Five months after reopening lumpsum investment in its small cap fund, SBI MF has announced that it will not accept lumpsum investments in the scheme after September 7. Further, the scheme will only accept SIPs of up to Rs 5,000 per investor.
Earlier in May SBI MF had said that fund house would stop accepting lumpsum money in itssmall cap fund whenever the scheme accumulates Rs. 1000 crore from March 30. DP Singh, Chief Business Officer, SBI Mutual Fund said that now that the small cap fund has received close to Rs.1000 crore, they have decided to stop fresh lumpsum inflows.
"The fund size has now gone past Rs 5,000 crore. Also, the valuation of small cap stocks has risen because of the current rally. Since there are size constraints in managing a small cap fund, we will stop lumpsum investmentsin the interest of investors," Singh said.
The largest fund house stopping lump sum investments in its small cap fund has raised concerns that the category may be overvalued at this point.
A fund manager said on the condition of anonymity that it varies from fund houses to fund houses. Given the inflows SBI MF has received, they may not be comfortable in pick more stocks at the current valuations.
Suresh Sadagopan of Ladder7 also feels that it is a combination of the fund manager's comfort with the investmentuniverse and the quantum of inflows in the fund.
He said that investors must assess the risk-reward proposition in any investment even if they have a high-risk appetite. “Small cap funds have not given significantly higher returns as against large cap funds in the long run. Therefore, even if an investor has the risk appetite and Investment horizon, I advise them to restrict their investment in small cap funds to around 20-25%.”
