Sundaram Emerging Small Cap Fund Series VI (NFO) – Should you invest?

Sundaram Emerging Small Cap Fund Series VI (NFO) - Should you investSundaram Emerging Small Cap Fund Series VI (NFO) Review


Sundaram Mutual Fund has come up with Series VI for its Emerging Small Cap Fund NFO. Investors might be thinking that when small cap stocks are taking beating, how come a mutual fund house is floating several series of small cap funds. Even I am curious to know this. Sundaram mutual fund already floated Series I to Series V in the last few months. Sundaram Emerging Small cap Fund Series VI NFO has opened for subscription on 20th August, 2018. What are the features of this Sundaram Emerging Small Cap Fund Series VI? What are the risk factors an investor need to consider before investing in such small cap funds? Should you invest in Sundaram Emerging Small Cap Fund Series VI NFO?

Also Read: 10 Best Agressive Balanced Mutual Funds for 2018

Features of Sundaram Emerging Small Cap Fund Series VI NFO


This is a close-ended equity scheme investing predominantly in small cap stocks.  

1) This scheme would open for subscription on 20th August, 2018.

2) This scheme closed for subscription on 3rd September, 2018.

3) This is close ended scheme which matures in 5 years period. 

4) Since this is a close ended scheme, it would not reopen for subscription after the closure date.

5) This scheme is available in both regular and direct plans.

6) Like any other MF scheme, each such plan offers both dividend and growth options. Under the dividend option regular dividends would be paid.

7) This scheme is available for lump sum option only.

8) Minimum investment is Rs 5,000 and in multiples of Rs 10 there-off for lump sum investments.

9) The NAV of the NFO is Rs 10 per unit now during initial subscription.

10) There is no entry load to invest in this mutual fund scheme.

11) There is no exit load on maturity.

12) This scheme is classified as moderately high risk scheme.

13) This scheme benchmark is a S&P BSE 250 Small Cap Index.

14) Scheme expense ratio is estimated up to 2.5% of the total assets on any day.

Who is the Fund Manager for Sundaram Emerging Small Cap Fund Series VI?


The Fund Managers are Mr.S Krishnakumar & Mr. Dwijendra Srivastava.

What is the investment objective and strategy of this Sundaram Emerging Small Cap Fund Series VI?


This mutual fund scheme seeks capital appreciation by investing predominantly in equity/equity-related instruments of companies that can be termed as Small Caps. However, there can be no assurance that the investment objective of the Scheme will be realized. Small Cap Stocks are defined as 251st company onwards in terms of full market capitalization.

What is the allocation pattern in this mutual fund scheme?


This fund investment pattern looks as follows:

1) It invests 65% to 80% in equity and equity related instruments of companies of small cap companies.

2) It invests 0% to 35% in equity and equity related instruments of any company.

3) It invests 0% to 35% in fixed income options or money market securities in India.

Can NRI invest in this MF scheme?


Yes, they can invest in this scheme. They can invest in this mutual fund scheme on repatriation basis subject to approvals from RBI. However, citizens of USA/Canada cannot invest in this scheme.

How is the Performance of Existing Sundaram Small Cap Schemes of Series I to Series V which came in the last 5 months?


Currently Sundaram mutual fund already came up to Series I to Series V, let us assess performance. Though it is very short term, this can give a better view.

1) Sundaram Emerging Small cap Fund Series I: This was launched in Mar-18 and this fund house was able to get Rs 170 Crores of subscription.  In the last 3 months, this fund gave 9% negative returns against benchmark negative returns of 5.8%.  

2) Sundaram Emerging Small cap Fund Series II: This was launched in April-18 and this fund house was able to get Rs 184 Crores of subscription.  In the last 3 months, this fund gave 6.4% negative returns against benchmark negative returns of 5.8%.  

3) Sundaram Emerging Small cap Fund Series III: This was launched in May-18 and this fund house was able to get Rs 154 Crores of subscription.  In the last 3 months, this fund gave 1.7% negative returns against benchmark negative returns of 5.8%.  

4) Sundaram Emerging Small cap Fund Series IV: This was launched in Jun-18 and this fund house was able to get Rs 109 Crores of subscription.  In the last 1 month, this fund gave 1.2% returns against benchmark returns of 5.4%.  

4) Sundaram Emerging Small cap Fund Series V: Series 5 was launched in Aug 1st week, 2018. Currently as per leading websites it shows that AUM is zero and we are assuming that it failed to get minimum subscription in Series 5.

How is the Performance of Existing Small Cap Funds?


Currently there are already bunch of small cap fund schemes in the market, let us look at their performance.

1) Reliance Small Cap Fund: This is one of my favorite small cap fund. This fund gave 14% returns in the last 1 year, 18% annualized returns in the last 3 years and 37% returns in the last 5 years. This fund gave 3.3% negative returns in the last 3 months and gained 7.5% returns in the last 1 month. This indicates that such funds may under perform during down trends in the small cap sector, however can recover fast.

2) SBI Small Cap Fund: This fund gave 19% returns in the last 1 year, 19% annualized returns in the last 3 years and 36% returns in the last 5 years. This fund gave 4.1% negative returns in the last 3 months and gained 8.8% returns in the last 1 month. This indicates that even such funds may under perform during down trends in the small cap sector, however can recover fast.

What are the risks involved in investing in this MF scheme?


One should consider some of these risk factors before investing.

1) This mutual fund scheme invests in small cap stocks which are high risk.

2) Small Cap Stocks has been under performing in the last few quarters. We may see some more down trend.

3) Small Cap stocks are not liquid in terms of volume. This poses risks to the mutual fund scheme as such strategy is high risk.

4) It invests upto 10% in unlisted securities and these face liquidity issues.

5) Small cap stocks are highly volatile.

6) This is close ended mutual fund scheme, hence liquidity is an issue.

7) This fund is expected to list on NSE. If an investor wants to sell on the stock exchange, they may or may not find a buyer.

8) This fund invests up to 35% in debt instruments. Certain debt instruments carry credit risk and there could be a downfall in such instrument ratings and values. 

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Should you invest in Sundaram Emerging Small Cap Fund Series VI?


The small Cap sector is highly volatile. Due to increased opportunities in small cap mutual fund segment, there was huge flow of funds in this category. Some of the funds like DSP BR small cap fund or Franklin India smaller cos fund has stopped fresh investment for some time. Recent series of Sundaram Emerging Small Cap Funds are not that encouraging as there is poor response from investors. As an investor, you should think twice before experimenting with such new funds that too, which has not caught investor attention in the last 5 months. Think, Think, Think… You are the best judge… take final call after that.

Sundaram Emerging Small Cap Fund Series VI NFO details can be downloaded from here.

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Suresh

Sundaram Emerging Small Cap Fund Series VI (NFO)

Suresh KP
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