 16% return when the market indices like the Sensex and the Nifty have only managed a growth in the range of 12-13%.
PORTFOLIO:
Sundaram Select Focus is clearly a scheme for the conservative investor given its exposure to large caps and beta equivalent to the benchmark. The fund currently commands a beta of 1, which implies that for every 1% gain/decline in the market, returns the scheme will gain/lose about 1%. This makes its volatility similar to that of the market.
The fund as a rule had limited its stock holdings to only 30 however, the fund manager plans to increase the stock holding for diversification. Also the fund has been actively playing thematic bets. So in the last quarter of 2007, the fund was highly bullish on metals, construction and oil and gas while exposure to some sectors such as technology, FMCG and healthcare was nil. Currently, the fund is bullish on automobiles, construction and FMCG, while exposure to oil and gas is less than 1%.
As far as the stock selection is concerned, the fund's portfolio comprises almost all popular largecap counters, such as Infosys, SBI, TCS, HDFC, L&T, Axis Bank, ICICI Bank, Sterlite and others. At the same time, it also has decent exposure in Lanco, Tata Global Beverages and Grasim Industries to name a few.
The fund has recently liquidated its 4% holdings in Reliance Industries due to which its cash holdings increased to 10% in the following month. However, now the fund is 95% invested in the equity market.
The fund manager actively churns the portfolio. Leaving about 10 odd stocks, all other stocks have been in and out of the fund. Currently, the portfolio turnover ratio is 150%. This implies that on an average Sundaram Select Focus holds a single stock for not more than eight months.
OUR VIEW:
The pure large-cap fund, with limited stock holdings, has had a good performance track record. However, the fund needs to do something to match the returns of its other large-cap peers in this category. The fund is recommended for conservative investors seeking relatively safe investment portfolio with just about decent returns, which are more or less at par with the market.
