UTI Mutual Fund has launched an open-ended equity scheme which will predominantly invest in small-cap stocks – ‘UTI Small Cap Fund’. The investment objective of the scheme is to generate long term capital appreciation by investing predominantly in equity and equity-related securities of small-cap companies. However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved. The New Fund Offer opens on December 02, 2020, and closes on December 16, 2020. The scheme will re-open for subscription and redemption for an ongoing basis from December 23, 2020.
The scheme will invest in a minimum of 65 per cent of the total assets in equity and equity-related instruments of small-cap companies and up to 35 per cent in Debt and Money Market instruments. The risk profile of the scheme is Moderately High and suits investors who are willing to absorb a relatively higher amount of short term volatility.
The minimum initial investment is Rs. 5,000 and in multiples of Re. 1 thereafter with no upper limit. The scheme offers Regular and Direct Plan and both the plans offer Growth and Dividend Payment Option to the investors. The Benchmark Index of the scheme is Nifty Small Cap 250 TRI and Ankit Agarwal is the Fund Manager of the scheme.
Compared to the large-cap and mid-cap stocks, the volatility is high in the small-cap stocks. The small-cap mutual funds typically invest in small size companies that have not been widely discovered by the market but might have the potential to be a leader in future.
Generally, a Bottom-up approach is considered while investing in small caps aimed at identifying businesses that have a long term potential to grow into a large-sized company. The liquidity in large-cap stocks is higher compared to other stocks as they are preferred by big investors, financial institutions, hedge funds and HNIs.
The risk is higher in small-cap stocks as stock prices of small-cap firms can show higher volatility than others, especially during downturns. One should carefully assess one’s risk profile and even consult one’s financial advisor before investing in Small-Cap mutual fund schemes.