At one time, Sundaram Select Mid Cap was shooting the lights out. In 2006 it was the best fund in its category and in 2009 it once again stood out with a return of 114.63%.
If one looks at the 3- and 5-year return, it is an average player. But it does outperform in the 10-year slot with an annualized return of 18.30%.
Here's what you should know about the investment process.
- The fund has stayed a true-to-label product despite peers within the small/mid-cap Morningstar Category moving a considerable portion of the portfolio into large caps, especially when small caps and mid-caps are overvalued.
- The fund manager tries to balance the stock’s perceived return, growth, and valuations while maintaining lower liquidity risk. A combination of absolute and relative valuation techniques such as discounted cash flow, return on equity, EV/EBITDA, P/E, and price/book value are used to make investment decisions.
- Though the fund house has a strong thematic undercurrent that may influence sector selection, the investment process is essentially bottom-up and stock selection is primarily driven by fundamentals. Analysts in the fund house are encouraged to take a long-term view of the business and use a "5S"model to evaluate it--sustainability, scalability, soundness of promoters, sustainable competitive advantage through strong brand promotion, and sustainability of cash flows. They look at investing in high quality firms with differentiated businesses and consider overall sector prospects and the positioning of the business within the sector.
- The earlier fund manager Satish Ramanathan used cash calls in times of market uncertainty to generate alpha for the fund. This was seen in 2008 when cash accounted for roughly 18% of assets vis-a-vis 14% for a typical category peer. In 2011, the allocation to cash was again increased to 11%. However, Krishnakumar prefers to remain invested in equities with minimal allocation to cash.
Our analyst has given the Sundaram Select Mid Cap a 'Silver' rating. You can read the brief analysis here.
