{"id":162,"date":"2019-04-22T11:21:30","date_gmt":"2019-04-22T11:21:30","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=162"},"modified":"2019-04-23T09:46:21","modified_gmt":"2019-04-23T09:46:21","slug":"principal-small-cap-fund-worthy-of-investment","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/04\/22\/principal-small-cap-fund-worthy-of-investment\/","title":{"rendered":"Principal Small Cap Fund: Worthy Investment?"},"content":{"rendered":"\n

Recently the markets corrected, several fund houses saw this as an opportunity to invest in the beaten down small cap space. As the small-cap stocks provide an opportunity to buy stocks at moderate pricing and have the potential to generate returns over the long term. Principal Small Cap Fund (PSCF), launched by Principal Mutual Fund<\/a>, is another fund to join the bandwagon of the recently launched funds that will invest primarily in stocks of companies falling under the small-cap category.<\/p>\n\n\n\n

PSCF is an open-ended equity<\/a> scheme launched with the belief that the small caps have the potential to grow exponentially. The fund house states in its presentation<\/a> that the small caps consist of many untapped sectors like the Chemicals, Ceramics & Sanitaryware, Hotels, Logistics, Construction, Sugar and Tea and Packaging to name a few. <\/p>\n\n\n\n

As per the SEBI classification of the market\ncapitalisation of stocks, small-cap companies are those that fall in the list\nthat starts from 251st onwards in terms of full market capitalization. As per\nSEBI mandate, Small-cap equity funds should invest at least 65% of their assets\nin companies below the top 250 by market capitalisation.<\/p>\n\n\n\n

Hence, PSCF will invest as per the given mandate and may\nalso invest up to 35% of its total asset in equity and equity-related\ninstruments of companies other than small caps. <\/p>\n\n\n\n

However, note that small-cap stocks, due to their size, usually, have a low trading volume and are less liquid. Thus, the risk<\/a> associated with small-cap funds is greater than mid-cap funds.  So, to mitigate the market risk for the investors PSCF provides an option to stagger the investments through Smart Trigger Enabled Plan (STEP) facility and Auto Trigger Facility to book profits.<\/p>\n\n\n\n

Image1: How STEP Works?<\/em><\/strong><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

(Source: Principal Small Cap Fund Presentation<\/a>)<\/p>\n\n\n\n

The STEP facility basically helps to facilitate the\ninvestors to take advantage of the downfall in the Index i.e. Nifty Small Cap\n100. In a scenario when the market corrects to 3% or more on a cumulative basis\nfrom the date of Allotment, the investments will be moved from Principal Cash\nManagement Fund to Principal Small Cap Fund.  This is for reducing the market timing related\nrisk for the investors.<\/p>\n\n\n\n

Whereas in Auto Trigger facility an investor can book\nprofits by mentioning specific the rate of return to redeem units. When the\nfund crosses the mentioned rate (trigger) the Fund will automatically redeem\nand\/or switch the units on behalf of the investors on the date of the happening\nof the event.  A trigger will activate a\ntransaction\/alert when the event selected for, has reached a value greater or\nless than the specified value (trigger point).<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

(Source: Principal Small Cap Fund Leaflet<\/a>)<\/p>\n\n\n\n

Table 1: NFO details<\/em><\/strong><\/p>\n\n\n\n
\n Type<\/strong>\n <\/td>\n An Open-ended Equity scheme \n <\/td>\n Category<\/strong>\n <\/td>\n Small-cap Funds\n <\/td><\/tr>
\n Investment Objective<\/strong>\n <\/td>\n To generate long term capital appreciation by\n predominantly investing in equity and equity related instruments of small cap\n companies.\n However, there is no assurance or guarantee that the\n investment objective of the Scheme will be achieved.\n <\/td><\/tr>
\n Min. Investment<\/strong>\n <\/td>\n Rs 5,000 and in multiples of Re 1 thereafter\n <\/td>\n Face Value<\/strong>\n <\/td>\n Rs 10 per unit\n <\/td><\/tr>
\n Plans <\/strong>\n <\/td>\n \u2022 Direct

\n \u2022 Regular \n <\/td>		\n Options<\/strong>\n <\/td>\n \u2022 Growth*

\n \u2022 Dividend (Pay-out and Reinvestment)

\n *Default option

\n  # <\/sup>Default option for Dividend\n <\/td><\/tr>
\n Entry Load<\/strong>\n <\/td>\n Nil\n <\/td>\n Exit Load<\/strong>\n <\/td>\n
    \n
  • \n If redeemed\/ switched on or\n before 1 year from the date of allotment: – Nil for redemption\/ switch out of\n units up to 25% of the units allotted (the limit)<\/li>\n
  • 1% on redemption in excess of\n 25% of the limit stated above- Redemption of units would be done on First in\n First out Basis (FIFO)<\/li>\n
  • Nil thereafter<\/li>\n <\/ul>\n \n <\/td><\/tr>
\n Fund Manager<\/strong>\n <\/td>\n Mr P.V.K. Mohan and Mr Siddarth Mohta\n <\/td>\n Benchmark Index<\/strong>\n <\/td>\n Nifty Small cap 100 Index\n <\/td><\/tr>
\n Issue Opens<\/strong>\n <\/td>\n April 22, 2019\n <\/td>\n Issue Closes:<\/strong>\n <\/td>\n May 06, 2019\n <\/td><\/tr><\/tbody><\/table>\n\n\n\n

(Source: Scheme <\/a>Information <\/a>Document<\/a>)<\/p>\n\n\n\n

How will the scheme\nallocate its assets?<\/strong><\/p>\n\n\n\n

Under normal circumstances, the scheme\u2019s asset allocation<\/a> will be as under:<\/p>\n\n\n\n

Table 2: PSCF\u2019s Asset Allocation<\/em><\/strong><\/em><\/p>\n\n\n\n
\n Instruments<\/strong>\n <\/td>\n Indicative Allocation\n (% of Net Assets)<\/strong>\n <\/td>\n Risk Profile<\/strong>\n <\/td><\/tr>
\n Equity and Equity-related Instruments of Small cap\n companies*\n <\/td>\n 65\n <\/td>\n 100\n <\/td>\n High\n <\/td><\/tr>
\n Equity and Equity-related Instruments of companies\n other than Small cap companies\n <\/td>\n 0\n <\/td>\n 35\n <\/td>\n High\n <\/td><\/tr>
\n Debt and Money Market Instruments including units of\n debt & liquid schemes\n <\/td>\n 0\n <\/td>\n 35\n <\/td>\n Low to Medium\n <\/td><\/tr><\/tbody><\/table>\n\n\n\n

* The fund will predominantly invest in small-cap\nstocks. In terms of SEBI circular SEBI\/ HO\/ IMD\/ DF3\/ CIR\/ P\/ 2017\/ 114 dated\nOctober 6, 2017, the universe of \u201cSmall Cap\u201d shall consist of 251st company\nonwards in terms of full market capitalization and that the Scheme will be\nrequired to adhere the following:<\/p>\n\n\n\n