Mirae Asset Small Cap Fund is an open-ended equity mutual fund predominantly investing in small-cap stocks. Managed by Mirae Asset Mutual Fund, this scheme targets small-cap stocks aiming for capital appreciation over the long term. It is suitable for investors willing to accept higher volatility in exchange for potential high returns associated with small-cap investments.
Investment Objective of Mirae Asset Small Cap Fund
The primary objective of the Mirae Asset Small Cap Fund is to generate capital appreciation by investing mainly in small-cap stocks. The fund manager may also allocate a portion of assets to other equity and equity-related securities to enhance diversification. However, it’s essential to note that there is no assurance that the scheme’s investment objective will be fully realized.
How Mirae Asset Small Cap Fund Allocates Its Assets
Asset allocation is a crucial aspect of this fund’s strategy, and it varies according to market conditions. Here’s a general breakdown of the allocation:
| Asset Class | Minimum Allocation | Maximum Allocation |
|---|---|---|
| Small-Cap Equity and Equity-related Securities | 65% | 100% |
| Other Equity Securities | 0% | 35% |
| Debt and Money Market Instruments | 0% | 35% |
| Foreign Securities, REITs, and InvITs | 0% | 35% |
** The investment universe of “Large Cap” “Mid Cap” and “Small Cap” shall comprise companies as defined by
SEBI from time to time. As per clause 2.7.1 of SEBI Master Circular dated June 27, 2024
- Large Cap: 1st -100th company in terms of full market capitalization
- Mid Cap: 101st -250th company in terms of full market capitalization
- Small Cap: 251st company onwards in terms of full market capitalization
Investment Restrictions and Regulatory Compliance
The Mirae Asset Small Cap Fund complies with SEBI guidelines and limits for each asset class. Some key restrictions include:
- Equity Derivatives: Up to 50% of net assets
- Securitized Debt: Up to 20% of net assets
- Repo in Corporate Debt Securities: Up to 10% of net assets
- Foreign Securities: Up to 35% of net assets
The fund refrains from investing in unrated debt instruments, credit default swaps, or other high-risk debt options to keep risk manageable.
Why Choose Mirae Asset Small Cap Fund?
1. High-Growth Potential with Small-Cap Focus
The primary appeal of the Mirae Asset Small Cap Fund is its focus on small-cap stocks. Historically, small-cap stocks have shown potential for high returns as these companies grow. The fund gives investors access to smaller companies poised for growth that may not yet be on the radar of large institutional investors.
2. Expert Fund Management
The fund is managed by experienced professionals, including Varun Goel and Siddharth Srivastava, who bring extensive expertise in fund management and equity research. With over 17 years in the industry, Mr. Goel has a track record of managing equity funds, while Mr. Srivastava has expertise in managing overseas investments and passive products.
| No. | Particulars | Details |
|---|---|---|
| i | Name | Mr. Varun Goel Mr. Siddharth Srivastava (Dedicated Fund Manager for Overseas Investments) |
| ii | Age | 41 years (Mr. Goel), 36 years (Mr. Srivastava) |
| iii | Educational Qualifications | Mr. Varun Goel: BTech (Mechanical Engineering), IIT Delhi; PGDM (Finance & Marketing), IIM Lucknow Mr. Siddharth Srivastava: MBA (Tech), BTech |
| iv | Past Experience | Mr. Varun Goel: – Around 17 years of experience in Fund Management & Equity Research. – Former fund manager for Equity AIF funds at Nippon Life India AIF Management Limited. – Past roles at Motilal Oswal Asset Management, Karvy Stock Broking, KC Securities, and Kotak Securities. – Manages/co-manages: Mirae Asset Flexi Cap Fund. Mr. Siddharth Srivastava: – Over 13 years in financial services and stock markets. – At Mirae Asset Investment Managers (India) since January 2020, leading passive investment products. – Previously worked at Mirae Asset Global Investments (India), NSE Indices Limited, and Morgan Stanley Capital International. – Manages: 1. Mirae Asset Hang Seng TECH ETF 2. Mirae Asset S&P 500 Top 50 ETF 3. Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund 4. Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund 5. Mirae Asset NYSE FANG + ETF 6. Mirae Asset Multi Asset Allocation Fund |
| v | Tenure for which the fund manager has been managing the scheme | New Scheme, hence not applicable |
3. Exposure to Global Investments
The fund can invest up to 35% of its net assets in foreign securities, allowing investors to gain exposure to international markets. This diversification can reduce risks associated with a single market, enabling the fund to tap into global growth opportunities.
4. Flexibility and Liquidity
Since the Mirae Asset Small Cap Fund is an open-ended scheme, investors can enter and exit at NAV-based prices on any business day, providing greater liquidity. This flexibility is especially beneficial for those who may want to adjust their investments based on market conditions.
Risks Associated with Mirae Asset Small Cap Fund
Investing in small-cap stocks comes with a higher risk due to their volatility. Some common risks include:
- Market Volatility: Small-cap stocks tend to be more volatile, leading to sharper price swings.
- Liquidity Risk: Small-cap stocks may have lower trading volumes, making it challenging to sell at favorable prices.
- Credit and Interest Rate Risk: The debt portion of the fund may be affected by interest rate fluctuations or credit downgrades.
How the Fund Manages These Risks
The fund manager uses several strategies to mitigate these risks, such as:
- Diversification: By investing across multiple sectors and securities, the fund reduces dependence on any single investment.
- Derivatives: The fund may use derivatives for hedging to manage volatility.
- Credit Assessment: A rigorous credit assessment process is followed for any debt instruments, ensuring a higher degree of safety.
Investment Strategies of Mirae Asset Small Cap Fund
1. Bottom-Up Stock Selection
The fund follows a bottom-up approach, where stocks are selected individually based on their growth potential. The fund manager focuses on companies with robust business models, competitive advantages, and attractive valuations.
2. Sector Diversification
Although the fund invests heavily in small caps, it maintains diversification across different sectors to reduce concentration risk. This approach allows the fund to capitalize on the performance of various industries and mitigate sector-specific risks.
3. Use of Derivatives for Hedging
To protect against volatility, the Mirae Asset Small Cap Fund may use derivatives, which can help mitigate losses during downturns. However, derivatives also carry their risks and require careful management by the fund.
4. Exposure to Overseas Markets
The fund may allocate up to 35% of its assets to foreign securities, providing a diversified geographical footprint and access to emerging global markets and sectors.
Benchmarking Performance: Nifty Small Cap 250 Index
The Mirae Asset Small Cap Fund benchmarks its performance against the Nifty Small Cap 250 Total Return Index (TRI). This index reflects the performance of small-cap stocks and aligns with the fund’s investment objectives. By choosing this benchmark, investors can gauge how the fund performs relative to its peer group and the small-cap market segment.
Cost Structure and Fees of Mirae Asset Small Cap Fund
The fund incurs several types of fees, which can impact overall returns:
- Management Fees: Charged as a percentage of assets under management.
- Exit Load: A 1% exit load applies if units are redeemed within 365 days of allotment, after which no exit load is charged.
- Other Expenses: These include transaction costs, brokerage fees, and expenses related to investor communications.
Investors can review the expense ratio on the fund’s website, ensuring transparency in all applicable fees.
Example of How Fees Impact Returns
For example, if an investor invests with a 2.25% total expense ratio and the fund earns 10% returns, the net return after fees would be approximately 7.75%. These fees ensure professional fund management and support the fund’s operations, helping to achieve its investment goals.
Who Should Invest in Mirae Asset Small Cap Fund?
1. Long-Term Investors Seeking High Growth Potential
The Mirae Asset Small Cap Fund is suitable for investors with a long-term outlook who can tolerate higher risk. Small-cap funds typically perform well over extended periods, and patient investors stand to benefit from the fund’s growth strategy.
2. Investors Looking to Diversify Their Portfolio
If you already have exposure to large and mid-cap funds, adding a small-cap fund can enhance diversification. The fund’s international allocation also provides exposure to foreign markets, ideal for investors seeking global diversification.
3. Risk-Tolerant Investors
Investing in small-cap stocks carries inherent risks, including market volatility and liquidity issues. This fund may be a good fit for investors who understand these risks and are prepared to ride out market fluctuations in pursuit of potentially higher returns.
How to Invest in Mirae Asset Small Cap Fund
Investing in the Mirae Asset Small Cap Fund is straightforward:
- Through Distributors: Investors may purchase units through registered distributors.
- Direct Plan: Available to those who wish to invest directly with the mutual fund, often with a lower expense ratio.
- Online Platforms: The fund is accessible through various online trading platforms and the Mirae Asset Mutual Fund website.
Systematic Investment Plan (SIP) Option
To make investing accessible, the fund offers a Systematic Investment Plan (SIP) with a minimum investment of ₹5,000. The SIP route allows investors to contribute monthly, spreading the investment over time and reducing the impact of market volatility.
Final Thought
The Mirae Asset Small Cap Fund is designed for investors looking to capture the growth potential of small-cap companies. With a diversified investment strategy, experienced fund management, and the flexibility to invest in foreign securities, it offers a unique opportunity for high-growth investors. However, as with any equity investment, it’s essential
Note: To get the most accurate and up-to-date information, you may want to consult with a financial advisor or directly check the Zerodha website or other reliable financial platforms.
