This fund has clearly been one of stars of the recent bull run in the mid-cap world.
Launched in July 2002, the timing was perfect for Sundaram BNP Paribas Select Midcap. As the mid-caps started gaining momentum on the bourses in 2003, this fund brought home handsome gains for investors.
The fund ended 2003 as the third-best equity fund with returns of 157.73 per cent. As the mid-caps slowed in 2004, Sundaram Midcap's returns too slowed a bit. The fund again hogged the limelight in 2006 with a return of 60.77 per cent, the second-best in the category of diversified equity funds. The phenomenal returns have brought in huge investor interest in the fund and assets have grown exponentially from Rs 500 crore in January 2006 to Rs 2,203 crore at present.
However, the year to date return of Sundaram BNP Paribas Select Midcap may not be appealing as the mid-cap stocks faced heat on the bourses. The fund likes to keep substantial portion of its portfolio in cash (almost 20-30 per cent), though in May it reduced its cash holdings to 5 per cent.
Although the assets in cash remain unutilised, the fund uses the cash for value buying during market falls. Holdings like Lakshmi Machine Works, Thermax, IVRCL Infrastructures have done wonders. The fund has highest exposure to metals and metal products sector.
Of late, the fund has gone overboard on diversification. With the growth in AUM, it has been increasing the number of stocks in its portfolio too. What used to be a 60-stock portfolio in late 2004 has swelled into a 112-stock pack by April 2007. The problem is that such a huge portfolio can dilute the returns.
Although there is the inherent volatility of the mid-cap universe, the fund is capable of rewarding the investors handsomely.
This article was originally published on June 21, 2007.
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