Fund Managers Positive View on Small-cap and Mid-cap Funds
From a couple of days, many market advisors and experts said that the small-cap and mid-cap funds do not generate huge returns in the stock market. As of the reports, some experienced fund managers believe that small and mid-cap funds become generate high returns in the coming days. It is the right time to invest in such schemes.
The CIO of Mirae Asset India said that they have some positive angles on small and mid-cap funds. Moreover, “these funds will drag the investors even more than large-cap schemes.” This point makes sense to look at them. He also added that Small-cap and Mid-cap fund is a large universe. Investors should have more information about the quality and management of these funds before going to invest in these funds. However, investors should be careful with small-cap funds because Small-cap funds have liquidity risk.
As of the reports, small-mid-cap funds do not perform well in the market. In the last one year, Mid-cap and small-cap funds reported to drag down -15.93 percent and -12.22 percent, respectively. These two categories of funds do not generate high returns, but fund managers assume that investors should not neglect them.
Many market experts think that small cap-funds become very risky and should avoid due to the continued flow of economic slowdown and depressing the data points. In the last month, a maximum of investors invested their money in large-cap schemes only, said a source.
Mid-cap and small-cap fund inflows reported as Rs 1,068 crore and Rs 1,307 crore. The fund manager of the Tata mutual fund started that Liquidity risk is the main problem in small-cap schemes. For this reason, the fund houses made more changes in small-cap funds. Although, this is the best in that field. In terms of company valuation and specific approach, he did not think that they are writing off of small-caps at this point.
Fund managers in Mutual Fund Industry trust that investors’ ignorance of small and mid-cap funds seems not right at this time. Because they suppose that a maximum of small-cap companies has the potential to grow in that field. The Mirae asset fund manager thinks that there is a chance to make money in three funds including small-cap. They do not think that small and mid-cap funds do not make money. At this time, he gave an example of small-cap funds. That is IT and Auto sectors well receive small-cap funds.
Fund managers think that some selected companies have maintained purity in their companies and stocks. This point noted at many small-cap funds experienced many issues due to the inaccurate management and liquidity issues. Another fund manager stated that “they considered the mainly three points to meet the companies and sectors. Those are which company treated as cash flow is not a problem and it does not have promoter pledge and not very leverage. If these basic criteria are met, they don’t mind whether it is large-cap or small-cap.”
Mirae Asset and Tata Mutual Fund managers believe that from five years to now, there is a better chance for small-cap companies to make more money even more than large-cap. Due to domestic and global issues, small-cap funds have liquidity problems. But, there is a possibility in small and mid-cap funds. Retail investors have a better role in multi-cap funds, said by the fund managers.
The large-cap funds have the best metric, management, and growth, etc. For this reason, they believe that retail investors should have a skewed portfolio towards multi-cap. But small and mid-cap should have an extra of 20 to 30 percent, says a fund manager. Another one also agrees with these points. He added that in the long term, multi-cap funds will be less volatile from a returns perspective. Retail investors should stick to them.
Disclaimer: The given information is about the thoughts and believes of fund managers in the MF industry. Those managers share their thinks to the public, not edited by us.