Samco Mutual Fund has launched an ELSS Tax Saver Fund, which will have a portfolio of midcap and smallcap businesses with a mandatory 3-year lock-in period. In a statement, the AMC said that Samco ELSS Tax Saver Fund is a differentiated ELSS Tax Saver Fund that will invest in high-quality mid and small-sized companies.
Mid and small-sized companies carry a higher growth potential, offering a superior risk-adjusted return over the long term. This ELSS fund will use HexaShield Framework, a proprietary strategy driven by technology, to filter out an investible universe of high-quality efficient stocks, Samco asset management company (AMC) said.
On a 3-year average rolling returns basis, the Nifty MidSmallCap 400 index has returned 8% higher returns compared to the Nifty500 index since April 1, 2005. The AMC said that the volatility around holding midcap and smallcap businesses also smoothens out significantly in the 3-year time horizon compared to a 1-year holding period. Hence, an investor will be able to generate higher risk-adjusted returns by investing in such a fund that has exposure to midcap and smallcap businesses by mandatorily holding the portfolio for at least 3-years.
New Fund Offer Dates
The New Fund Offer (NFO) will open on 15th November 2022 and close on 16th December 2022
Are midcap and smallcap companies poor-quality businesses?
Samco Mutual Fund said in the statement that there is a myth in the industry that generally midcaps and smallcaps are poor-quality businesses just because of their size. “In reality and on the contrary, some of these businesses are leaders in their respective categories, having robust earnings growth, high stickability, strong intangibles, and high pricing power despite their smaller size,” the AMC said.
“It is essential to understand the traits of businesses to invest in the right ones which can become giants of tomorrow because a Mid-Cap stock in its life faces two outcomes – a mid-Cap could become a Small-Cap i.e. Wealth Destructor, or a Mid-Cap could become a Large-Cap i.e. Wealth Creator,” it added.
What is special about Samco ELSS Tax Saver Fund?
The AMC said that most ELSS Funds in India have majority exposure to Large Cap stocks and the constitution of their top holdings are usually the same few stocks. Because of this, it can get very difficult for an investor to differentiate one fund from the other.
“Samco Tax Saver Fund is unique because of its pre-dominant exposure to Mid-Cap and Small-Cap high-growth stocks which offer great potential but at the same time, higher volatility is also smoothened out due to the mandatory 3-year lock-in period,” it added.
SAMCO Mutual Fund will disclose the Active Share of its ELSS Tax Saver Fund daily on its website.
Commenting on the fund, Umeshkumar Mehta, CIO of Samco Asset Management Pvt. Ltd said “The Large-Cap stocks you invest in today were also Mid-Caps sometime in the past, and in this transition from being a Mid-Cap to a Large-Cap immense wealth has been created for an investor. With the Samco ELSS Tax Saver Fund, we are enabling an investor to avail the benefits of tax saving under Section 80C and get exposure to efficient growing Mid and Small-Cap businesses for at least a 3-year time horizon.”
“The idea is to enable an investor to be a part of India’s growth story through investments in mid and smaller-sized leaders of niche sectors because these businesses could become future drivers of growth for our country, taking them on an exponential compounding trajectory. Historically, Nifty MidSmallCap 400 TRI has generated an alpha of ~8% compared to Nifty 500 TRI on a 3- year average rolling return basis. A portfolio of Mid & SmallCap companies with a 3-year lock-in feature would be a solid combination to generate high risk-adjusted returns,” he added.
(Disclaimer: The above information is based on a press release issued by Samco Mutual Fund. Mutual Fund investments are subject to market risks. There is no guarantee or assurance that the past performance of a fund or an index would sustain in future. Please consult your financial advisor before investing in mutual funds)