Sundaram Alternate Assets Ltd. (SA) is a wholly-owned subsidiary of Sundaram Asset Management Company Limited (SAMC), which specializes in high-net-worth individuals’ investing needs (HNIs). SAMC is a wholly-owned subsidiary of Sundaram Lending Limited, India’s largest non-banking finance firm. Under the Sundaram umbrella, there are two divisions: Sundaram Portfolio Managers (SPM) and Sundaram Alternative Investment Funds (AIFs). Sundaram Alternates tailors solutions to assist you to achieve your long-term wealth-building goals, based on a foundation of trust. Our fund management team has over three decades of experience in the real estate and stock markets, and our strategies are based on cutting-edge industry standards, robust operational models, data-backed research, and transparency to give your money the edge it requires. Invest with the help of Join us and take the next step forward.
|Number of Stocks||15 – 25 Stocks|
|Fund Tenure||6 years from the date of first closing; extendable by 1 year post approval from investors|
|Fund Type||Closed Ended Category III AIF|
Capital structure and fees
|Class||Minimum investment||Management fee p.a.||Hurdle rate with high watermark||Performance fee|
|A1||Rs. 1 crore – 5 crores||2.50%||Not applicable||Not applicable|
|A2||Rs. 1 crore – 5 crores||2.25%||10% IRR (pre-tax) p.a||15%|
|A3||Rs. 5 crores||2.25%||Not applicable||Not applicable|
|A4||Rs. 5 crores||2.00%||10% IRR (pre-tax) p.a||10%|
Exit Load (Adjustment to NAV on exit)
<12 months from final closing or final drawdown, whichever is later
- 5% of NAV plus applicable taxes, duties, and levies (i.e., exit value)
> 12 month <= 24 months from final closing or final drawdown whichever is later
- 4% of NAV plus applicable taxes, duties, and levies (i.e., exit value)
> 24 month <= 36 months from final closing or final drawdown whichever is later
- 3% of NAV plus applicable taxes, duties, and levies (i.e., exit value)
> 36 month <= 48 months from final closing or final drawdown whichever is later
- 1% of NAV plus applicable taxes, duties, and levies (i.e., exit value)
> 48 months from final closing or final drawdown whichever is later
Redemption allowed from the immediate quarter of the final closure/drawdown whichever is later. Notice to be provided 20 business days prior to the relevant quarterly exit window.
- Administrative Expenses: Up to 0.25% p.a.
- Organizational Expenses: Up to 2.00% (as applicable)
- All expenses indicated are excluding applicable taxes
- Management fees will be calculated on the daily average AUM and charged monthly in arrears
- Drawdown: Initial Drawdown – 30%; Subsequent Draw-downs – At discretion of Investment Manager
The primary objective of the Fund will be to carry on the activity of a Category III AIF, as permissible under the AIF Regulations, to generate absolute total returns by adopting a bottom-up investment process. The portfolio will be a multi cap portfolio with investments in large, small and mid-cap stocks, as well as units of other Category III AIFs, with the objective of seeking long term capital appreciation. The Fund would have a concentrated target portfolio of about 20 (twenty) stocks which would typically range between 15 (fifteen) to 25 (twenty-five) stocks.
The number of Portfolio Entities in the portfolio is indicative and would be determined by the Investment Manager based on the opportunities, available funds for investment and market conditions. The Fund’s investments will focus predominantly on structural growth stories and a portion of allocation to cyclical turnaround stories to achieve the objective of the Fund. The Fund will invest across market caps and will be sector agnostic
- Target is to create meaningful alpha in long term
- Identify and invest in big return generating ideas and avoid momentum
- Being contrarian is a necessity to outperform a benchmark meaningfully over the long term
- Flexibility to allocate across cap curves and in both structural & opportunistic ideas
- Concentrated portfolio with meaningful allocation to high conviction ideas
- Structural high growth stories tend to get underappreciated in short term mostly
- Low liquidity in mid & small cap space do offer large value opportunities during market down cycles
- Cyclical businesses provide excellent contra opportunities during weak industrial cycles
Our Track Record in Identifying Opportunistic Equities
- With a track-record of over a decade, our Voyager portfolio has delivered an impressive alpha of ~6% since its inception.
- The portfolio has grown ~7.0x vs ~3.7x in the benchmark. Rs. One crore invested in 2011 has made Rs. 3.3 Cr more than the benchmark in this time.
- We are certain that the reasons for the consistent out-performance has been 1. Disciplined investment in to compounding and 2. Meaningful investment into mid and small cap opportunities in cyclical sectors.
The down-capture ratio of <100 is indicative of the overall out performance of the portfolio vs. the benchmark in down-market conditions
- The fund was launched in the month of May 2022
- The funds collected have been deployed into stocks of various sectors to the extent of 95.7% as at 28th of February 2023.
- The top sectors where the investment are made are Banking, chemicals & petrochemicals, Finance sector.
Private banks preferred over PSU’s
- Private Banks are preferred over public sector banks as they depict higher growth.
- High ROA, above 1.5% to handle down cycles
- ROE > 15%, capital to grow consistently
- Leverage Technology
- Private banks are spending ~0.25% of assets on technology
- Banking services and loan sourcing > 80% digital
- Branch addition to capture market share from NBFCs
- Lower ticket size to address larger opportunity
Technology as a key differentiator to defend and grow
- Online sector has high growth potential
- Online companies entered capital markets with a bang, promise to deliver stupendous growth and at unprecedented valuations.
- Only a few companies have moat to grow at 30-40% and be profitable in next 3–5 years.
- Online beauty, fashion, food, logistics, insurance have potential to grow ahead of traditional business.
- Such high growth companies are now available at reasonable valuations vs. traditional companies.
Enablers of higher penetration
- Formalization of economy
- Open architect databases – Aadhaar, E-Way bill, GST etc
- UPI revolution in India – Rs.8 trillion by value
- There are 30cr monthly UPI users in India (2021)
- 50% + customers do online search and buy offline
- 50% + customers do online search and buy offline
Fund Manager Profiles
MADANAGOPAL RAMU ( Fund Manager Head, Equity )
- Comes with a rich 16-year capital market stint from an analyst to head of research to fund manager & Head of Equity for the last 6 years.
- Veteran at Sundaram Mutual Fund with over 12 years of experience over the 4 years in Cent rum Capital as research analyst.
- Astute business understanding across sectors, strong affinity for number crunching, qualified cost accountant and management degree from BIM Tricky.
- Tracked various sectors from capital goods, infrastructure, cement & power in his equity research stint.
- Sundaram Emerging Leadership Fund (S.E.L.F.) ranked 2nd among Best Funds in the Mid and Small cap space at the India’s Smart Money Manager Awards 2021.
- SISOP and PACE earned 4 and 3 stars respectively in the Multi Cap category, and S.E.L.F. received 3 stars in Small & Mid-Cap category in PMS Bazaar’s PMS Rankings FY 20-21, powered by CRISIL.
PRASHANT N KUTTY ( Assistant Fund Manager )
- Over 15 years equity research experience and actively managing funds for last 1 year.
- Worked with top tier capital market companies like HDFC Securities, Standard Chartered securities and Emkay securities before 6-year current stint in Sundaram Mutual Fund.
- Closely tracked Consumption sector for over 10 years; has special affinity for identifying mid and small cap stocks.
- Astute business acumen understanding across sectors & likes playing with numbers, he holds an MBA from BVIMSR, Mumbai University.
Urban job/wage growth points to secular growth ahead
- Consumer discretionary spending is gaining share in total consumption, as per-capita GDP has crossed the important US$2,000 mark.
- Growth drivers in place
- Urban consumption will see a sharp rebound in next 2 years | Affordability at a decade high – Increasing salary falling EMI
- The Naukri Job Speak report – February sees 9% sequential growth in hiring trends amidst uncertainties
- Target addressable market should be substantially higher
- Prefer companies with the best control on working capital, primarily inventory days
- Companies with best pricing power – better margins / working capital / inflation hedge
Strong Income Levels; Giant Opportunity for Organized
- After COVID-19, Footfalls across organized retail to theaters to shopping malls to restaurants have witnessed a sharp revival.
- Covid-19 induced changes in consumer behavior are likely to reverse like OTT vs. Cinemas, Online ordering Vs Dine out, WFH vs. Office
- Jewelry, Paints, Retail, QSR, multiplex have all accelerated store expansion in COVID-19 period – beneficiaries of unbranded to branded.
- The wealth effect is likely to drive HH to shift focus on discretionary spending like recreation, entertainment, transportation, healthcare, and luxury.
- Potential winners: D-Mart, Trent, Titan, PVR, Rainbow, Sapphire, Westlife
Discretionary is a decade's theme, interrupted by Covid-19
- Different categories of consumption see accelerated growth at different point of income levels in an economy
- Economies crossing $2500 p.a. per capita income see a shift in consumption pattern from staples to discretionary
- When China crossed $2500 per capita in 2008, it saw a significant boost to discretionary spending for a long period.
- With India at $2500 mark, some segments like organized retail, branded apparels, QSR, health and travel are poised to see robust growth.
- It is evident from the table that the growth potential is multifold in the majority of discretionary segments compared to staples
- Given the young population and high percentage of data connectivity in India, online penetration also looks a structural opportunity
- Current penetration levels in the majority of these segments are substantially lower
2 Buckets of Stocks
Bucket 1: Structural Equities – 20% growth models
In a growing country like India, every stage of economic development, provides investment opportunities. Identifying such opportunities, taking a deep dive into these businesses, the management, and execution capabilities helps us create value over the long term. In this process, it is crucial to maintain discipline and follow pre-defined quantitative and qualitative filters to isolate quality businesses out of the large universe to create long term value.
Quality of Business
- Scalability – How big is the opportunity?
- Self Sustaining business models – 3Q Financial framework
- Strong differentiating factor in business
- What is the key competitive advantage to sustain the growth over the long term?
- Is it cost competitiveness, a superior brand leading to higher pricing power or pure execution?
Quality of Financials
- Ability to double earnings in 4–5 years
- Growth = Reinvested Cash x RoIC
- Businesses with min. ROIC of 15%
- Higher cash generation leads to higher reinvestment: OCF/ EBITDA > 50%
- Debt to Equity: < 0.5x – low debt helps navigate business tough times
Quality of Management Focus on
- Past execution track record
- Vision of management
- Focus on high sustainable growth
- Record of identifying and investing in profitable opportunities
- Good corporate governance track record
Bucket 2: Opportunistic Equities
- The market in its inherent volatile nature provides pockets of cyclical / turnaround opportunities at attractive valuations
- Such pockets also provide lucrative risk reward opportunities at different facets
- Turnarounds are rare
- Clear Entry – Exit strategy
- Extremely attractive Risk – Reward
- Sufficient Margin of Safety
Investing in value opportunities includes
- Underappreciated business | Tata Consumer
- Niche businesses | GMM Paddler
- Management turnarounds | ICICI Bank
- M&A | Mindtree
- Spin-Offs / Split | Orient Electric
- Out-of-favour industries | Dixon Technologies
Disclaimer: Investing Involves Risk. This document is for information purposes only and should not be viewed as a legal offering document or solicitation. Offers to invest in this fund are made only by the Discretionary Portfolio Management Services Agreement. Past performance does not guarantee future results and there is no assurance that the managed accounts will necessarily achieve their objectives. We do not guarantee any returns in the hand of investors not we take any sort of accountability for the performance of the scheme. The above-mentioned data is collected from the respected Fund house please verify the same at SEBI website.