Asset Management Companies (AMCs) throughout India are trying to launch funds in SEBI categories where they do not already have funds. Following this trend, IDFC Mutual Fund has filed papers with SEBI for a small cap fund. A small cap fund is required by the regulator to invest 65-100% of its assets in the stocks of small cap companies.
Small cap companies are defined as those below the top 250 companies by market capitalisation. A list of such companies has been published by AMFI and is available here. The proposed scheme will invest 65-100% of its assets in small cap companies and the rest in larger companies or debt. It can also invest 0-10% of its assets in REITs and InVITs.
Small-cap funds have seen a moderation in their returns in recent months. The average return for the Value Research small cap category over the past three months is -3.78%. However this comes on the back of many years of stellar returns. Their average five year CAGR is a jaw dropping 30.5% and their three year CAGR is 18.06%.
IDFC has some popular equity schemes, particularly IDFC Premier (now IDFC Multi-cap fund). IDFC Premier has a five-year CAGR of 19.6%, above the 14.14% delivered by the benchmark S&P BSE 500 (but below the category average). The fund has run into more choppy waters in recent years, underperforming the benchmark and category average over the past three years with a 7.8% CAGR. Anoop Bhaskar, the head of equities and manager of IDFC Premier, will also manage IDFC Small Cap Fund.
Another factor to be considered is that reports have emerged that the IDFC AMC itself is up for sale with players like Blackrock, Mirae, Indusind Bank and others in the fray. This may mean changes in fund managers and management style.
Plans: Regular and Direct
Options: Growth, Dividend Payout, Reinvestment and Sweep
Minimum Investment: Rs 5,000
Benchmark: S&P BSE Small Cap Index (TRI)
Fund Manager: Anoop Bhaskar