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Exit Cues

It is better to move out of a fund which consistently underperforms its peer set and benchmark

I invested Rs 50,000 in Sundaram BNP Paribas energy opportunities fund. I have been patiently waiting for the fund to perform well since its launch. Till date it has neither paid any dividend nor is the NAV any better from the NFO. Should I continue to hold this or exit under loss?
- Satish Chander

This is a closed-end thematic fund and hence comes with its share of risks. It bets in the energy sector and focuses on stocks that benefit directly or indirectly from opportunities in this sector. The broad sectors it invests in include oil and gas, coal and power generation, renewable energy and infrastructure support services for setting up and maintaining the facilities. The timing of this NFO in December 2007 was at a time when the markets were approaching their all-time highs. The fund has not been able to improve its performance ever since. It has had its 52-week high NAV as recently as 9th November at 9.23, way below the NAV at which you would have bought it. Being a closed-end fund, as an investor you have the exit option, and you should exit, even if it calls for adjustments towards initial expenses. The opportunities that markets offer you today, with other funds are immense. You can also draw a lesson from this investment-never invest in thematic funds unless you are very clear of the risks; for everything else it is best to invest in a large-cap or multi-cap fund.

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