Fund Focus: Sundaram BNP Paribas Select Midcap

Selecting Gems
Launched in July 2002, this fund's assets have been volatile. It started off with Rs 18.75 crore and within eight months was down to Rs 5.64 crore. In a few months it rose to Rs 18.68 crore and now stands at a phenomenal Rs 1,192 crore. This period has also witnessed five fund manager changes.

Nevertheless, the performance has been consistent. When the tide turned in favour of mid-caps in 2003, this fund began to shine. It ended 2003 as the third-best equity fund with returns of 157.73 per cent. In the next two years too it generated top quartile returns.

The fund manager has displayed a skill in identifying winners. For example, it was the first fund to spot the opportunity in IVRCL in January 2004. At present, construction is the top-most sector with 11.39 per cent of total investments. Most of the construction stocks have been with the fund for years (Shree Cement, Vesuvious, Gammon , Hindustan Construction and IFGL).

By and large, the fund manager sticks to 'buy-and-hold' philosophy. Some stocks (Yes Bank, Usha Martin Infotech, Vijaya Bank) were held on to for short periods, while even fewer has he entered and exited to re-enter. Take Sesa Goa's appearance in the portfolio for instance: July- November 2003, November 2004-May 2005 and July 2006-till date.

The fund manager is now moving cautiously. The cash component and large-cap allocation have increased while small-caps are on the decline. Moreover, the diversification belief has turned into an obsession. Last year, the portfolio was spread over 70 to 80 stocks and now the number has crossed 100. Diversification is apt for a mid-cap fund, however, if it does hit upon a few multi-baggers the effect will be minimized.

This article was originally published on November 01, 2006.