Two of the most popular small-cap funds in the market today have restricted inflows. Which means, you cannot invest an unlimited amount of money in them.
Recently, the retail investor has been investing money into small and mid-cap funds owing to their strong performances.
Reliance Small Cap Fund recently limited inflows to the fund. You cannot invest a lump sum in the fund. Only SIP can be started in it.
And through the systematic investment plan (SIP) mode, from May 16.
Henceforth, the fund will be called SBI Small Cap Fund and will have an investment limit of ₹25,000 per month and per PAN card.
The subscription was closed since the fund had a capacity constraint of Rs. 750 crore. After many small-cap funds have been putting restrictions on accepting fresh funds due to rising inflows and limited investment opportunities, SBI Small Cap is the first fund to reopen for fresh investments.
A comparison of both these funds will give a clear picture to the investors for making the choices.
In this article
- Which Gives Higher Returns: Reliance Small Cap or SBI Small Cap Fund
- Objectives of Investment
- Key Details
- Reliance Small Cap vs SBI Small Cap: Investment Strategy
- Fund Manager of Reliance Small Cap Fund
- Fund Manager of SBI Small Cap Fund
- Investment Philosophy
- Which Fund to Invest in Instead of SBI and Reliance Small Cap?
Which Gives Higher Returns: Reliance Small Cap or SBI Small Cap Fund
|Reliance Small Cap Fund - Direct - Growth||-5.25%||16.41%||32.22%||Equity
|SBI Small Cap Fund - Direct - Growth||-9.02%||16.93%||NA||Equity
Objectives of Investment
Generating long-term capital appreciation through predominantly investing in equity and equity related instruments of small cap companies.
It provides opportunities for long-term growth in terms of capital with the liquidity of an open-ended scheme through predominantly investing in a well-diversified number of equity stocks, in small-cap companies.
It is evident that both the funds have a similar objective of investment. The risk is similar too.
You can also read how to reduce losses when invested in small cap funds
|Particulars||Key Details of Reliance Small Cap Fund||Key Details of SBI Small Cap Fund|
|Fund House||Reliance Mutual Fund||SBI Mutual Fund|
|Scheme Benchmark||S&P BSE Small Cap Index||S&P BSE Small Cap Total Return Index|
|Category||Small Cap||Small Cap|
|Inception Date||August 2010||July 2009|
|Face Value (Rs/ Unit)||10.00||10.00|
|Total Fund Size (in Rs Cr.)||6571.75||873.82|
|Fund Manager||Dhrumil Shah (Since: Feb, 2018)
Samir Rachh (Since: Jan, 2017)
|R. Srinivasan (Since: Nov, 2013)|
|Availability of SIP||Yes||Yes|
|Minimum Initial Investment||5000/-||5000/-|
|CEO||Sundeep Sikka||Anuradha Rao|
Reliance Small Cap vs SBI Small Cap: Investment Strategy
Both Reliance Smallcap Fund and SBI Small & Mid Cap Fund are open-ended schemes which give flexibility to the investors. The schemes aim for long-term capital appreciation for the investors.
The managers after careful analysis of the macroeconomic factors and the sector of operations of various companies determine the best company to invest in, based on their valuation and investment rationale.
Being a small cap focused fund, both the schemes fall into the category of high risk, high return.
Both the schemes have asset allocation as follows:
Reliance Small Cap Fund
SBI Small Cap Fund
Fund Manager of Reliance Small Cap Fund
Mr. Samir Rachh has graduated in B.Com (H) from V.G.Vaze College, Mumbai. Prior to joining Reliance Mutual Fund, Mr Rachh has worked in Hinduja Finance, Emkay Research and Anvicon Research. He has an professional experience of over 25 years. Few of the funds by him are:
- Reliance Value Fund – since April, 2017
- Reliance Capital Builder Fund III – Series A – since Jan 2017
- Reliance Capital Builder Fund II – Series B – since Jan 2015
- Reliance Focused Equity Fund – since Sep 2010
Mr. Dhrumil Shah has graduated in B.com and obtained the degree of Chartered Accountancy. Prior to joining Reliance Mutual Fund, he has worked with Birla Sun Life Insurance as AVP Investments, Equity Fund Management and Research and ASK investment Managers as Portfolio Manager, Equity Fund Management and Research. Few of the funds managed by him are:
- Reliance Capital Builder Fund IV Series C – since Feb 2018
- Reliance Capital Builder Fund IV Series D – since Feb 2018
Fund Manager of SBI Small Cap Fund
Srinivasan has completed post-graduation in M.Com and MFM. Prior to joining SBI, he has worked with Principal PNB AMC, Oppenheimer & Co, Indosuez WI Carr, and Motilal Oswal. Few of the funds managed by him are:
- SBI Small Cap Fund
- SBI Magnum Equity Fund – Dividend
- SBI Emerging Business Fund – Growth
- SBI Contra Fund- Dividend
Both the funds aim at generating risk-adjusted returns, by investing in small-cap equity and equity-related securities. Small cap stocks are equities, whose market capitalization value stands below the top 250 companies.
The approach of the investment is to adopt prudent risk management measures, like diversification and margin of safety to generate high returns for the investors.
Small cap funds offer twin advantage, which is, it offers high growth prospects and relatively lower valuation. However, a high return has high risk associated with it.
An investor considering to put in money in either of the two funds should consider the following points:
- The historical performance and return of both the funds as stated above in the returns heading
- The portfolio section and the weight given by the funds for its investments
- If an investor is willing to invest a big amount and SBI Small Cap Fund may not prove to be a good option, due to its limitation of 25,000
- Finally, the risk-taking ability of the investor.
Which Fund to Invest in Instead of SBI and Reliance Small Cap?
Reliance Smallcap Fund and SBI Smallcap Fund are not the only good small cap mutual funds available.
Here are some good small-cap mutual funds that are similar to SBI Small Cap Fund and Reliance Small Cap Fund.
Launched in April 2014 this fund is a small cap equity oriented mutual fund with a high risk and high return. The key details of the fund are:
|Launch Date||April, 2014|
|Fund Category||Equity Oriented – Small Cap|
|Asset Under Management (AUM)||Rs. 4145.21 Cr|
|Scheme Type||Open Ended|
|Scheme Benchmark||S&P BSE Small Cap Total Return Index|
|Investment Objective||Generating long term capital gain appreciation by predominantly investing in a diversified equity funds|
|Face Value (Rs/Unit)||10.00|
|Fund Managers||Karan Desai (Since: Feb, 2017)
Soumendra Nath Lahiri (Since: Apr, 2014)
|Fund House||L &T Mutual Fund|
The NAV of L&T Emerging Businesses Fund is Rs. 26.93(as at 21st May 2018) and the historical returns on the fund has been in the following pattern:
|L&T Emerging Businesses Fund - Direct - Growth||-8.08%||19.29%||NA||Equity
The fund has made its mark in the market and is one of the most attractive fund among the small cap oriented mutual fund.
Launched in January 2013 this fund is a small cap equity oriented fund with high risk and high return (as with most of the typical small-cap funds). The key details of the fund are:
|Launch Date||January 2013|
|Fund Category||Equity – Small Cap|
|Asset Under Management (AUM)||Rs. 2576.70 crore|
|Scheme Benchmark||NIFTY Small Cap 100 Total Return Index|
|Investment Objective||Provide long-term capital appreciation by predominantly investing in Small Cap companies|
|Face Value (Rs/Unit)||10.00|
|Fund Managers||Rakesh Vyas ( Since: June, 2014)
Chirag Setalvad (Since: June, 2014)
|Fund House||HDFC Mutual Fund|
The NAV of HDFC Small Cap Fund is Rs. 45.11(as at 21st My, 2018) and the historical returns of the fund has been in the following pattern:
|HDFC Small Cap Fund - Direct - Growth||1.38%||18.72%||NA||Equity
This fund has constantly outperformed its benchmark and managed to keep its risk metrics lower than the benchmark.
Small and mid-cap funds are the type of funds which weigh very high on the risk parameter. The funds can provide great gains but could also lead to great losses in a turn of the market.
An investor must identify his/her goal and objective before investing in any of the stated funds.
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.