Small-cap mutual funds are those funds that invest in businesses ranging from rank 251 onwards in terms of market capitalization. Such funds require a minimum investment of 65% of total assets in equity & equity-related instruments of small-cap companies.
Advantages of Small-cap Funds
Small-cap is more suitable for investors who have an aggressive risk appetite. Historically, small-cap funds have a good track record when it comes to returns and a potential for growth. Investing in small-cap funds can help investors diversify the risk on their portfolio.
Factors to consider before investing in small-cap funds:
- Past performance
- Profit/Expense ratio
- Experience of fund manager
- Fund rating
- Objective of the fund
- Stock exposure
- Diversification in fund’s holding
Best small-cap funds of 2018:
L&T Emerging Businesses Fund
L&T Emerging Businesses Fund is an equity-oriented mutual fund launched on May 12, 2014. Groww has given this fund a 5-star rating. The fund has approximately Rs4,286cr Assets Under Management (AUM) and it has surpassed its benchmark the S&P BSE SmallCap consistently.
The portfolio holdings of this fund include Sobha Ltd., CBLO ( CCIL ), Rane Holdings Ltd., Aarti Industries Ltd., Future Supply Chain Solutions Ltd., Dilip Buildcon Ltd., IPCA Laboratories Ltd., and Nocil Ltd.
This fund has diversified its holdings and has given maximum allocation to industrial manufacturing (21.9%), followed by financial services (14.9%), and consumer goods (10%). The L&T Emerging Businesses Fund has given 28.10% returns since its launch.
Reliance Small Cap Fund
Reliance Small Cap fund is an equity-oriented mutual fund launched on September 16, 2010, with an AUM of approximately Rs6,371cr and a 5-star rating (Groww). The fund has surpassed its benchmark S&P BSE SmallCap consistently.
The holdings of this fund include Navin Fluorine International Ltd., Deepak Nitrite Ltd., Aditya Birla Finance Ltd. ( 91D ), VIP Industries Ltd., RBL Bank Ltd., Cyient Ltd., CBLO ( CCIL ), among others. The maximum allocation of the fund is in the sectors of consumer goods (21.7%) and industrial manufacturing (15.1%).
The fund has generated returns of 30.51% since its inception.
Sundaram Small Cap Fund
Sundaram Small Cap fund was launched on February 15, 2005, and has AUM amounting to approximately Rs1,481cr. It has a 4-star rating from Groww. The fund has consistently outperformed its benchmark S&P BSE SmallCap.
The top players in this fund’s portfolio include Navin Fluorine International Ltd., Rane Holdings Ltd., JK Cement Ltd., V-Guard Industries Ltd., Heritage Foods Ltd., ITD Cementation India Ltd., NRB Bearings Ltd, among others.
The fund allocated the maximum corpus towards industrial manufacturing (19.3%), construction (13%), and financial services (12.8%). The fund has given returns of 22.17% since its launch.
SBI Small Cap Fund
SBI Small Cap fund is an equity-oriented mutual fund launched on September 09, 2009 and has AUM amounting to Rs943cr. The fund has consistently outperformed the benchmark S&P BSE Small Cap.
The fund’s holdings are in Westlife Development Ltd., Kirloskar Oil Engines Ltd., LT Foods Ltd., Relaxo Footwear, Elgi Equipments Ltd., Tamil Nadu Newsprint & Papers Ltd., Hawkins Cooker Ltd., etc. The maximum allocation is in the sectors of consumer goods (23.7%), industrial manufacturing (17.8%), and services (14%).
The fund has generated returns of 32.72% since its inception.
When looking to invest in small-cap mutual funds, the investor has to consider their risk appetite and investment goal. A reputed fund house and an experienced fund manager can help you gain reliable returns from your investments.