Samir Rachh, Fund Manager, Reliance Small Cap Fund says, we maintain a well diversified portfolio across stocks and sectors
What is your investment universe?
As per the investment mandate the fund will invest at least 65 per cent of the portfolio in small-cap stocks and the balance in mid and large-caps based on prevailing valuations. The fund will invest in small-cap stocks whose market capitalisation is in between the highest and lowest market capitalisation of companies on S&P BSE Small Cap Index at the time of investment.
What attributes should a stock have for it to become a part of your portfolio?
The key attributes for stock selection are:
What kind of stocks never enters your portfolio?
We avoid companies with fractured balance sheets, poor quality managements, high valuations without strong fundamentals, low growth visibility etc.
What will you attribute the relatively superior performance of your fund to in recent years?
The superior performance of the fund can be attributed to our internal research capabilities. We have one of the largest equity fund management and research teams in the industry and track over 200 companies in house. Given the unique characteristics of the small-cap space like low coverage, lower transparency, large universe etc. in house research capabilities is a clear differentiator.
In line with our investment philosophy of long term wealth creation, we invest in 'Businesses' and not prices and are empowered by the strong internal research capabilities to invest in differentiated ideas which can deliver over the long run.
We maintain a well diversified portfolio across stocks and sectors. Investments in single stock usually does not exceed 4 to 5 per cent, and not more than 20 per cent of the portfolio is allocated to a single sector. Further given the unique characteristics of small-cap investments, we are not averse to actively using cash in times of extreme valuations or lack of adequate investment opportunities. However, this cash position will be always within the maximum limits specified in the scheme information document.
All these measures have helped the fund to outperform over the long run.