Mirae Asset Small Cap Fund: A Fresh Addition to Your Portfolio

Publish Date: Jan 16, 2025

Mirae Asset Mutual Fund has launched Mirae Asset Small Cap Fund, it is an open-ended equity scheme predominantly investing in small cap stocks.

The year 2024 was a pivotal one for the small-cap segment. After enduring periods of volatility, driven by global macroeconomic challenges and geopolitical tensions, the segment staged a strong recovery in the latter half of the year. Small-cap indices outperformed their large-cap counterparts, fueled by increased domestic participation, government policy support, and improving corporate earnings.

Many small-cap companies benefited from sectoral tailwinds in manufacturing, technology, and green energy, attracting significant investor interest.

[Read: 3 Best Small Cap Funds for 2025 - Top Performing Small Cap Mutual Funds in India]

Details of Mirae Asset Small Cap Fund:

(Source: Scheme Information Document)

What will be the investment strategy for Mirae Asset Small Cap Fund?

Mirae Asset Small Cap Fund will primarily adopt a small-cap strategy, maintaining a minimum allocation of 65% to small-cap equities and related instruments. additionally, it may include investments in other equity and equity-related securities to construct an optimal portfolio.

The investment manager will employ a bottom-up, stock-specific approach to select securities, focusing on building a portfolio of high-growth companies that represent the most compelling investment opportunities at any given time.

The stock selection will largely focus on companies with robust business models, sustainable competitive advantages over peers, and strong return ratios.

The fund manager will ensure a well-diversified portfolio to mitigate concentration and liquidity risks. careful attention will be paid to trading volumes of individual stocks before investment to manage liquidity effectively.

How will the scheme allocate its assets?

Under normal circumstances, Mirae Asset Small Cap Fund will hold an allocation of 65% to 100% in Equity and Equity related securities of Smallcap Companies, 0% to 35% in Equity & Equity Related Securities of Companies other than above, 0% to 35% in Debt and Money Market Instruments, 0% to 35% in Overseas Mutual Funds schemes/ ETFs/Foreign Securities and 0% to 10% in Units issued by REITs and InvITs.

Should investments in Mirae Asset Small Cap Fund be considered?

Investing in small-cap funds can be a strategic move for those seeking higher returns over the long term, and the Mirae Asset Small Cap Fund predominantly invests in small-cap companies with growth potential. It maintains a minimum allocation of 65% to small-cap equities, focusing on companies with robust business models, competitive advantages, and attractive return ratios.

The fund manager avoids over-concentration in any specific stock or sector, reducing exposure to risks associated with market volatility. Additionally, liquidity is closely monitored, with investments made only in stocks with adequate trading volumes. This balanced approach makes the fund a compelling option for investors.

However, it's crucial to remember that small-cap funds are inherently volatile and subject to market fluctuations. Small-cap stocks often excel during bullish market cycles, delivering returns that outpace their larger peers. Their growth potential makes them an appealing choice for investors with a long-term horizon. Yet, these benefits come with heightened risks, including sharp price fluctuations and liquidity constraints.

For investors looking to tap into this segment, maintaining a balanced approach by considering market valuations and aligning investments with personal financial goals is essential to avoid overexposure to risks.