Tata Small Cap Fund is a growth-oriented scheme in the Small Cap Fund category that has exhibited a noteworthy track record since its inception and has outpaced many of its prominent peers, thereby rewarding investors with superior risk-adjusted returns.
Launched in November 2018, Tata Small Cap Fund aims to invest in stocks of companies that are in growth mode and have the potential to make it big in the market. Tata Small Cap Fund looks to identify growth-oriented sound stocks available at reasonable valuations. Its emphasis is on stocks that carry low debt and high cash flow. The fund invests over 85-90% of its assets in stocks of small-sized companies as compared to the category average of 75%. While this may pose liquidity risk typically associated with stocks of small-sized companies, the fund’s focus on diversification in fundamentally sound stocks across various sectors has enabled it to reward investors.
The fund has displayed remarkable growth since its inception, generating returns at a CAGR of about 22% and outpacing the benchmark returns of 18.6%. It has flourished under the supervision of Mr Chandraprakash Padiyar, who has been managing the scheme since its launch. Tata Small Cap Fund efficiently limited the downside risk during the market crash of 2020, while it also found a place among the top performers in the category in the recent bull phase. In the last five years, Tata Small Cap Fund has generated returns at a CAGR of 35.7% as against a CAGR of 33.7% in its benchmark Nifty Smallcap 250 – TRI. An investment of Rs10,000 in Tata Small Cap Fund five years back would have now accelerated to 46,066, while a simultaneous investment in the benchmark would now be valued at Rs 42,783.
Within a relatively shorter time span of little over 6 years, Tata Small Cap Fund has established itself among the top performers in the Small Cap Fund category. Even though the fund has trailed the benchmark in the last one year, it has outperformed the category average. Over the longer 3-year and 5-year period Tata Small Cap Fund has maintained a lead of about 3 percentage points over the category average as well as the benchmark Nifty Smallcap 250 – TRI, on a rolling returns basis.
Despite relatively higher allocation to small caps,
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