Sundaram Equity Plus NFO Review

by Manshu on May 8, 2011

in Mutual Funds

This is another post from the Suggest a Topic page, and today we’re going to take a look at the newly launched Sundaram Equity Plus NFO. This NFO began on May 4th 2011, and will close at May 16th 2011 (not that it matters).

About Sundaram Equity Plus

This is an open ended mutual fund which will hold a minimum of 65% in equity, 15% in gold ETFs, and up to a maximum of 20% in fixed income and money market instruments.

The minimum 65% in equity means that Sundaram Equity Plus will be treated like an equity mutual fund for tax purposes, and under the current rules there will be no long term capital gains. However, these rules are going to change with the DTC taxation rules that will be implemented next financial year.

This is the indicative allocation of the fund:

Asset

Minimum

Maximum

Equity

65%

85%

Gold ETF

15%

35%

Fixed Income

0%

20%

The gold part will be in gold ETFs – they don’t speak about a specific gold ETF, so I think that they might invest in more than one gold ETF.

For the equity part, this is the strategy they quote:

As far as equity part of the portfolio is concerned, the strategy will focus on large-cap stocks – defined as stocks with a market captitalisation (stock price multiplied by outstanding number of shares) not below the 50th stock by value on the National Stock Exchange and aim to create a diversified portfolio with a maximum of 30 stocks.

So, you should expect to own gold ETFs and large cap Nifty stocks when you invest in this fund. The stocks part of it will be actively managed, and the allocation between stocks and gold ETF is also actively managed.

The minimum investment for the NFO is Rs. 5,000 and if you want to get a SIP then Rs. 750 for a quarterly, and Rs. 250 for a monthly one. There is an exit load of 1% if you sell this fund within a year. You don’t have to pay any exit load if you hold it for more than a year.

The fund has a Dividend, Dividend Reinvestment, and Growth Options as part of this fund.

Sundaram Equity Plus Expenses

This mutual fund will incur expenses of 2.5%. This fund incurs double expenses for the gold ETF part of it because they will charge you 2.5% for the fund that they manage, and then the underlying gold ETF will charge 1% or more in expenses. The equity part of Sundaram Equity Plus is direct investment in large cap stocks, so at least for that part of the fund there are no additional fees.

Final Words

In my opinion – the primary (and only?) benefit of this fund is that you can own one asset that gives you exposure to both equity and gold.

However, the 2.5% annual fee is much too high a cost for such a thing. You can very easily create a SIP in one of the best balanced mutual funds and buy the best gold ETF or create a gold SIP in it on your own.

That way you can get absolute control on how much money you want to invest in both, and also be able to choose the funds of your liking without incurring any additional fee at all!

{ 8 comments… read them below or add one }

Vijay May 8, 2011 at 9:52 pm

Thanks for the review Manshu! As you pointed out, the Sundaram Equity Plus MF acts as a ‘fund of funds’ as far as the Gold ETF is concerned which accounts for the higher expense!

Reply

Manshu May 9, 2011 at 10:35 am

Thanks for the suggestion! Glad that I was finally able to write on one of the topics suggested by you.

Reply

Mithlesh May 9, 2011 at 7:16 am

I think its ok for people who dont have much time doing manual SIP etc and invest in these kind of funds but again its a new fund and you never know how its equity component is gonna perform.its better to put your money in an equity or balanced fund with good track record.

Good article though!! (based on KISS principle always)

Reply

Manshu May 9, 2011 at 10:37 am

Now, there are gold mutual funds that charge no expenses and then invest in underlying gold ETFs, so people who don’t have a demat / trading account or who want to go the SIP route can explore that option as well.

Reply

Amit agrawai May 9, 2011 at 9:01 am

Well NFO are not performing upto mark due to bad selection of fund by fund mgr moreover exp. Are high side it will be better to invest th. SIP seprately

Reply

Amit kapoor May 16, 2011 at 10:17 am

Nfo close today or extend for few day.plz reply.

Reply

Manshu May 17, 2011 at 12:09 pm

I don’t think its extended, but if you’re interested you can always buy it after it re-opens.

Reply

YATIN BANSAL May 24, 2011 at 4:15 am

I WANT TO KNOW THE NFO RATE OF SUNRAM EQUITY PLUS

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