If there was one word to describe Sundaram Growth it would be 'consistency'. With a well-diversified large-cap portfolio, lower volatility and no single stock crossing 5 per cent allocation, Sundaram Growth Fund is an ideal choice for supplementing an aggressive equity portfolio. Sundaram Growth believes that protection of returns is as important as their generation. Hence, you will hardly find this fund among chart-toppers, but it holds a respectable long-term record-five-year annualised return of over 17 per cent. Moreover, it has outpaced its peers in five out of six calendar years of its existence. And the year 2004 is no exception-its 16 per cent return is better than the category's 13.5 per cent return.
The year 2004 has been a classic example of the fund's limited downside and limited upside potential. In the not-so-favourable equity markets in the first five months of 2004, the fund lost 21 per cent, which was less than what its peers lost. And once the markets recovered in latter half of 2004, the fund gained 35 per cent-in line with its peers. The fund has benefited as its tech holdings-TCS, Wipro and Infosys-have appreciated. It has recently pared exposure to auto stocks and increased its allocation to metal stocks.
The fund also participated in the mid-cap PSU bank rally of 2003, though in a limited way and returned 112 per cent, mirroring the category performance. When the prospects of divestment seemed uncertain, the fund started reducing its allocation to PSUs in recent months. Its exposure in FMCG, healthcare and banking sectors has also been trimmed down substantially.
At all times, the fund has held over 40 stocks in its kitty, thus providing the much-needed diversification. This has also helped the fund in limiting its volatility-the fund's standard deviation of 6.43 per cent lies in the bottom half of the category. And as the fund manager has largely followed a buy-and-hold strategy, the fund's portfolio turnover is on the lower side.
With returns hovering somewhere in middle quartile of its category, we don't recommend this fund for aggressive investors as they may not agree with the strategy. However, a stable long-term performance should help Sundaram Growth attract cautious investors.
This article was originally published on March 10, 2005.
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