The fund will invest primarily in stocks of small companies, which would mean currently investing predominantly in stocks with market cap of less than 3,000 crore. The selection will be based on businesses with scalability as micro-caps are generally varied, not correlated to broader markets and not sector-specific. The fund may also use various derivative and hedging products and techniques to generate better returns.
It started off as a close-ended offer and was converted into an open-ended one in June 2010. Investors here are a happy lot, though they had some tense moments in 2008 as the fund got hit. However, it did not face much redemption pressure. And has rewarded its investors well since then. It steamrolled ahead in 2009 and in 2010 was the best performing one in its category.
Despite five fund managers in a little over three years, the fund house's strong core management team has done a good job. The fund sticks to its mandate and holds close to 70 per cent in the less-than `3,000 crore market cap segment and none in the above `7,000 crore category. The fund remains fully invested, with well over 90 per cent equity exposure at any given time.
The fund manager very wisely ensures that individual stock bets are not high. Currently, none crosses four per cent of the assets. Nevertheless, the fund is arisky bet. It invests only in mid- and small-caps and avoids large-caps. More, it does not flee to cash during market downturns. This makes it volatile. Yet, it has outperformed other mid- and small cap funds by a huge margin, mainly due to its good stock picking techniques.
