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Our Bureau

Select Small Cap to restrict collection to Rs 300 cr

Kolkata , Jan. 4

Sundaram BNP Paribas Mutual Fund has decided to limit the maximum corpus of its forthcoming funds, Select Small-Cap and Equity Multiplier, to Rs 300 crore and Rs 500 crore respectively. These will be benchmarked against the BSE Small-Cap Index and S& P CNX Mid-Cap Index.

The fund house, which intends to deploy the collections in an optimum manner, is aware that it may not be quite easy for it to spread very large amounts over stocks that are often constrained by factors such as relatively poor liquidity and high volatility.

Sundaram MF, which has chosen to present both funds as close-end products, feels such a structure would help tackle the volatility that is commonly faced by small- and mid-cap stocks. A close-end fund also enables the fund manager concerned to handle the compulsions that stem from regular inflows and redemptions.

While Select Small-Cap is a five-year product, Equity Multiplier will have a tenure of 3 years. The former (which will allow 10 per cent redemption every year) will be redeemed at the end of its tenure; the latter will be converted into an open-end fund. Equity Multiplier will provide unit holders with a single-day redemption window every half-year.

The fund house is not mounting any exceptional effort to present the new funds before investors. As Mr Sanjay Santhanam, V-P - Marketing & Sales, Sundaram MF, points out, a combined collection of Rs 800 crore will not substantially add to its total assets under management.

"However, both are compelling ideas. Investors may well opt for them with a view to improve their overall returns," he said. Incidentally, in both cases, a 10 per cent over-subscription will be retained. Sundaram MF manages close to Rs 7,000 crore at the moment.

Referring to the risks involved, the MF has underlined the possibility of getting lower returns in a scenario marked by large cash holdings. There is also the possibility of concentration in the portfolios. Not all sections may wish to take exposure to small-cap stocks for long periods, it is felt.

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