Tata AIA Life Insurance (Tata AIA) has launched its first dedicated small cap fund, Tata AIA Small Cap Discovery Fund. The new fund will offer policyholders the opportunity to generate capital appreciation in the long-term by investing in small-cap market capitalisation stocks. The New Fund Offer (NFO) window will remain open till July 24, 2023, at Rs 10 per unit, applicable only during the NFO period.
Commenting on the launch of the Small Cap Discovery Fund, Harshad Patil, Executive Vice President and Chief Investment Officer (CIO) of Tata AIA Life Insurance, said, “The Government is focused on formalising the economy during the Amrit Kaal, which will benefit small businesses immensely. Further, growth in consumption demand, rising disposable income, and support for manufacturing will catalyse several smaller companies to become dominant in their sectors."
Small cap stocks are a significant part of the Indian equity market, with more than 4,500 companies. Among these, approximately 500 stocks have a market cap higher than Rs 2,000 crore. That is why, compared to the large-cap and mid-cap categories, the small-cap category presents a large universe of stocks for investment. However, many of them are also prone to a high degree of volatility as their performance can be impacted by changing market dynamics. Therefore, one needs to have a longer investment horizon to enjoy the returns from this fund, the insurance firm said.
Small cap stocks offer several advantages to investors:
1. Nifty Small Cap 100 trades at a deeper discount on 2-year average PE (14.7) as compared to Nifty 50 (22.08)- stocks available at lower prices.
2. Nifty Small cap index has given excellent returns over 1 year (14.3 percent), 3 years (41 percent), and since inception (13.6 percent)
3. Tata AIA funds have beaten their benchmarks over multiple time periods. The below table illustrates the returns over 5 years
Tata AIA Small Cap Discovery Fund will primarily invest (up to 65 percent) in handpicked small-cap companies offering opportunities for long-term wealth creation. The fund provides investors with an opportunity to invest in quality businesses that are small but have the potential to grow into mid and large-cap companies, the insurer said.
"Tata AIA policyholders can invest in this fund through the company’s ULIP offerings, Fortune Pro, Wealth Pro, Fortune Maxima, Wealth Maxima, Systematic Insurance Plan and Smart Sampoorna Raksha Plus. In addition, this fund will also be attached to Tata AIA’s Param Rakshak Solutions. This offers consumers the unique opportunity to benefit from the long-term growth potential of equity while securing their loved ones with the protection of a life insurance cover," it said.
