Big things often have small beginnings. Small is simple and small is good. Small equity mutual funds are usually ignored when fund recommendations are given to investors. One of the filter for fund recommendations is usually the fund size and the assets it holds. But does that mean the small equity mutual funds which do not have a huge asset base aren’t performing well? There are funds in every category that have a relatively small asset base than its peers but have performed better than its peers in the category.
Being small has its own perks. The fund can track all its assets easily than a large fund and can maneuver its portfolio better than the large funds. Due to limited assets the fund manager can enter and exit any position quickly without having to worry about the liquidity of the chosen stocks or its cost impact on the assets. Being small doesn’t mean the fund lacks credibility. It can simply mean distribution is weak as it is not supported by banks and others as is the case with large fund houses. Size of the fund shouldn’t matter to an investor until and unless the fund’s performance is good and consistent. Also, the risk profile of the investor should be in line with that of the fund.
Here’s a list of small equity mutual funds that have performed well in their category.
|Fund||AUM||Return (3Yr)||Return (5Y)|
|Mirae Asset Tax Saver Fund||Rs 1252Cr||20.66%||20.66%|
|Axis Midcap Fund||Rs 1808Cr||14.21%||20.14%|
|Invesco India Growth Opportunities Fund||Rs 1017Cr||15.01%||16.05%|
|Invesco India Tax Plan||Rs 686Cr||13.80%||17.68%|
|Parag Parikh Long Term Equity Fund||Rs 1453Cr||13.51%||16.51%|
|SBI Large & Midcap Fund||Rs 2367Cr||12.77%||16.62%|
|SBI Small Cap Fund||Rs 1438Cr||16.38%||28.86%|
|Sundaram Select Focus Fund||Rs 881Cr||14.15%||12.75%|
|Canara Robeco Equity Diversified Fund||Rs 906Cr||14.31%||13.84%|
|Kotak Equity Opportunities Fund||Rs 2373Cr||14.38%||16.37%|
|Kotak India EQ Contra Fund||Rs 659Cr||16.42%||14.42%|
This is a recent entrant into the category of tax saving funds. The fund has a diversified portfolio of strong growth companies at a reasonable price with no bias towards theme or style. The fund invests in companies that have a robust business model, that enjoy a sustainable competitive advantage and have high return ratios. Over three years, the fund has been ahead of its benchmark by 6 percentage points. Compared to the category, it has managed 6-6.5 percentage point outperformance. Also, a SIP of ₹5,000 p.m. in this fund started at inception in December 2015 is worth ₹2.3 lakhs now.
The fund predominantly invests in mid-cap companies. They include innovative and entrepreneurial companies with experienced management. They concentrate on high growth companies and market leaders in emerging industries. The fund has an actively managed portfolio that is diversified across sectors to keep the risk well managed. Over three years and five years, the fund has been ahead of its benchmark by 1 percentage points. Compared to the category, it has managed 1 percentage point outperformance. Also, a SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹4.17 lakhs now.
The fund is a member of the newly introduced large and mid-cap category. The fund uses both top-down and bottom-up approach to invest in large and midcap companies. It aims to generate consistent returns in all market conditions with no style or sector bias. The fund has outperformed its category by 1 percentage points and the benchmark by 1-2 percentage points in the 3 and 5-year returns. The fund gave 10.81% (annualized) return since its inception in 2007. Also, a SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹4.10 lakhs now.
This ELSS tax saver is a diversified portfolio of equity securities. It is dominated by large and mid-caps which are growth oriented. The fund predominantly invested in mid-caps until late 2015, but later changed its strategy and cut down on mid-caps and increase its allocation to large caps. The five-year return is now over 5 percentage points ahead of the benchmark returns and 1 percentage points more than the category returns. Also, a SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹4.07 lakhs now.
This fund is a multi-cap fund with a diversified portfolio. Its investment universe is not restricted by any self-imposed limitations in terms of sector, market capitalization, geography, etc. However, 65% is invested in Indian Equities to benefit from capital gain tax treatment. The concentrate on investing in businesses that are going through a painful phase in their business cycle. The fund is suitable for long-term investors. It has outperformed its category by 1 percentage points and the benchmark by 1-3 percentage points in the 3 and 5-year returns. The fund gave 16.34% (annualized) return since its inception in 2013. Also, a SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹4.07 lakhs now.
The fund follows a blend of growth and value style of investing. It follows a combination of a top-down and bottom-up approach to stock-picking and chooses companies across sectors. The fund has outperformed its benchmark by 4 percentage points in the 5-year returns. The fund gave 14.29% (annualized) return since its inception in 1993. Also, a SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹4.02 lakhs now.
This high-risk fund is an emerging star in the small-cap category. It looks for five attributes in the stocks it buys. They are, competitive advantage, return on capital, growth, management, and valuation. The scheme seeks to provide investors with opportunities for long-term growth in capital along with the liquidity of an open-ended scheme by investing predominantly in a well-diversified basket of equity stocks of small-cap companies.
The fund has reopened subscriptions through SIP from May 16th, 2018. The fund hasn’t taken any fresh investments since October 2015. Over three years and five years, the fund has been ahead of its benchmark by 5 and 29 percentage points. Compared to the category, it has managed 4 and 7 percentage point outperformance respectively. Also, a SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹4.75 lakhs now.
This fund is a concentrates on large-cap (>80%) companies. The fund follows a bottom-up approach in stock picking based on in-house research and fund managers’ conviction and would generally be focused around 3-4 themes. The investment strategy changes according to the market sentiments. The scheme invests in a maximum of 30 stocks with a focus on large-cap companies. The fund’s 3-year returns have outperformed its category and benchmark by 0.1 percentage points. The fund gave 18.75% return since inception. Also, a SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹3.94 lakhs now.
The fund aims to deliver robust and better risk-adjusted returns by taking a flexible approach to investing in a mix of large cap and mid & small cap companies based on relative valuation. The fund focuses on bottom-up stocks selection with top-down risk allocation. The fund’s 1-year and 3-year returns are 7 and 2 percentage point ahead of its category and 4 and 0.4 percentage points ahead of its benchmark. The fund gave 18.01% return since its launch in 2003. Also, SIP worth ₹5,000 in this fund started 5 years ago is worth ₹3.97 lakhs now.
The fund looks for opportunities across sectors based on performance and potential of companies within the sectors. The fund manager has the flexibility to invest in a mix of large and mid-cap stocks from various sectors. The allocation between large caps & midcaps would broadly depend on the choice of sectors, business environment & valuations. The fund’s 3-year returns have outperformed its category and benchmark by 0.7 and 0.6 percentage points. Also, a SIP worth ₹5,000 in this fund started 5 years ago is worth ₹3.99 lakhs now.
The investment objective of the scheme is to generate capital appreciation from a diversified portfolio of equity and equity related instruments. This fund follows a contrarian investment strategy. Hence invests in companies/sectors which are not doing too well currently being picked up by the fund manager. The fund’s 1-year and 3-year returns are 7 and 1 percentage point ahead of its category and 2 percentage points ahead of its benchmark respectively. Also, a SIP worth ₹5,000 in this fund started 5 years ago is worth ₹4.07 lakhs now. The fund gave 12.64% return since its launch in 2005.
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