DSP Blackrock Small Cap Growth - Hold or Sell?
- Bharath
What are the best small-cap mutual funds for investment with a 5-year horizon?
- Akshay
I am currently invested in Franklin Small Companies and have an investment horizon of 10+ years. The performance of this fund has been very sluggish for last 3 years. Your views?
- Kshitij
I like HDFC Midcap Opportunities but the fund size is a concern. Would you recommend investing in this fund given the large AUM?
- Suresh
Small-Cap and Mid-Cap funds should be invested in with at least 7-10 year investment horizon. It is hard to give you a recommendation without the knowledge of your current split across the various fund categories. It is important to look at your investments from a holistic portfolio perspective after understanding your risk return objectives.
Ideally large cap funds should ideally form the core holding of any investors portfolio. Small-cap stocks are excellent wealth creators over the long term, but also can be quite volatile in the short term. 2018 is a classic case in point, whereby small cap stocks have fallen quite significantly and so have small cap funds. But if you do indeed have a long term horizon, small cap funds can serve you well.
You can refer here to read our analysts' views on the rated small-cap funds.
DSP Blackrock Small Cap Fund is the erstwhile DSP Blackrock Micro Cap Fund. Although the fund’s performance over the short term (say over 1-year) has not been impressive, over the long-term it has a noteworthy track record to show for.
Given that it is from the small-cap category, the fund would be exposed to above average volatility during market downturns or when small cap stocks are witnessing a rough patch. On a year-to-date basis as of July 31, 2018, while the S&P BSE Sensex has appreciated by 11.3%, S&P BSE Smallcap TR index has fallen by 13.4%. The stress in the small cap segment has impacted the performance of DSP Blackrock Small Cap Fund vis-à-vis peers as it maintains a higher small/midcap exposure (around 90-95%) compared to the category average of 75-80%.
This fund is managed by Vinit Sambre who is a seasoned manager in the small/mid cap space. He plies a research-intensive investment approach and has an uncompromising approach towards quality. He adopts a buy and hold approach which is apt for such investment mandate. With such a strategy, short-term underperformance cannot be ruled out. Hence, it’s prudent to stay invested in such funds over the long haul (not less than 5 years).
Having said that, it is a risky strategy, meant only for high risk-high return investors. So, if you don’t have the appetite for the risks that tags along with such strategies and are not willing to stay invested for the long haul, then you can consider other less risky options. But if you have the requisite risk appetite, you can consider staying invested in this fund. It has a Morningstar Analyst Rating of ‘Silver’.
Also read: Should I continue with my investment in DSP Small Cap
Franklin India Smaller Companies is from small-cap category which is extremely volatile, depending on market conditions. However, it is important to note that the fund manager R Jankiraman is an able manager and conversant with the risks associated while investing. Under him the asset size has grown steadily with the fund’s superior risk adjusted returns.
Do read the fund analyst’s views here as to why the fund is assigned a Silver rating.
HDFC Mid-Cap Opportunities fund is amongst the best in its category. While you are right in saying that it is a large size fund (it is in fact the largest fund in its category by a significant margin), the weighted average market cap of the fund is lower as compared to its index. This gives the manager enough leeway to explore his universe of mid-cap stocks as defined by the market regulator.
We think that the fund size is an important factor to consider while investing in a fund, but as long as the fund size does not impact its operations or lead to overly high levels of cash within the fund, a regular monitoring of the portfolio should help keep track of it.
The fund is rated by our analysts and you can find the analyst report here.
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