The Hindu Business Line : Sundaram CAPEX Opportunities: Hold

Investors can retain their holdings in Sundaram CAPEX Opportunities. The fund has performed impressively and returned 64 per cent since its launch in September 2005. This is higher than returns registered by most diversified equity funds over the past six months. The inspiring return in a short period can be attributed to the run-up in a number of stocks in the engineering sector as a result of capex and infrastructure spending in the country.

Funds such as UTI Basic Industries and Tata Infrastructure have also gained from this boom. However, none of the sector/theme funds riding this wave outperformed the BSE capital goods index over the past six months.

Timely entry, periodic profit booking and staying on with some stocks may have yielded better returns for most funds playing the engineering and infrastructure themes.

Sundaram CAPEX Opportunities is a theme fund and has a mandate to invest predominantly in companies in the capital goods space.

As the investment universe for theme and sector funds is narrow, the risks involved can be high.

The performance in such funds depends strongly on the fund manager's skills in choosing from the universe of stocks within the theme. While such funds have potential to deliver returns superior to the broad market, any downturn in the sector may affect performance.

A diversified equity fund is better placed to face the downside risks. Investment in theme funds should, therefore, form only a small portion of a portfolio.

Sundaram CAPEX has more than 55 stocks in its portfolio with exposure to individual stocks restricted to 8 per cent. This makes it less risky than funds such as Reliance Diversified Power, which has a highly concentrated portfolio.

Over the quarter ended March 2006, the fund returned 33 per cent.

Although this still lags the benchmark capital goods index return of 40 per cent, the fund has beaten similarly positioned funds such as DSP ML T.I.G.E.R and Birla Sunlife Basic Industries.

Portfolio: Siemens, Suzlon Energy, Bharat Heavy Electricals and Ansal Properties are a few of the stocks that have stayed in the portfolio since inception.

Mather & Platt Pumps and South East Asia Marine Engineering are offbeat picks in the industrial manufacturing space. The fund has invested about 70 per cent of assets in stocks with market capitalisation of over Rs 2,000 crore.

Fund details: Sundaram CAPEX Opportunities has Rs 282 crore of assets under management. Ms Srividhya Ramesh manages the fund.

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