A new fund offer (NFO) by Sundaram Mutual, the Sundaram Multi Asset Allocation Fund, is an open-ended scheme that invests in gold exchange-traded funds (ETFs), debt, and equity market instruments. The scheme's investment goal is to produce long-term capital growth through holdings in gold exchange-traded funds (ETFs), debt and money market instruments, and equity and equity-related securities.
In order to provide investors with the benefits of equity taxation, Sundaram Multi Asset Allocation Fund will invest a minimum of 65% in equity and may invest 10–25% in each of Gold ETFs and Fixed Income Instruments.
By including a portion of fixed income, a less volatile asset class, equity-oriented hybrid mutual funds aim to outperform pure equity mutual funds in terms of risk adjusted return, while sacrificing a smaller portion of the higher returns that would come with pure equity. For our fund, this means that we include gold as a third asset class in commodity exchange-traded funds (ETFs).
The reason behind picking Gold is that although it is erratic in the medium run, gold performs well when stocks do not. This is due to the fact that major institutional investors see it as a safe haven in times of severe political and economic unrest. In these kinds of situations, equity typically underperforms, but gold frequently does better by offering either positive returns or less negative returns, thus functioning as a shock absorber.
As a result, there is little to no correlation between gold and equity, making them the perfect combination to provide higher risk-adjusted returns for the entire portfolio. Speaking on the launch of Sundaram Multi Asset Allocation Fund, Sunil Subramaniam, Managing Director, Sundaram Mutual said, “Sundaram Multi Asset Allocation Fund is an ideal vehicle for long term risk adjusted capital appreciation. In addition to the potential of Equity combating inflation in the medium term, Gold also provides a hedge against currency depreciation. Besides, given the inevitability of business cycles, there are always times when the economy goes through a slowdown following rapid expansion – a period in which Gold generally turns out to be the best performing asset class. Thus, SMAAF is suitable as a long-term investment, and for aggressive pure equity investors who wish to take a short-term tactical allocation to Gold.”
The fund's fixed income portion will be managed by Dwijendra Srivastava and Sandeep Agarwal, while Arjun Nagarajan will oversee the gold ETF segment. Rohit Seksaria and S Bharath will oversee the equity portion of the fund. The NIFTY 500 TRI for 65% Equity, the NIFTY Short Duration Debt Index for 10% Fixed Income, and the Domestic Prices of Gold for 25% Gold ETF investments have been selected as the benchmarks for the Sundaram Multi Asset Allocation Fund. The subscription period for the New Fund Offer (NFO) begins on January 5, 2024, and ends on January 19, 2024. On February 1, 2024, the program will reopen for continuous subscription and redemption.