Tata Mutual Fund has decided to stop accepting lump sum amounts and switch-in investments in Tata Small Cap (TSC) Fund from July 1, 2023. The fund house, however, said that they would continue accepting investments through systematic investment plans (SIPs) and systematic transfer plans (STPs).
The move will stay effective until further notice, the asset management company said.
The trigger
According to Anand Vardarajan, Business Head – Banking, Alternate Products & Product Strategy at
Tata Asset Management, the mentioned fund had been doing very well but due to the illiquid nature of small caps, deployment takes time, as one has to wait for the right opportunities.
He said chasing the stocks might drive up the price, thereby, defeating the very purpose of investing and that they wanted their investors to have a good investment experience.
Typically, fund houses restrict subscriptions in the scheme when they do not find enough opportunity to deploy the cash. This practice is employed to maintain the overall investment strategy and protect the interests of existing investors.
What happens now
The fund house has said that the lump sum and switch-in investments in Tata Small Cap Fund would be accepted until the cut-off time of June 30, 2023. After this, investors would not be able to invest via these modes.
However, all existing SIPs and STPs will continue and investors can also register new ones. There will be no restrictions on redemptions and switch out of the scheme.
For existing investors, experts say that those who are bullish on growth opportunities may continue to remain invested. But, it's better to wait till the restrictions are lifted to deploy fresh capital. Alternatively, they can opt for the SIP route.
About the fund
Launched in November 2018,
Tata Small Cap Fund invests 86 percent in domestic equities, of which 65 percent is invested in small-cap stocks and the remaining in large- and mid-cap stocks, besides debt instruments and REITs and InvITs. Chandraprakash Padiyar and Satish Chandra Mishra manage the scheme.
The fund has delivered 43 percent return in the last three years and has assets under management (AUM) of Rs 4,400 crore. Huge inflows and delay in deployment have led to a cash holding of 14 percent in the scheme.
Small-cap funds
Association of Mutual Funds in India (AMFI) data has recently revealed that investors chasing returns are flocking to small-cap funds, Of the total net flow of Rs 1.46 lakh crore into equity-oriented schemes, 15.1 percent or Rs 22,104 crore was invested in small-cap funds in FY23. This trend continued in FY24 (April and May) when of the total net flow of Rs 9,721 crore, a net flow of Rs 5,465 crore was into small-cap funds.
Here's a look at some of the small-cap funds and their returns:
| Fund name | 3-year return | 5-year return | 10-year return |
| Tata Small Cap Fund - Direct Plan - Growth Small Cap Fund | 43.04% | - | - |
| Quant Small Cap Fund - Direct Plan - Growth Small Cap Fund | 59.15% | 26.96% | 16.96% |
| HSBC Small Cap Fund - Direct Plan - Growth Small Cap Fund | 43.94% | 17.19% | - |
| Canara Robeco Small Cap Fund - Direct Plan - Growth Small Cap Fund | 44.96% | - | - |
| Nippon India Small Cap Fund - Direct Plan - Growth Small Cap Fund | 46.94% | 22.03% | 29.40% |
| HDFC Small Cap Fund - Direct Plan - Growth Small Cap Fund | 43.30% | 17.25% | 21.70% |
| SBI Small Cap Fund - Direct Plan - Growth Small Cap Fund | 36.91% | 20.20% | 27.88% |
| Kotak Small Cap Fund - Direct Plan - Growth Small Cap Fund | 43.02% | 21.19% | 23.50% |
(Source: Moneycontrol)
