Sundaram Mutual Fund launched its Select Equity Ex-Top 100 Long Short Fund on October 21, 2026. The new product requires a minimum investment of ₹10 lakh and uses a concentrated portfolio of mid and small-cap stocks. By combining long-term equity bets with derivative-based short positions, the fund aims to manage volatility while seeking growth in smaller companies.
Sundaram Asset Management has launched a new investment product called the Select Equity Ex-Top 100 Long Short Fund. This offering marks an expansion into the Specialised Investment Fund (SIF) category, targeting companies ranked between 101 and 750 by market capitalization. The new fund, which opened for subscription on October 21, 2026, requires a minimum entry amount of ₹10 lakh, signalling that it is designed primarily for high-net-worth investors rather than standard retail participants.
The investment strategy deviates from traditional mutual funds, which typically only buy stocks they expect to rise. Instead, this fund uses a "long-short" approach. This means the fund managers will hold long positions—buying stocks they believe will grow—while simultaneously using derivatives to take short positions on other stocks within the same universe. By betting against certain stocks, the managers aim to profit from price declines and hedge the portfolio against broader market drops. The portfolio will be concentrated, holding between 25 and 40 stocks, which allows the fund to place bigger bets on its selected companies.
While this strategy offers a different way to navigate the market, investors should be aware of the specific risks involved. A concentrated portfolio of 25 to 40 stocks means that the performance of a few individual companies will have a much larger impact on the overall fund returns compared to a diversified fund holding 100 or more stocks. Additionally, mid- and small-cap stocks are historically more volatile than large-cap stocks, meaning their prices can swing significantly based on changing economic conditions or company performance.
Furthermore, the use of derivative instruments adds a layer of complexity. While derivatives can act as a safety net during market downturns, they also require precise management. If the short positions do not work as intended, they can lead to losses rather than protection. This tactical style of investing requires that investors have a clear understanding of the fund's risk management practices and its ability to execute trades effectively in the mid- and small-cap segments.
The success of this strategy will depend on the management team's ability to pick the right stocks to buy and correctly identify which ones to short in a volatile market. Potential investors should closely monitor the fund's future performance reports to understand how these derivative strategies impact the overall return and how the fund manages to navigate market swings compared to standard long-only equity funds.