Protecting returns is just as important as generating them. And Sundaram Growth seems to be following this principle perfectly. Though it does not soar to the top, but it ensures a soft landing. This fund believes in distributing its bets among different stocks, and ensuring that no single pick gets more than 5 per cent of total assets. And when a stock exposure crosses 5 per cent as prices appreciate, the fund trims its holding.
The result of this diversification is that while Sundaram Growth may have rarely beaten its benchmark during bull phases or topped its category, it has rarely fallen more than the benchmark or its category peers.
During the bear spell of December 2002 to April 2003, an average equity fund was down 6.08 per cent and the BSE 200 lost 11 per cent. In comparison, Sundaram Growth held its ground and lost just 3.11 per cent. True to its form, in the subsequent market surge, the fund could find place in the third quartile only.
Besides capping individual positions, the fund does not tend to skew its sectoral spread. Starting with the bull run of 1999-2000, the fund did participate in the growth-led rally of tech, FMCG and pharma stocks. But prudent diversification, low to medium exposure in momentum stocks and timely exit saved this fund as it lost as much its average peer against the steep losses in most of equity funds.
Since then, its technology exposure has rarely accounted for more than 20 per cent. Old economy and cyclical stocks have helped the fund survive the bear spell during 2001. Though it missed out the early 2001 rally in energy-driven PSU stocks, the fund participated in the next round during the run-up to Budget 2002. But with the divestment prospects of both PSUs hanging in the air, the allocation to the sector has come down in recent months.
In banking sector too, it participated actively in the PSU banks driven rally in early 2003, but the exposure has come down in recent times. FMCG and healthcare are two other sectors where the fund has reduced its exposure substantially.
Sundaram Growth's low volatility coupled with a consistent performance makes it an ideal choice to supplement an aggressive equity portfolio.