NFO review: Sundaram Flexi Cap Fund

Sundaram Mutual Fund is the latest entrant in the crowded flexi-cap category. The fund house recently announced the launch of Sundaram Flexi Cap Fund that aims to dynamically invest across market capitalisation and sectors.

The new fund offer (NFO) has been open for subscription since August 16, 2022 and will close on August 30, 2022. The fund, managed by Sudhir Kedia and Ravi Gopalakrishnan, is benchmarked against Nifty 500 TRI index.

Here are the key details of the new fund offer:

Ever since the Securities and Exchange Board of India (SEBI) came out with the flexi-cap category in November 2020, fund houses have rolled out a surfeit of funds in this category.

The flexi-cap category emerged after SEBI had asked multi-cap funds to invest 25 per cent each in large-cap, mid-cap and small-cap stocks. Several multi-cap funds were later converted to flexi-cap funds. Now, the flexi-cap category has assets of around Rs 2.31 lakh crore.

One of the biggest advantages of flexi-cap funds is that they offer fund managers an option to manage money across the length and breadth of their market. Currently, there are 73 funds in the category and in the last one year, it has given an average return of 7.12 per cent.

About the strategy
Its past record suggests Sundaram Mutual Fund's bias towards mid- and small-cap strategies. But since taking over Principal Mutual Fund, the fund house has started focusing on the large-cap side of the market too.

According to the fund house, the portfolio will consist of a mix of 55-70 large-, mid- and small-cap stocks, with a top-down approach to sector selection and bottom-up to stock picking. While the large-cap strategy will be biased towards compounding stories, the mid- and small-caps will rely on companies that can provide alpha returns.

If we look at the portfolio composition of some of the top-performing schemes in the recent past, most of the schemes have around 70-80 per cent exposure in large-cap stocks. They might have stayed away from higher allocation towards mid- and small-cap stocks due to their high valuations.

The fund will be looking to invest in four broad themes, including turnaround business where there is potential for value unlocking and value migration. The fund will also look at new-age sectors like insurance, wealth management, asset management, eCommerce, movie exhibition, organised retail, among others.

In terms of moving the money between large-cap, mid-cap and small-cap stocks, the fund will broadly follow its in-house dynamic allocation strategy. So, whenever the price-to-earnings (P/E) ratio of mid-cap and small-cap indexes goes up, the large-cap stocks will get a higher allocation and vice versa.

About the fund manager
The fund will be managed by Sudhir Kedia and Ravi Gopalakrishnan. Both fund managers were part of Principal Mutual Fund, which was later acquired by Sundaram Mutual Fund.

Sudhir Kedia has over 16 years of experience in fund management and equity research. Prior to Sundaram, he worked for Mirae Asset Global Investments and ASK Investment Managers. He is a chartered accountant, a cost and works accountant and an MBA.

Ravi Gopalakrishnan joined Sundaram AMC in January 2022. He has over three decades of experience in research and asset management. Prior to Sundaram, Ravi worked with Principal AMC, Canara Robeco AMC, PGIM India Mutual Fund, Hudson Fairfax Group, USA, Sun F&C Asset Management Ltd., UBS-Warburg Dillon Read Securities, and Unit Trust of India Advisory Services.

Ravi adopts a strong bottom-up approach to investing and has a track record of successful performance across sectors and business cycles. Nurturing and developing high-performing teams at both Principal Mutual Fund and Canara Robeco Mutual Fund has been a key feature of his tenure as Head of Equities over the last 12 years.

While at Canara Robeco, his fund Canara Robeco Emerging Equities Fund consistently ranked in the top quartile on a one, three and 5-year basis.

About the fund house
Sundaram AMC, a significant player in the fund management space along with its subsidiaries, has assets under management (AUM) of about Rs 52,379 crore as on July 29, 2022. The brand has a strong retail focus, with over 1.1 million active investors and 80+ branches across the country. Sundaram AMC has a bouquet of 19 equity and 10 fixed-income funds catering to diverse investor preferences.