A part of L&T Financial Services offering, L&T Emerging Businesses Fund (click to see details) is one of the best performing small-cap funds in the market today.
A category of the equity funds, in small-cap funds, a large portion of the investment is done in small-cap stocks i.e. in companies with small market capitalization- having a market cap of less than ₹ 500 crores.
Small-cap funds are highly risky and volatile investment instruments as compared to large and mid-cap fund category due to their exposure to high performing equities. These funds have the objective of seeking capital appreciation through investment in high growth stocks.
L&T Emerging Businesses Fund: Investment Objective
The investment objective of this fund is to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities, including equity derivatives, in the Indian markets with the key theme focus being emerging companies (small cap stocks).
The scheme could also additionally invest in Foreign Securities. Emerging companies are businesses which are typically in the early stage of development and have the potential to grow their revenues and profits at a higher rate as compared to the broader market.
L&t Emerging Businesses Fund: Details
|AUM||₹ 4,285.61 Cr. (as on Feb 28, 2018)|
|NAV||₹ 28.686 (as on Feb 28, 2018)|
|Minimum SIP Investment||₹ 500|
|Expense Ratio||1.58 % (Regular – 2.09%)|
|Returns Since Launch||29.49% (as on Feb 28, 2018)|
|Returns 1 Year||27.54% (as on Feb 28, 2018)|
|Portfolio Turnover Ratio||0.3069|
|Risk Grade||High Risk|
|Benchmark||S&P BSE Small Cap TRI Index|
|Fund Manager||Mr. S.N.Lahiri and Mr. Karan Desai|
L&T Emerging Businesses Fund is a small-cap fund which has given a return of approximately 30% since its inception. The fund is over 3 years old which shows that the fund is yet to various bull and bear cycles.
Its expense ratio of 1.58% for a direct plan is at par with other peers in the same category. Additionally, the fund belongs to High-Risk grade.
However, the high return grade compensates for that. The fund carries no exit load, unlike some other funds in this category.
It has a minimum SIP amount of only ₹500, which encourages investors to invest even small amounts periodically, usually monthly. S&P BSE Small Cap TRI Index is the benchmark for this particular fund.
The fund, has outperformed its benchmark index in its 1Y and 3Y performance giving returns of 28.78% and 22.83% respectively, in comparison to benchmark returns of 26.34% and 15.96% respectively in the same period.
The fund has a Sharpe ratio of 1.08, in comparison to 0.48 for the respective benchmark index.
The standard deviation of this particular fund is 16.82% which is lower than the standard deviation of the benchmark index which stands at 17.55%. The risk is also lower than the concerned benchmark index.
The investment process followed by L&T mutual fund is proprietary in nature and is called GEM. The investments are based on a foundation of in-depth research and fundamental analysis. Three important steps followed in the proprietary investment process are- Generation of Ideas, Evaluation of companies and Manufacturing and monitoring of portfolios.
L&T Emerging Businesses Fund: Review
The fund’s portfolio is skewed towards small-cap and medium-cap stocks, with a small portion of cash to make use of any opportune investment opportunities. The fund also a very small part of the total AUM invested in debt.
Equity comprises about 86% of the total AUM, while cash comprises about 11%. The balance of nearly 2% is invested in Debt.
Mid-cap stocks and small-cap stocks comprise 67% and 33% of the fund’s AUM respectively.
In terms of sector allocation, the fund investments are well diversified in various sectors like Industrial Manufacturing (21%), financial services (15%), automobile (10%), Chemicals (10%), Construction (9%), and consumer goods (10%).
We can observe that the fund is inclined towards the Industrial Manufacturing industry with investments in being over one-fifth of the total corpus.
Some of the top stock holdings for this fund are- HEG Limited (2.63%), Ramco Cements Limited (2.04%), Aarti Industries Limited (1.77%), IPCA Labs Limited (2.30%) and Laxmi Machine Works Limited (2.59%) among others.
The fund has been successful in creating wealth for its long-term investors. It is suitable for investors looking for high capital appreciation over a long-term period.
L&T Emerging Businesses: Fund Manager
Mr. S.N.Lahiri has an experience of over 27 years in managing equity and equity related instruments.
While Mr. Karan Desai has an experience of more than 11 years for investment in foreign securities.
How to Invest in L&T Emerging Businesses Fund?
L&T emerging Businesses Fund is available for investment on the Groww. Simply log in to your account, choose the fund – L&T emerging Businesses Fund – make payment and start your SIP!
What are Emerging Businesses?
Emerging businesses are small size companies with the potential to grow at a much faster rate than other established businesses. The management teams of such companies are generally more hands-on and play an instrumental role in the success of the business.
From a longer-term perspective, investing in a small cap emerging business and seeing it grow to a mid-cap and then to a large-cap is the best way to be a part of the growth of a quality stock and simultaneously earn exponential returns.
Moreover, it is on a path of economic growth and emerging businesses, if identified at the right time can create significant wealth and provide exponential returns in the long-run.
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.