Focused Funds endeavour to identify high conviction bets in select stocks/sectors that are expected to do well in the medium to long term and take concentrated exposure in such stocks/sectors. These funds are mandated to limit the number of stocks in their portfolio to 30. Focused Funds have the flexibility to choose high potential stocks from across market caps and sectors, which gives them the opportunity to benefit from dynamic market conditions.

However, on the off chance that the fund manager’s bets do not pay off as expected, investors may incur heavy losses due to high concentration of the portfolio. Therefore, it is important to select Focused Fund for your portfolio carefully.

Sundaram Focused Fund is a small-sized Focused Fund that has shown turnaround performance in the last few years and rewarded investors with decent risk-adjusted returns.

Graph 1: Growth of Rs 10,000 if invested in Sundaram Focused Fund 5 years ago

Graph 1

Past performance is not an indicator of future returns
Data as on July 12, 2022
(Source: ACE MF)  

Sundaram Focused Fund is the erstwhile Principal Focused Multicap Fund that has recently shifted to the stable of Sundaram Mutual Fund as a part of its acquisition of Principal Mutual Fund in December 2021. Launched in November 2005, the fund was earlier a Large-cap Fund that was reclassified as a Focused Fund in 2018, under the SEBI recategorization norms. Sundaram Focused Fund is mandated to invest in a maximum of 30 stocks, where the fund manager looks for high conviction stock ideas but ensures reasonable diversification across market capitalisation and sectors. While the fund’s performance in the past was ordinary it has shown turnaround growth under its current fund manager, Mr Ravi Gopalakrishnan, who has been managing the scheme since October 2019. Sundaram Focused Fund currently stands among the top performers in the Focused fund category over the longer time frames and also fares better in terms of risk-adjusted returns. In the last five years, Sundaram Focused Fund grew at a CAGR of 12.1% which is higher than the 11.2% CAGR generated by the benchmark Nifty 500 – TRI over the same time period. An investment of Rs 10,000 in the fund five years ago would now be worth Rs 17,870.

Table: Sundaram Focused Fund’s performance vis-á-vis category peers

Scheme Name Corpus (Cr.) 1 Year 2 Year 3 Year 5 Year 7 Year Std Dev Sharpe
Mirae Asset Focused Fund 8,222 1.18 28.13 20.31 23.23 0.20
IIFL Focused Equity Fund 2,784 1.94 28.26 19.42 15.08 15.18 23.19 0.18
Quant Focused Fund 96 4.28 32.16 18.69 13.38 13.42 23.20 0.17
ICICI Pru Focused Equity Fund 3,069 7.06 27.59 17.50 12.47 11.98 20.51 0.17
Nippon India Focused Equity Fund 5,626 8.15 33.93 17.49 11.34 13.09 26.77 0.15
Sundaram Focused Fund 665 -0.99 23.94 16.64 12.14 12.16 20.95 0.15
SBI Focused Equity Fund 24,277 0.65 24.25 15.56 13.78 14.05 21.27 0.14
HDFC Focused 30 Fund 1,371 18.10 33.87 15.23 9.50 11.03 24.99 0.13
Franklin India Focused Equity Fund 7,397 5.06 31.81 14.98 12.10 12.20 25.84 0.13
Baroda BNP Paribas Focused Fund 233 4.35 22.56 14.05 20.64 0.13
NIFTY 500 – TRI 2.92 26.37 14.67 11.20 11.59 23.08 0.13

Returns are point to point and in %, calculated using the Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on July 12, 2022
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

Sundaram Focused Fund’s historical long-term performance looks encouraging. In the last 3-year and 5-year period, the fund has maintained a significant lead of around 1 to 2 percentage points CAGR over its benchmark and has outpaced the category average as well by a similar margin. Over the longer 7-year period the fund’s performance has been nearly in line with the benchmark and the category average. Notably, Sundaram Focused Fund’s superior performance in the last few years has helped scale up its long-term returns.

More importantly, the fund’s superior performance has come at a far reasonable risk when compared to the benchmark and the category average. Its Standard Deviation of 20.95% is much lower than the benchmark as well as the category average. Sundaram Focused Fund has shown significant improvement in its risk-adjusted returns (as denoted by the Sharpe ratio) and has outperformed its benchmark as well as many of its peers.

Investment strategy of Sundaram Focused Fund

Sundaram Focused Fund is a focused fund having the mandate to invest in a maximum of 30 stocks and holds flexibility to invest across market capitalisation and sectors. The fund’s portfolio strategy revolves around investment in a high conviction concentrated portfolio of companies across market capitalisation and sectors to achieve its stated investment objective of long-term capital growth. It predominantly invests in equity and equity-related instruments of large-cap companies along with significant exposure to mid-caps and some allocation to small caps.

The fund follows a process-based investment strategy and long-term investment philosophy and applied the 6 Pillar investment framework filter process to pick quality stocks across schemes. It includes

1. Business Dynamics (Size, scalability, and Longevity)

2. Quality of Growth (Management quality and business model)

3. Operating Matrix (Operational Efficiencies)

4. Capital Allocation (Efficiency and Distribution of Capital)

5. Profitability (Quality and sustainability of profits)

6. Valuation (Price the Value and not Value the Price)

Sundaram Focused Fund aims to participate in the all-round growth of the economy. For this, the fund managers aim to identify suitable stocks that will benefit from economic growth. The fund follows a bottom-up approach towards investing/identifying individual stocks and a top-down approach towards investing/identifying sectors so that the resultant portfolio is well diversified. Sundaram Focused Fund invests in companies based on various quantitative and qualitative criteria like sound financials, professional management, track record, industry scenario, industry and company growth prospects, etc.

Graph 2: Top portfolio holdings in Sundaram Focused Fund

Graph 2Graph 2

Holding in (%) as of June 30, 2022
(Source: ACE MF)  

As of June 30, 2022, Sundaram Focused Fund held 29 stocks in its portfolio spread across sectors. The top 10 stock holdings constitute mainly of top large-cap names like ICICI Bank, Reliance Industries, Infosys, HDFC Ltd., SBI, etc. having an allocation in the range of 4% to 8%. The top 10 stocks accounted for 50.8% of its portfolio. Many of these stocks have been part of its portfolio for about 2 years. It occasionally churns a portion of its portfolio holdings to replace them with attractive opportunities.

In the last one year, Sundaram Focused Fund benefitted from its holdings in Reliance Industries, ICICI Bank, Bharat Electronics, and SBI. However, its holdings in Samvardhana Motherson International, Shree Cement, HDFC Bank, Infosys, HDFC Ltd., among others eroded some of its gains.

Among sector holdings, Sundaram Focused Fund’s portfolio is skewed towards Banking and Finance forming around 30.5% of its portfolio allocation. Engineering and Infotech are the other major holdings having an allocation of around 8.5% in each, along with diversification to Auto & Auto Ancillaries, Petroleum, Retailing, Telecom, Pharma, Chemicals, Healthcare, Power, Cement, among others. The top 5 sectors in Sundaram Focused Fund’s portfolio together accounted for around 55.4% of its assets. Though the fund’s portfolio is predominantly invested in cyclical and sensitive sectors, it is fairly diversified to defensive sectors as well.


Sundaram Focused Fund is a process-driven fund that has distinctly outperformed the benchmark, as well as most of its large-sized peers in the last few years. It has achieved this feat without exposing the portfolio to undue risk. The fund appears to be well placed in terms of generating reasonable returns and has the potential to reward investors willing to stay invested in the fund for the long term.

Despite being a Focused Fund, Sundaram Focused Fund holds a portfolio that is fairly diversified at the stock level. The cautious approach followed by the fund manager has helped the scheme do well to limit losses during market corrections, as seen during the market crash of 2020.

Sundaram Focused Fund is suitable for investors looking for a fund that invests in high conviction stocks, particularly in the large-cap and mid-cap segment and can help generate decent alpha in terms of returns.

This article first appeared on PersonalFN here

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