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Motilal Oswal joins the small-cap bandwagon with NFO: All you should know

The investment objective of the scheme is to generate capital appreciation by investing predominantly in small-cap stocks.

mutual funds, MFs

BS Web Team New Delhi

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Motilal Oswal Asset Management Company (MOAMC) on Monday launched a small-cap fund, an open-ended equity scheme that banks on the growth potential of small-cap stocks. The new fund offering opens for subscription on December 5, 2023, and will be available until December 19, 2023.

The fund aims to maintain a well-balanced portfolio with a minimum 65 per cent exposure to small-cap stocks, complemented by a thoughtful allocation to large-cap stocks for tactical and liquidity purposes.

The Motilal Oswal Small Cap Fund is ideal for those with an investment horizon of five to seven years. The fund's performance will be benchmarked against Nifty Small cap 250 TRI.
Notably, this is Motilal Oswal’s first active fund after a gap of seven years. An actively managed fund means a fund manager has more involvement in the decision making, and is more active in looking after which stocks and bonds go in and out of a mutual fund portfolio and when. 

In passively managed funds, the fund manager cannot decide the movement of the underlying assets. A passive fund tracks a market index, or a specific market segment, to determine what to invest in.

Other active funds by the mutual fund include Motilal Oswal Midcap Fund, Motilal Oswal Large and Midcap Fund, Motilal Oswal ELSS Tax Saver Fund and Motilal Oswal Focused Fund among others. 

The new small-cap fund will be managed by Ajay Khandelwal. Co-managers include Niket Shah for the equity component, Rakesh Shetty for the debt component, and Ankush Sood for the international equity component.

Asset allocation pattern of the Scheme


The scheme may invest in foreign securities including ADRs/GDRs/foreign equity and equity-related instruments up to 15 per cent of the total net assets of the scheme. 

According to Navin Agarwal, MD and CEO, MOAMC, the company has a significant 22 per cent investment in the small-cap segment. 

"The financial landscape is continually evolving providing various investment opportunities to investors. We are committed to staying ahead of the curve and delivering innovative solutions,” said Agarwal.

Why pick small-cap funds?

 According to the AMC: 

1. The small-cap funds have shown the potential for high earnings growth, with a notable 38-time increase in the market cap of the largest small-cap companies over the past 20 years.
2. The small-cap space, encompassing about 537 companies with a market cap above Rs 2,000 crore, offers fertile ground for alpha generation.
3. The small-cap earnings growth has compounded by 49 per cent in the last three years, contributing to reduced volatility and healthier balance sheets, according to the AMC.

“In the last 2-3 years, we've witnessed a remarkable surge in small-cap fund flows, and this trend indicates a structural shift in investor preferences. Small caps, with their agility and growth potential, have become a focal point for discerning investors looking beyond conventional avenues,” said Ajay Khandelwal, Fund Manager at Motilal Oswal AMC.

According to the scheme risk-o-meter, the principal invested in the fund will be at ‘very high’ risk. 

Other small-cap funds available in the market, include Quant Small Cap Fund, Nippon India Small Cap Fund, HSBC Small Cap Fund, Tata Small Cap Fund, Invesco India Smallcap Fund, and Franklin India Smaller Companies Fund, among others. 

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First Published: Dec 04 2023 | 4:29 PM IST

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