Three fund houses – Sundaram, L&T and Birla Sun Life have launched close ended small cap focused funds.
Funds houses are rushing to launch their close ended equity funds focusing on small and mid-cap companies.
Generally, as the large cap equity indices go up, the small and mid-cap stocks tend to follow suit. According to Value Research, mid and small cap fund category has delivered an absolute return of 29% over a one year period. This has led AMCs to come up with funds focusing on small cap stocks.
Recently, Sundaram Mutual Fund has launched four series of its five year close ended equity fund called Sundaram Micro Cap Fund.
Similarly, L&T has launched its Emerging Businesses Fund which is currently open for subscription and closes on May 06, 2014. L&T Emerging Businesses Fund is a two year close end which would become open end after two years. The scheme aims to generate capital appreciation by investing in a portfolio of equity and equity related instruments. SN Lahiri, Rajesh Pherwani and Abhijieet Dakshikar are the fund managers of the scheme.
Birla Sun Life too is coming out with its close ended fund called Birla Sun Life Emerging Leaders Fund – Series 1 which opens for subscription on April 25.
Birla Sun Life Emerging Leader Fund aims to generate long term capital appreciation by investing predominantly in equity and equity related securities of companies in the small and mid-cap segment that have a potential to appreciate in the long run. The investment emphasis of the scheme would be on identifying companies with sound corporate managements and good prospects. It will also focus on companies having trustworthy management with established track record, significant business presence in the area of their operations, prospects for future growth and scalability and financial discipline and returns as measured by ratios like Return on Investment (ROI) and Return on Equity (ROE).
Benchmarked against S&P BSE Midcap Index, the scheme has a minimum application amount of Rs 5000. Hitesh Zaveri will manage the fund.
In a press release, A Balasubramanian, Chief Executive Officer, Birla Sun Life MF said, “The Indian economy is on the road to recovery. We expect steady improvement in macro-stability with a gradual acceleration in GDP growth. Small and Mid-caps which may be volatile in short term, tend to do very well in periods of rising economic growth and may be expected to bounce back strongly over the next 2-3 years. Our NFO thus looks to provide investors a good opportunity to make the most of this growth phase over the 3-year horizon.”
Soumendra Nath Lahiri, Head of Equities, L&T Mutual Fund had earlier told Cafemutual, “Currently, the small cap space is very attractive as many good companies are available at fair valuations. Secondly, this segment is untapped. Also, many companies in this space that have emerging businesses and where there is growth will reward investors who stay invested for a long time regardless of the market they are in.”
Vidya Bala, Head - Mutual Funds Research, FundsIndia.com seconds the view but she advises that such funds may not be suitable to be a core part of one’s portfolio. “It’s better for investors to invest a small portion of their portfolio in such funds.”
Last year, IDFC Mutual Fund had launched IDFC Equity Opportunities Fund focusing primarily in mid and small cap funds.
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