Is it wise to invest in SBI Small and Midcap Fund?

Would it be wise to invest in SBI Small and Midcap Fund which will soon open up for investment. It has now been renamed. It was a stellar performer in the past. But now its investment mandate has changed. Do you think we can invest based on its past performance even though the mandate has been changed from small and midcap to smallcap?
--Nishant Mishra

You are likely to come across more such instances in the coming days as more mutual fund schemes may see change in their fundamental attributes or get merged with another scheme. The re-categorisation exercise is expected to be over in a few weeks and only then a clear picture would emerge. So, if you are planning to make any changes in your portfolio, hold on for the moment. Let the entire exercise be over and then assess its impact on your entire mutual fund portfolio.

Yes, some schemes would not have a track record to bank on. In such cases, you may go by some factors like the reputation of the fund house and the fund manager and the track record of the fund house in managing the category, etc.


If you have a very high risk appetite and a really long investment horizon, you can invest in smallcap schemes. As for SBI Small and Midcap Fund, it currently holds around 72 per cent of its total assets in smallcap stocks. As per the new Sebi mandate, smallcap schemes are expected to hold a minimum 65 per cent in smallcap stocks. That means the scheme, once it becomes a smallcap fund, need not change its portfolio to be in line with the new mandate. It currently holds around 22 per cent of its portfolio in midcap stocks. The fund can retain this holding even after its re-categorisation as a smallcap scheme. So, there would be hardly any change in the scheme.