Reliance Small Cap Fund will stop taking new subscriptions from the 26th March 2018. A newspaper notice by Reliance Mutual Fund announced this on 23rd March 2018.
This move comes after the small-cap fund’s Asset Under Management (AUM) swelled to an all-time high Rs 6371 crores.
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Reliance Small Cap Fund to Stop New Subscriptions
This means that no new lump sum investments can be made in Reliance Small Cap Fund.
“It is decided to limit the subscription of units in Reliance Small Cap Fund (an open-ended equity Scheme) through suspension of subscription via fresh/additional subscriptions/switch-ins and limit the subscription through Systematic Investment Plan (“SIP”) or Systematic Transfer Plan (“STP”) or such other special product, with effect from March 26, 2018 (“effective date”) till further notice,” the announcement stated.
This means that you cannot start fresh lump sum investment. Existing SIPs will continue. And new SIP has to be below an amount of Rs 1,00,000.
Why is Reliance Small Cap Stopping New Investments?
Reliance Small Cap Fund’s AUM reached an all-time high of Rs 6371 crores. This has been done in the interest of existing investors of Reliance Small Cap Fund. If the AUM increases by too much, it can prove detrimental for existing investors.
The Rs 6000 crore mark is an AUM high enough for a small-cap fund. However, such limits vary based on the category of mutual fund. For example, a Rs 6000 crore AUM is not very high for large-cap funds. There are several large-cap funds that are considered healthy despite having an AUM of larger than Rs 10,000 crores.
This is not uncommon. In February 2017, DSP BlackRock Micro Cap Fund suspended sale of mutual fund units.
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.