HDFC Small Cap Fund is easily one of the best performing small cap funds in the market today. With such consistently high returns, this fund has managed to outperform nearly all other funds in its category.
To know more about this fund and how it fares, read more below.
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HDFC Small Cap – Investment Objective
To provide long-term capital appreciation by investing predominantly in Small-Cap and Mid-Cap companies
|Absolute returns (%)||50.88||22.26|
HDFC Small Cap Fund Review
The fund in the small/mid-cap category fund has outperformed its benchmark and category over multi-trailing time period generating 50.88% and 22.26% returns over 1-year and 3-year period respectively.
The fund seeks to invest primarily in the small and mid-cap category and thus has around 2/3rd of its allocation of mid-cap space followed by around 30% in small-cap space and the remainder in large cap. This results in the fund having SMID/Large ratio to 15.39 times.
With over 90% of its allocation to small and mid-cap space, the fund has the ability to outperform its benchmark and category over the medium term.
The portfolio has 63 stocks with top 5 accounting for less than a quarter thereby indicating a fair degree of diversification thereby reducing the risk of concentration.
While the fund manager doesn’t follow any value or growth style of investing for the fund, they seek to ensure that the fund is invested completely at all times and reflect the highest conviction stocks in the mid and small cap space.
The fund managers primarily look for strong management, robust fundamentals, sustainability and demand of business before including any stock in the portfolio.
This has resulted in the fund having a higher exposure to domestically oriented sectors with sectors such as Industrial, Consumer Discretionary and Materials accounting for nearly 50% of total portfolio.
While the fund has undoubtedly scored on the performance front, it has also managed to keep its risk metrics lower (with the standard deviation of 15.97% against the category average of 17.84%) than the benchmark thereby resulting in an improved risk-reward profile.
The fund has outperformed its benchmark even in bear phases without having much support from large-cap stocks (which generally do well during the time of distress) that is a clear reflection of the balanced nature of the portfolio with a beta of 0.99.
Thus, the fund should not get carried away as per market movement and helps an investor generate returns from actual business performance irrespective of market.
The scheme is ranked 2 in the Small/Mid-cap category by CRISIL for the quarter ended September 2017 and with the consistent performance, the fund has managed to climb to four-star ratings by Morningstar in the past year.
HDFC Small Cap Fund Manager
The fund is jointly managed by Mr Chirag Setalvad and Mr Rakesh Vyas.
Mr Chirag Setalvad is a Senior Fund Manager. Previously he was the Vice President at New Vernon Advisory Services Pvt. Ltd.
He received a Bachelor of Science degree in Business Administration from University of North Carolina, Chapel Hill and has over 14 years of experience.