One of the best-performing small-cap funds in the last 10 years– the SBI Small Cap Fund

Charlotte Miller

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One of the best-performing small-cap funds in the last 10 years– the SBI Small Cap Fund

Small Cap funds are for creating wealth in a short period as smallcap funds invest in those companies which are growing, and have huge potential for the future but at present, selling cheap. While the risk factor is also high for these companies, but higher the risk, the higher the profit. 

In the world of small cap funds, one fund that has been performing consistently well and also has been successfully beating the benchmark returns’ is SBI small-cap fund. This article will help you understand this fund in detail. 

What is the SBI smallcap fund?

SBI smallcap fund was launched on the 1st of January, 2013 by SBI Mutual Fund house. This is a small cap mutual fund scheme that invests mostly in smallcap companies’ stocks. Small Cap funds are those funds that invest 65% or more of its asset into equity or equity-related assets of the companies which rank from 251st onwards as per market capitalization. 

SBI smallcap fund has been one of the most consistent smallcap funds in the past ten years. It has provided an average return of 25.3% per annum since inception. The fund size is Rs. 11,831 crores as of 30th June 2022. 

Investment objective

The investment objective of this fund is to provide investors with long-term growth of their wealth. For this, the fund invests in equities and equity-related instruments of smallcap companies in India. This fund mostly invests in companies dealing in capital goods, chemicals, services, consumer discretionary, mining sector, and metals. The benchmark index that this fund track is S&P BSE 250 smallcaps TRI. 

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Returns & Expense ratio of SBI smallcap fund

SBI smallcap fund since its inception provided an average annual return of 25.3% which is one of the highest in the segment. 

The trailing returns of this fund for 5 years is 18.18% while the same for the category average is 13.81%. This indicates the fund’s better performance in the long term. The 3-year return of this fund has been very close to the category average that is the fund generated 26.67% and the category average is 26.26%. 

If you look at the short-term, the fund generated 6.79% in 1 year while the category average is 3.47%, which is almost half of what the fund has provided its investor. While the past 3 months’ return has been in the negative, the category average is negative 11.62% while the SBI smallcap fund fell by 6.82%. 

All these returns suggest the consistency of the fund has been amazing even during tough market scenarios. That said, as a smallcap fund, it possesses market risk, however, if you are a risk-taker, then this fund can help you grow your wealth significantly high. 

The expense ratio is another thing to consider while investing in any mutual fund and for this fund, it is 0.76% as of 31st May 2022. 

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Asset Allocation of SBI smallcap fund

Over 90% of the assets of the SBI smallcap fund are invested in equities. Out of which 76.76% is invested in small cap companies, another 13.92% is invested in midcaps. 

If you look at the asset allocation by sectors, you will find the fund has invested a maximum portion of the AUM into consumer discretionary – 16.35%. Then there is the capital goods sector, in which this fund has invested 15.2% of its assets, followed by services where the fund has 10.26% of its assets. 

The top stock holdings of this fund are Elgi Equipment Ltd. where the fund has invested 4.03% followed by Sheela Foam Ltd. with 3.99%, and then Vedant Fashions Ltd. with 3.78%. These are the top three stocks in this fund. 

Why you should invest in SBI smallcap fund?

  • You can invest in this fund with just Rs. 500 via SIP. This fund allows investment via SIP only and there are no lump sum investments allowed. 
  • The expense ratio is comparatively lower and the exit load is at par with the market that is 1%
  • There is no lock-in period for this fund. You can withdraw the investment at any time you want.
  • It has been providing above-average returns consistently 
  • The fund provides exceptional downside protection that is controlled losses when there are corrections in the market and also less volatility. 

Final thoughts

Small Cap funds are interesting to invest your money into if you are a risk-taker, especially when you have a fund like SBI smallcap fund which is a smallcap fund providing consistent returns over the last ten years or since inception as you may say. Moreover, it has been outperforming the benchmark index as well which is a sign of a great fund and fund manager.