THE market benchmark, S&P CNX Nifty, has not moved much for the past few months. But there is a lot of action in smaller companies. Participating in the growth story of today's small companies can be a money spinner for most. DSP Black-Rock Micro Cap Fund is well-positioned to do just that.
PRODUCT
The fund was launched in June 2007 as a 3-year close-ended fund that would invest in small companies. The fund is converted into an open-ended diversified equity fund and is open for new subscriptions. The investment objective of the scheme is to seek to generate long-term capital appreciation from a portfolio that is substantially constituted of equity and equity-related securities, which are not part of the top 300 companies by market capitalisation. From time to time, the investment manager will also seek participation in other equity and equity-related securities to achieve optimal portfolio construction.
ASSET ALLOCATION
The fund manager will invest 65-100% of the money in equity and equity-related instruments of companies that are not part of top 300 companies by market capitalisation. Zero-35% of the money can be invested in companies that constitute top 300 companies by market capitalisation. Up to 35% of the money can be parked in debt and money market instruments.
RISK-REWARD
The fund manager primarily focuses on small companies, given the fund mandate. This has caused the fund to see a falling NAV in the bearish period in 2008. However, the fund posted a smart comeback in 2009 and 2010. The fund delivered a 94.99% returns over the past one year compared to 58.83% delivered by the BSE Small Cap Index as on July 23, 2010. Since its inception, the fund has delivered 10.54% compared to 13.39% registered by its index.
The fund works best as return enhancer for investors with high risk appetite. A small allocation to this fund can impact the portfolio returns in the long term. Of course, in the short term, the fund can drag the portfolio returns if one invests in higher levels of markets. The best way to invest in this fund is to invest through an SIP and the ideal holding period should be more than three years to enjoy good returns.
THE FUND
To participate in this opportunity, you have to start with at least Rs 10,000. You can also invest through an SIP. BSE Small Cap Index is the designed benchmark for the fund. Apoorva Shah, along with Vinit Sambre and Mehul Jani, manages the fund. As of the end of June 2010, the scheme has assets under management of Rs 280 crore. Expense ratio of the fund stands at 2.28% as of the end of June 2010. The fund offers only growth option. There is an exit load of 1% if you choose to walk out of the scheme before completing one year from your date of allotment. Value Research has given five-star rating to this fund.
WHY INVEST?
To benefit from investing in small companies with high growth potential over the long term
WHY NOT INVEST?
The fund can be highly volatile, given the high volatility in the share prices of small companies
