Axis Small Cap fund

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Being a NFO there's no Past Track record of the fund's performance, but yes we do have track record of the fund Management and Fund manager Pankaj Murarka who is also Head- equity of Axis Mutual fund. Below charts shows that he's done reasonably well as far as performance of his directly managed funds are concerned.

There's no denying the fact that small cap category of stocks are the riskiest of lot and axis AMC also admits to this that in short to medium term small caps have traditionally been more volatile than large Caps. But this is also a fact that Mid and small caps has generated brilliant return as compared to Large caps and combination or large and Mid Caps.

 

Should you invest in Axis Small Cap fund?

 

Though fund manager has good track record and Small cap as category has performed good in past years, but as I mentioned in the starting of the Article that I have few concerns over this fund.

 

One is that this is NFO with no track record of anything. NFO is easy to sell for Asset Mangement Companies as this helps in drawing a fresh start line for a fund with no baggage of poor or average performance. Investors also get convinced easily as they will be issued units @Rs 10/-. But one has to understand that fund may be new but the stocks are already there and whatever this new fund will buy will be at existing prices, the same price at which the already existing, good performing , having good track record and open ended funds can buy.

 

My second concern is its close ended structure. Close ended Mutual funds doesn't allow you to make exit if fund is not performing as per expectation or even if it is performing one cannot rebalance his Asset allocation. If we invest in it only looking at fund manager's Track record, how would we ensure that the same fund manager will stay for the full tenure of fund. Fund management gets impacted by so many external factors which sometimes are beyond the control of fund management even. So as an investor we should review the invested funds time and again and have to make decision on staying put or exit accordingly.

 

Right now the equity market is betting on the upcoming elections, probability of reduction in interest rates which is impacting growth of country, improving the fiscal and current account deficit of the country etc. but all these positive factors will impact the performance of open ended funds too. And if you are disciplined, planned investor you would not find difficulty in staying with the fund even for 5 years or more. So in my view you should keep your investments simple, open and flexible. Avoid close ended mutual funds unless there is a specific structure.

Happy Investing!!

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