Name of the NFO
Sundaram Asset Management Co. Ltd’s Sundaram Equity Plus.
What it offers
It’s an open-ended equity scheme that aims to provide long-term capital appreciation to investors. The scheme would invest mainly in equities and gold exchange-traded funds (ETFs). The investment in equities will be 65-85%, while in gold ETFs 15-35%. The scheme may also invest in fixed income and money markets instruments in order to meet any redemption requirement; this could go as high as 20%.
The equity portion of the investments will be benchmarked against S&P CNX Nifty, while gold ETFs will be benchmarked against the price of gold. The scheme provides both growth as well as dividend options to investors.
The new scheme allows systematic investment with as low as Rs 250 per month and Rs 750 per quarter compared with the industry norm of a minimum of Rs 500 and above. While it doesn’t exactly offer a micro systematic investment plan, which starts at Rs 50, it would cater to those with low monthly savings.
Among all the equity schemes in the market, the NFO will be the only one to invest as much as 35% in gold ETFs.
Even as investors will have a significant chunk of investment in gold ETFs, the NFO will be taxed as an equity scheme. The tax liability on an equity scheme is lower than in gold ETFs. You pay 10% as short-term capital gains (STCG) tax in an equity scheme; long-term capital gains (LTCG) tax is nil. For gold ETFs, which are treated like debt schemes for taxation purposes, STCG tax is as per your income-tax slab and LTCG tax 11.33% without indexation and 22.66% with indexation.
The scheme charges an exit load of 1% if investors can redeem within a year. Since exit load is less, it will not deter investors from exiting early even though equity and gold investments are meant for the long term.
The fund house does not have a great track record. As of 31 March, of the four comparable schemes of this fund house, three have provided single-digit returns on an annualized basis. Only one fund underperformed its benchmark, two outperformed slightly and the fourth by 10.90 percentage points.
Mint money take
This scheme is only meant for those who wish to invest a significant chunk in gold, while enjoying lower taxation. For those who wish to invest in equities predominantly, the scheme is not a good bet as there are other funds that charge less and have a proven track record as well.