Sundaram Financial Services Fund for Future Growth

For those seeking targeted exposure to India’s banking and financial services, understanding the Sundaram financial services fund could be of interest.

The plan includes Regular plan, Direct plan, Growth plan and IDCW plan. The Sundaram Financial Services Fund Regular Plan Growth option is focused on here.

Understanding the Sundaram Financial Services Fund

The Sundaram Financial Services Fund is an open-ended equity fund that targets the banking and financial services industry. The scheme was started in June 2008, and is managed by Sundaram Mutual Fund.

What Is the Sundaram Opportunities Fund?

Another name that’s often heard of the Sundaram Financial Services Fund is the Sundaram opportunities fund.

Fund Category and Investment Objective

The scheme is a sectoral/thematic equity scheme. The Nifty Financial Services Index TRI is its main benchmark with Nifty 50 TRI added as an additional benchmark.

The fund’s aim is to generate long-term capital appreciation through investment in predominantly banking and financial services companies.

The disadvantage here is that this is a fund that will focus on a specific sector rather than an “all in one” equity fund.

How the Fund Focuses on Financial Services

Financial services are much more extensive than banking services.

The sector may contain one or more of the following:

Commercial banks
Small finance banks
Housing finance companies
NBFCs
Consumer finance companies
Insurance businesses
Capital-market companies
Other financial institutions

Sundaram Financial Services Fund Regular Plan Growth

The Regular Plan Growth option is a combination of two important characteristics: Regular Plan structure and Growth option.

The most recent information states that the scheme features Regular as well as Direct and Growth and IDCW choices.

What Does the Growth Option Mean?

The main advantage of the Growth option is to keep investment gains in the scheme with the periodic distribution of IDCWs rather than being the major advantage.

This can make the option appealing to investors who are looking for a long-term investment objective.

Understanding the Regular Plan for Sundaram Financial Services Fund

The Regular Plan is a distribution plan using intermediaries and generally has a higher expense ratio compared to the Direct Plan.

The extra cost is a significant consideration as costs can impact on the investor’s after-tax returns in the long run.

Recent published data for the Regular Plan expense ratio ranged from 2.15% to 2.17%, as of the time of the report or by source. Expenses may vary and investors are advised to refer to the most recent official scheme documents before investing.

So, don’t evaluate a Regular Plan and Direct Plan just based on their past performance. Consider all the costs, services rendered and preferred investment methods.

Who Should Consider the Sundaram Opportunities Fund?

Investors who are looking for a concentrated exposure to the financial services category of India may find the Sundaram opportunities fund interesting, and are aware of the additional concentration risk.

Investors With a Long-Term Horizon

Equity investments have time to go through cycles of the financial markets, depending on length of investment horizon.

This is not risk-free, but it can help dampen the effect of small changes in the market if your investment objective is many years in the future.

Investors should also periodically check their portfolio to make sure the investment matches their objectives.

Investors Comfortable With Sectoral Exposure

This fund might be better suited for investors who have the awareness that the financial sector can greatly affect the performance of this fund.

Alternatively, if you prefer diversification across several industries, a diversified equity fund might be more suitable to your investment style.

Who May Want to Avoid This Fund?

A sectoral financial services fund might not be right for you if:

The money is needed in the short-term.
You are not able to tolerate the fluctuation of the equity market.
You would like a fund with a wide spread of sectors.
You are buying in because you are seeing favorable returns.
You are not aware of risk from sector concentration.

Factors to Check Before Investing for Sundaram Financial Services Fund

Before investing in financial services opportunities, one thing that one should consider is more than just the NAV of the Sundaram financial services fund.

Investment Horizon

Typically, equity investments need to be held for a long period of time.

Consider how much money you really need, at this moment.

If you have a few months to go before you want to achieve your goal, it may not be the right time to invest in an equity sectoral fund.

Risk Appetite

Are you able to keep your head down when financial stocks go down?

If the short-term downside would cause you to panic and sell your investment, you should question if concentrated equity funds are the right investment for you.

Portfolio Diversification

Look at your complete portfolio.

It’s all about the avoidance of unnecessary reliance on a single sector, theme or asset class that’s known as portfolio diversification.

Benefits and Limitations

The Sundaram financial services fund has some attributes that might appeal to long-term investors.

Potential Benefits

Specific exposure in Banking & Financial Services.
Multi-segment financing.
Long history of experience since 2008.
Growth and IDCW options.
SIP facility.
Low minimum investment requirement.
Professional portfolio management.

Potential Limitations

The one thing they all have in common is they are all limited in concentration.

As the fund is a general sector fund, developments in financial services can have a significant impact on the performance of the fund.

The Direct Plan will also have a lower cost structure than the Regular Plan.

Last but not least, history doesn’t repeat itself.

Is the Sundaram Opportunities Fund Suitable for Long-Term Goals?

The fund might make sense for investors who are looking to gain exposure to the financial-services industry in India but have a long investment horizon and accept the volatility of equities.

However, rather than a sectoral fund being the most natural option, if you choose one mutual fund to offer you a broad-based exposure to the Indian equity market.

A financial-services fund may be a single component, but you would probably not want to make a meal out of a single component.

Conclusion

The Sundaram financial services fund offers focused exposure by providing active management in a portfolio of equities in India’s financial services and banking sector.

Therefore it is important to look at the Sundaram opportunities fund as a part of a larger investment strategy and not just in terms of past performance.

FAQs

1. What is the Sundaram Financial Services Fund?

Ans) The Sundaram Financial Services Fund is an equity scheme, which is mainly invested in the Indian Banking & Financial Service Companies.

2. What is the Sundaram Financial Services Fund Regular Plan Growth option?

Ans) It’s the Regular Plan’s Growth option, which is for investors who want to gain exposure to the financial-services industry while seeking long-term capital appreciation.

3. What is the benchmark of the Sundaram Financial Services Fund?

Ans) The scheme’s main benchmark is Nifty Financial Services Index TRI and additional benchmark is Nifty 50 TRI.

4. What is the minimum investment in the Sundaram Financial Services Fund?

Ans) According to the latest official factsheet, they have mentioned that the minimum investment is ₹100 and SIP plans are available.

5. Is the Sundaram Opportunities Fund suitable for every investor?

Ans) No. The sector-specific exposure might appeal to those who are looking for exposure to the financial-services industry and who are comfortable with equity and concentration risks.