Markets experts contend that ensuing correction is likely to dent a major blow to mid and
small cap funds.
"It will be a diversified equity fund, including large cap, mid-cap and
small cap funds," said Dinesh Khara, managing director and CEO of the bank's SBI Mutual Fund.
- What long-term value would
small cap funds add to an investment portfolio?
large and
small cap funds, emerging market funds, gold and real estate, and high-yield corporate bonds were also among the categories gaining inflows, while high-quality bond categories experienced modest redemptions.
Diversified equity funds with average three-year allocation to large cap stocks more than or equal to 80 per cent of portfolio are classified as large-cap funds; 60-80 per cent as large- and mid-cap funds, 40-60 per cent as multi-cap funds, and less than 40 per cent as mid and
small cap funds. For equity tax-savings, all funds compliant with Section 80C of the Income Tax Act were considered.
Given the lower assets base of the
small cap funds, it becomes comparatively easyy for the fund manager to manage the fund efficiently and generate excess returns over the fund's benchmark index.
Small cap funds would generally be considered more risky but with greater growth potential.
Investing in Aim has been a popular option for many private investors, directly and indirectly through
small cap funds.
"We suggest that our clients invest in
small cap funds rather than micro caps," says Robert Pagliarini, a certified financial planner and executive vice president with Allied Consulting Group in Los Angeles.
First, they break the fund down by size: large cap funds traditionally invest in companies capitalized at $9 billion or above;
small cap funds invest in companies with assets under $1.5 billion.
While large cap diversified equity funds returned 13 per cent over the last one year, mid and
small cap funds did even better returning 33 per cent.
In common with other
small cap funds, the Baring Europe Select Trust suffered in the first quarter, but has since recovered strongly.