In response to a recent advisory from the Association of Mutual Funds in India (AMFI), urging heightened transparency, ACE MF and FISDOM Research conducted an analysis to identify potential impacts on certain funds.
The advisory specifically addresses mid-cap and small-cap equity schemes, stressing the need for comprehensive disclosures regarding risk parameters on the official websites of Asset Management Companies (AMCs).
As part of their analysis, ACE MF and FISDOM Research have identified five small-cap funds that exhibit noteworthy characteristics. It is essential to emphasise that these identified funds are not categorised as poor quality or underperformers.
These funds, including HDFC Small Cap Fund, Axis Small Cap Fund, HSBC Small Cap Fund, DSP Small Cap Fund, and Franklin India Smaller Companies Fund, have been singled out due to their higher exposure to microcaps, lower exposure to large caps, and specific consideration of asset under management (AUM) and cash positions.
For instance, the HDFC Small Cap Fund, with an AUM of ₹28,607 crore, demonstrates 3.7% exposure to large caps and an 18% exposure to microcaps, coupled with a 9.9% cash holding.
Similar trends are observed across the other identified funds.
Take a look:
| Fund | AUM (₹crore) | Largecap Exposure (%) | Microcap Exposure (%) | Cash Exposure (including T-bills) (%) |
|---|---|---|---|---|
| HDFC Small Cap Fund | ₹28,607 crore | 3.7 | 18 | 9.9 |
| Axis Small Cap Fund | ₹19,531 crore | 2.3 | 9 | 8.2 |
| HSBC Small Cap Fund | ₹13,981 crore | 2.3 | 15 | 1.8 |
| DSP Small Cap Fund | ₹13,859 crore | - | 22 | 5.8 |
| Franklin India Smaller Companies | ₹11,834 crore | 3.2 | 16 | 6 |
To reemphasise, these identified funds are not categorised as poor quality or underperformers. The purpose of this analysis was solely to pinpoint funds with notable exposure to microcaps, coupled with lower large-cap and cash holdings, as per ACE MF and FISDOM Research.
In light of these findings, it becomes imperative to align them with the recent AMFI advisory, which directs AMCs to disclose risk parameters within 15 days after the conclusion of each month.
The required disclosures include standard deviation, portfolio beta, trailing PE of the portfolio, and portfolio turnover.
Chintan Haria, Head of Investment Strategy at ICICI Prudential AMC believes, there is nothing to worry about or panic about. “Proactive measures are always beneficial in the long run. Being proactive is not a sign of worry, being proactive is ensuring that the system runs smoothly for the foreseeable future,” he said in an interview with CNBC-TV18.
For February 2024, AMCs are required to effectuate these disclosures by March 15, 2024.
(Edited by : Amrita)
First Published: Feb 29, 2024 12:53 PM IST
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