Retail frenzy creates Rs 17,500-crore confusion for smallcap fund managers

Even as retail investors continue to loosen purses for smallcap mutual funds, AMCs are sitting on a cash pile of Rs 17,500 crore. Fund managers have chosen to keep about 7.6% of the total assets under management (AUM) in cash, shows data collected by ET Mutual Funds.

Last month, the total AUM of active smallcap funds swelled to Rs 2.3 lakh crore.

The analysis showed that SBI Smallcap was the most conservative among all smallcap schemes. The scheme had Rs 4,043.76 crore cash pile in its portfolio, making it the highest among all such schemes. This was 19.42% of its total equity AUM of Rs 20,817 crore. Meanwhile, HDFC Small Cap Fund was sitting on Rs 2,832.50-crore cash which was 10.99% of the total equity AUM.



Axis Small Cap Fund was sitting on Rs 1,963.97 crore cash making it to around 11.18% of total equity AUM.

Nippon India Small Cap Fund, the largest small cap scheme in the small cap category based on assets managed, was sitting on Rs 1,853.26 crore cash. This was 4.21% of its total equity AUM. Quant Small Cap Fund was sitting with Rs 1,182.41 crore cash making it to 8.16% of its equity AUM.

Motilal Oswal Small Cap Fund, which was launched in December 2023, was sitting with Rs 152.16 crore cash. This was around 12.02% of its total equity AUM.

Quantum Small Cap Fund, the smallest scheme in the small cap category based on assets managed, had the lowest cash allocation. The fund was sitting with Rs 7.91 crore cash making it 25.39% of its equity AUM.

Around five small cap schemes had cash allocation of more than Rs 1,000 crore, while 8 small cap schemes had cash allocation of less than Rs 100 crore.

The market regulator Sebi has told mutual funds to frame a policy to protect the interest of investors of small and midcap mutual fund schemes.

Sebi in a letter to the Association of Mutual Funds in India (AMFI) said to frame a policy which contains appropriate and proactive measures to protect investors, including but not limited to moderating inflows, portfolio rebalancing, etc. and to take steps to ensure that investors are protected from the first mover advantage of redeeming investors. Sebi also asked mutual fund houses to disclose this within 21 days.

Note, the above exercise is not a recommendation. The exercise was done to find how small cap schemes were sitting on cash.

One should not make investment or redemption decisions based on the above exercise. One should always consider risk appetite, investment horizon and goal before making investment decisions.