New investors seeking a multi-cap investment in mutual funds have other options to choose from and can ignore Sundaram Equity Multiplier

A multi-cap offering from Sundaram Asset Management Company, Equity Multiplier has been an average performer so far with returns at par with those of the benchmark indices. While the fund has had a good launch at the beginning of the stunning rally in January 2007, it slipped in performance after that. Its failure to rebound since then has had a cascading impact on its overall ratings till date.

PERFORMANCE:

Despite the volatility in the markets, Sundaram Equity Multiplier has had a good start in 2011. Returning over 3% since January this year, it is poised to outperform the major indices which have registered a fall of more than 5% during this period. This short term performance, however, fails to make up for its underperformances during the previous years.

Equity Multiplier gained the market momentum posting a handsome 79% gain in the very first year ? a fine reward for those who took the risk of investing in a new fund offering. This excitement was, however, short-lived as the impact of the global financial meltdown led to the scheme shedding more than 55% of its gains in the very next year. The savage sell-off stocks being uniform, across all equity mutual fund schemes, sectors and indices, investors would have ignored the slippage in the performance of this scheme in 2008. However, the scheme?s failure to compensate for the losses during the upswing in the markets in 2009 and then again in 2010 does not seem to have gone down well with investors, as reflected in the consistent decline in its AUM.

In 2009, for instance, Equity Multiplier returned just about 68% gains against over 88% clocked by its benchmark index ? the S&P CNX 500. Its peers, on an average, returned nearly 87% then. Again in 2010, the scheme?s performance was quite dismissal as it returned just about 11% against the average of 18% returns by its peers. No wonder, having made just about 42% absolute gains since its launch, Sundaram Equity Multiplier appears to have lost out in terms of investor confidence.

PORTFOLIO:

Unlike most of its peers, who are extremely bullish on the financial and energy sectors, Sundaram Equity Multiplier has placed its bets on the healthcare sector which currently accounts for more than 22% of its equity portfolio.

A dormant sector once upon a time, healthcare has seen a good run-up since 2009. So much so that equity funds dedicated totally to the healthcare segment have shown a better performance over the past three year period. However, having seen a good run up already, it is anyone?s guess as to whether the momentum will continue in the healthcare sector. If it does, then Sundaram Equity Multiplier could be a sure shot beneficiary. While the healthcare is the predominant sector for the fund, the diversification here is restricted to just about four stocks ? Cadila Healthcare, Glenmark, Torrent and Biocon. Moreover, its asset under management of about 300 crore is concentrated in just about 24 stocks resulting in a high exposure per stock.

OUR VIEW:

Barring its performance in the current calendar year so far, Sundaram Equity Multiplier does not have much to back it. New investors seeking a multi-cap investment in mutual funds have other options and can ignore Equity Multiplier. However, given the turnaround in its performance over the past few months, existing investors may hold on to their investment, especially if they have invested in the scheme during late 2007? early 2008 when NAV of the scheme had peaked at 18 per unit.