DSP BlackRock Micro Cap restricts fresh investments

Improved investment sentiments and investors interest at times could pose challenges for fund managers. Flush with money in its Micro Cap fund, DSP Black Rock Mutual Fund is now finding it difficult to deploy the money, and hence it has decided to put a cap on certain transactions in the scheme.

The fund house has barred any fresh investment above Rs 2 lakh (lump sum or single instalment of an SIP) under DSP BlackRock Micro Cap Fund with effect from October 1, 2014.

According to Ajit Menon, executive vice president and head - sales, and co-head marketing, the fund's asset under management has quadrupled from Rs 350 crore to Rs 1,280 crore in the past six months.

"The mandate of the fund is to invest in smaller companies with market cap of less than Rs 2,000 crore. This category of stocks usually have lower liquidity and hence could be more volatile, therefore, it takes time to deploy fresh money. Therefore, in the interest of the existing investors in the scheme, we believe it would be prudent to limit the pace of further inflows.

Of course, when we truly believe that market opportunities are present for our investors to gain from and our fund managers feel comfortable to absorb further flows, we will re-open the scheme for subscriptions in a structure that we feel will be best suited for our investors."

Mutual fund schemes cannot invest in a single company more than 10 per cent of the its total asset value. Besides, a mutual fund under all its schemes should not own more than 10 per cent of any company's paid up capital carrying voting rights. These become a big constraint in case of small-cap funds, where the market cap of stocks is small.

In the last six months, mid and small-cap stocks have beaten their large-cap peers by a handsome margin. While the Nifty and the Sensex (both large-cap indices) have moved up by 19 per cent, the BSE Mid-cap and the BSE Small-cap indices have jumped 35 per cent, and 52 per cent, respectively.

As a result, small-cap funds have also given stellar returns attracting investors interest. DSP BlackRock Micro Cap fund has given 60% return in the past 6 months.