From August 10, 2016, the daily inflows into DSP BlackRock Micro Cap fund will be limited to a maximum of Rs 1 lakh per investor.
These transactions include:
- Subscription/switch-in application(s) in the scheme
- Registration of new Systematic Investment Plan, or SIP, into the scheme of a single installment
- Registration of new Systematic Transfer Plan, or STP, into the scheme of a single installment
- Daily STP into the scheme of any amount
The fund's assets on July 31, 2016, stood at Rs 3,113.17 crores, a substantial sum for a micro-cap fund. Our analyst had previously noted that a growing asset size can pose challenges in the form of market-impact cost and opportunity cost. This could prove detrimental to the interest of the existing unit holders. With that in mind, the fund house had earlier restricted the amount to 2 lakh per subscription. Now it has been reduced to Rs 1 lakh.
Our analyst's view on the fund...
The small/micro-cap segment of the Indian equity universe is a risky space in which to invest. Hence research experience and good execution are of paramount importance for portfolio managers in this area. Vinit Sambre fills the bill on these counts. He is a competent analyst with reasonable portfolio management experience under his belt. He has managed this fund since June 2010. That he is backed by a high-calibre team also adds to our conviction.
Sambre plies a bottom-up, buy-and-hold approach to picking stocks, scouting for growth-oriented companies that have sustainable competitive advantages over their peers and are leaders in their industries. Although he is valuation-conscious, he believes that the companies in which he invests should command a premium given their leadership positions in their respective industries. We believe this focus on longer-term strength is a positive and helps reduce the issue-specific risks associated with a small-cap fund.
Sambre also invests a portion of the portfolio in value stocks. We believe that this approach can help reduce price risk in the portfolio, given the inherent growth bias here.
Cash calls are not a part of the strategy – this is a positive as it eliminates timing risk.
That said, small/micro-caps are tricky beasts and the risks of running such funds are magnified. For instance, Sambre may find it difficult to exit stocks when liquidity dries up – a common event in the small- and micro-cap space. Moreover, the fund’s exposure to value stocks may lead to potential value traps.
Sambre so far has displayed an ability to contain downside risks in the portfolio. He appears at home with his investing style and has been fairly disciplined in his approach.
The fund is a good investment option for risk-taking investors.
- Fund manager: Vinit Sambre
- Star rating: 5 stars
- Category: Small/Mid-Cap
- Portfolio: Sambre selects companies with sustainable competitive advantages and dominant market shares.
- Process: Sambre combines growth-styled quality stocks with value plays when constructing the portfolio.
