Should I continue with my SIP in DSPBR Small Cap?

By Morningstar Analysts |  05-07-18 | 

I invested in DSP BlackRock Small Cap Fund (erstwhile DSPBR MicroCap). I first invested a lumpsum 2 years ago and since then have been investing via the SIP route.

The NAV had hit Rs 55 in February 2017 and is now around Rs 60. It has actually underperformed compared to category in 2017. Add to that, the changes in the fund house ownership.

Is it OK to continue the SIP or stop and look at better funds like SBI Small Cap fund (which has started accepting SIP)?

- Neerav

DSP BlackRock Small Cap Fund is managed by Vineet Sambre. We do believe that it still makes an excellent investment choice in the Small-Cap fund space.

The small-cap segment of the Indian equity universe is a risky space in which to invest. Hence research experience and good execution are of paramount importance for portfolio managers in this area. Vinit Sambre fills the bill on these counts. He is a competent analyst with reasonable portfolio management experience under his belt. He has managed this fund since June 2010. That he is backed by a high caliber team also adds to our conviction.

Sambre plies a bottom-up, buy-and-hold approach to picking stocks, scouting for growth-oriented companies that have sustainable competitive advantages over their peers and are leaders in their industries.

Although he is valuation conscious, he believes that the companies in which he invests should command a premium given their leadership positions in their respective industries.

We believe this focus on longer-term strength is a positive and helps reduce the issue specific risks associated with a small-cap fund.

Sambre also invests a portion of the portfolio in value stocks. This approach can help reduce price risk in the portfolio, given the inherent growth bias here.

Given the in-house capability of deeper analysis in the small and micro-cap space, last year Sambre added a new aspect of trading to his investment style where he invests roughly 5% of the portfolio to capture short-term market movements.

Sambre so far has displayed an ability to contain downside risks in the portfolio. He appears at home with his investing style and has been fairly disciplined in his approach.

Although the fund has witnessed a period of relative underperformance lately, we don’t think there is a systemic issue with the fund.  All fund managers will go through periods of relative underperformance, depending on their individual styles and which pocket of the market is currently in favour. But over a market cycle, good fund managers will continue to deliver good risk adjusted returns. For instance, this fund has underperformed recently as some of Vineet’s stock calls in the Basic Materials and Consumer Cyclicals space haven’t panned out as expected. But we expect him to make a strong comeback over the market cycle.

We recommend that you continue with the SIP.

You can get more information on the fund here.

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Dhawal Parikh
Jul 5 2018 03:34 PM
Hi Larissa,
What is Morningstar’s opinion on the malpractices that ICICI Pru MF is accused of? Cannot find it on your website.
First, they used investor’s money in actively managed funds to invest in Bharat 22 ETF that they manage. Clear conflict of interest.
Now they have used investor’s money to invest in IPO of ICICI Securities (group company) for which SEBI has pulled them up and even punished them. It is appearing in the media every day.
Investors in ICICI Pru equity funds are suffering repeatedly. Your research has rewarded this ICICI Pru MF with a Gold status.
Has your research written about this? I couldn’t find it.
I will not be surprised if your research maintains silence on this event.
Sorry to say this. But I think that your team is worried about losing rewards from ICICI Pru MF at your annual conference event.
Dhawal Parikh
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