Ask Morningstar: Choosing between 2 small-cap funds

Nov 01, 2022
Himanshu Srivastava, associate director of manager research, answers a reader's query.

Which one would be better: Canara Robeco Small Cap or Quant Small Cap?

Regarding your first question, Canara Robeco Small Cap Fund has an edge over Quant Small Cap Fund.

Canara Robeco Small Cap Fund was launched in February 2019 and is being managed by Shridatta Bhandwaldar. Shridatta is a good fund manager and plies a buy-and-hold approach while investing, which is more apt for small cap strategies. Since small cap is a relatively risky segment to invest in, such an approach does provide a degree of stability to the portfolio. Over a 3-year period as of Oct 25, 2022, the fund has clocked a return of 41.0%, thus outperforming S&P BSE Smallcap TR Index (31%) and 95% of the category peers.

From the perspective of returns, Quant Small Cap Fund has performed better than Canara Robeco Small Cap Fund over the same time frame. However, it is run with a momentum driven investment approach, which adds an element of risk. Such an investment style is based on relatively fluid investment strategy and is very fund manager centric. Its success would depend on managers ability to capture short-term investment opportunities consistently. This strategy may deliver well during sharp rally in the small cap segment, but during testing times, the manager may find it difficult to execute the strategy with the same degree of precision.

From the long-term as well as from the perspective of providing stability to your portfolio, Canara Robeco Small Cap Fund should be apt.


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Articles authored by Himanshu Srivastava

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