L&T Emerging Business Fund: Fund Review

L&T Emerging Business Fund invests in small size companies which have the potential to grow at a much faster rate than established businesses. Though a recent entrant, the fund has been performing remarkably well in the small-cap space. It has also entered the 4-star rating in 2017. It parks most of its assets in mid-caps and closely followed by the small-caps. The fund managers S.N. Lahiri and Karan Desai invest in small-cap stocks with rich cash flows and avoid taking big bets in small-cap space.

 

Performance

L&T Emerging Business Fund is in the top 5 list of small cap funds. The fund has been performing astonishingly well since its inception in May 2014. It has consistently beaten its benchmark since its inception. The funds trailing returns both 1 and 3-year are higher than its benchmark. The fund has delivered an annualized return of 15.36% since inception as against 7.16% by BSE Small Cap Index, its benchmark.

L&T Emerging Business Fund has beaten its category by 4-6 percentage points and its benchmark by 8-9 percentage points in the 1 and 3-year returns. It is also ranked second in the category of small-cap funds by CRISIL.

Fund1 Year Return (%)3 Year Return (%)5 Year Return (%)
L&T Emerging Business Fund-16.41%17.14%-
Reliance Small Cap Fund-20.16%13.80%26.49%
HDFC Small Cap Fund-9.14%18.11%20.37%
SBI Small Cap Fund-21.81%15.06%28.86%
Franklin India Smaller Companies Fund-17.42%10.54%22.35%

A SIP investment of Rs 5,000 a month in L&T Emerging Business Fund started at the time of inception is worth Rs 3.85 lakhs.

Fund Information

This 4-year old fund, though a new entrant, has performed well in the market since its inception. The fund managers make small bets for the small-cap companies. They do not take big risks with these companies. The fund invests in evolving smaller players that are a part of a larger industry. They look at investing in businesses that cater to niche segments. The fund believes it has the ability to turn emerging businesses into opportunities to be the next success story. The fund doesn’t restrict itself by investing in growth or value stock and label itself as a growth or value fund. In fact, it invests in companies that have good growth, quality and have reasonable valuations. The fund majorly invests in mid and small caps stocks. With little or no allocation to large-cap stocks.

The fund believes in diversification with 60-70 stocks in the portfolio. The top five holding sectors constitute 42.22% of the portfolio. These include Industrial Products (15.61%), Auto Ancillaries (8.33%), Retailing (6.36%), Industrial Capital Goods (5.99%), and Finance (5.93%).

Recommendation

L&T Emerging Business Fund is ideal for long-term goals. Investors whose risk-taking ability is high can look at investing in this fund. The fund accepts both lump sum and SIP investments. This fund has higher ups and downs (volatility) than other equity funds but can yield much better returns. Invest in this fund for an investment horizon of at least 5 years to give the best results. Do not look at the returns for this fund in short-term. The short-term returns can be manipulative.

Fund NameL&T Emerging Business Fund
Launch DateMay 12th, 2014
AUMRs 5,631 Cr
Return (Returns greater than 1 year are annualized)Since Launch: 19.90%
1 Year: -16.41%
3 Year: 17.14%
Expense Ratio2.18%
Fund Category RiskHigh
Investment PlanGrowth
Minimum Investment Horizon5+ years
Minimum InvestmentRs 5,000
Minimum Additional InvestmentRs 1,000
Exit Load1% if withdrawn within 1 year
Fund ManagerS.N. Lahiri
Karan Desai
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