Mahindra Manulife Mutual Fund has launched a small-cap fund, an open-ended equity scheme, primarily bent towards small-cap stocks.
As per the fund offer document, the fund house would allocate a minimum of 65 percent of the assets under management in equities and equity-related instruments of small-cap companies.
Apart from this, the fund house would also park a part of its funds in derivatives for hedging, portfolio balancing, and such other purposes as permitted under the regulations and subject to guidelines issued by the SEBI/RBI from time to time.
The scheme was launched on November 21 and will be open till December 5. The scheme would again be reopened for continuous sale and repurchase from December 14 this year.
Just like most other small-cap funds available for investment, this small-cap fund scheme would also be benchmarked against the S&P BSE 250 Small Cap TRI.
The fund house that resulted from a joint venture of Mahindra & Mahindra Financial Services Limited (Mahindra Finance) and Manulife Investment Management (Singapore) Pte Ltd announced this new fund offer (NFO) at a time when many mutual fund houses are busy launching new fund schemes, mostly in the debt fund segment.
You can start with a minimum lump sum investment of ₹1,000. Post this, the investors can continue their systematic investment plans (SIPs) in this fund with a minimum amount of ₹500 only. There is no exit load though 0.50 percent is payable if the units bought are redeemed/switched out on or before the completion of three months from the date of allotment of the units.
The fund managers assigned to look into the working of this scheme include famous names like Abhinav Khandelwal and Manish Lodha.
Why invest in small-cap funds?
Small-cap fund schemes are deemed inherently volatile and must be considered only by those seeking long-term capital appreciation through investments primarily from small market capitalisation companies. This is because one must stay invested in small-cap companies for a prolonged period to create the much-needed corpus.
The fund offer document states, “Small cap mutual funds have the potential to create wealth and generate alpha over the long term, as they provide exposure to companies which are potential market leaders in the industries they operate in and are likely to become future midcaps as they scale up. They are generally under-researched and under-owned, thus providing an opportunity for stock picking at reasonable valuations.”
Anthony Heredia, MD & CEO, Mahindra Manulife Mutual Fund said, “The Indian economy is well poised and has the potential to be one of the leading economies in the world over the coming decade. This may throw unprecedented opportunities across sectors and businesses, with many smaller companies using this possibility to become much larger over time."
Adding to why this fund has been launched and how it would help investors seeking capital appreciation on their investments, Krishna Sanghavi, Chief Investment Officer – Equity, Mahindra Manulife Mutual Fund, said, “Indian small caps offer a wide range of companies that are likely to participate and grow with the Indian economy as India moves from the seventh largest to the world’s third-largest economy in terms of size."