UTI Small Cap Fund
Small businesses are often referred as backbone of Indian economy, their presence is across the sectors engaged primarily in manufacturing, retailing, services, construction etc., In the recent years, a wide spectrum of initiatives and opportunities are set forth by the government to nurture the small businesses, and there is continuous impetus for innovation and formalisation of economy. Therefore, in long-run the share of small companies to the economic growth is likely to expand. So if you want to be part of the growth journey of young companies, some of which may become tomorrow’s leaders then consider investing in UTI Small Cap Fund.
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Why invest in UTI Small Cap Fund?
UTI Small Cap Fund endeavours to invest in companies that have scalable business models, are run by seasoned management and aims to generate high return on invested capital. While, the upside of investing in portfolio of small cap companies is their growth potential, they can be quite volatile. We have 360⁰ risk assessment framework to mitigate the underlying risks and is aligned to gain from small cap companies and select mid cap companies having growth opportunities.

Research Framework
Standardized and in-depth research methodology to identify good stocks and avoid poor stocks

Diversified Portfolio
Aims to maintain judicious portfolio diversification across stocks and sectors

Position Sizing
Based on the relative conviction, market depth and overall stock level risks

Portfolio Review
Continuous evaluation and monitoring of risk parameters and companies in the portfolio
Who should invest in UTI Small Cap Fund?

Risk Allocation
Investors looking to add a high risk strategy to balance an overall conservative portfolio construct

Return Expectation
Investors seeking higher returns’ potential relative to other diversified equity funds and willing to ride the underlying higher portfolio volatility and risks

Investment Route
Investors looking for allocation either lump sum or staggered route (SIP*/STP^)

Time Horizon
Investors looking for investments over medium to long-term horizon
*SIP (Systematic Investment Plan) is a feature offered for a disciplined investment of a certain amount on a pre-decided date in a specific mutual fund scheme, regularly over a period of time. ^An STP (Systematic Transfer Plan) allows you to transfer a certain amount of money from one mutual fund scheme to another. An STP is possible only between mutual funds of the same fund house. An STP is similar to a SIP. But instead of transferring money periodically from your bank account to a mutual fund, you transfer money from one mutual fund to another.
Features

Score Alpha strategy
A rigorous and pragmatic approach to identify quality stocks

Robust Risk-Management Framework
To assess portfolio for any potential risk

Flexibility
To invest in businesses going through a transitory phase of weakness or undergoing significant transformational change

Investment style & approach
To follow a blend of both value and growth style with a tilt towards growth & deploys bottom-up stock selection approach

Prudent Diversification
By investing across stocks and remain sector agnostic
Overview

Scheme Objective
The objective of the scheme is to generate long-term capital appreciation by investing predominantly in equity and equity related securities of small cap companies. However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.

Type of Scheme
An open-ended equity scheme predominantly investing in small cap stocks

Benchmark
Nifty Smallcap 250 TRI

Minimum Application
Amount ₹ 5000/- and in multiples of ₹ 1/- thereafter with no upper limit.

Load Structure
Entry Load: Nil Exit Load: Less than one year – 1%; Greater than or equal to one year – Nil

Plans Available The Scheme offers following Plans:
Regular Plan Direct Plan Both the plans offer following Options: Growth Option Dividend Payout Option
Knowledge Hub
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UTI Small Cap Fund Infographic
FAQ's
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What are Small-caps?As defined by SEBI, companies ranked after 250th rank by full market capitalization are small caps. Relative to bigger companies, some small-cap companies have larger room for future growth. However, small-caps are under-covered and under-owed by institutions due its inherent attribute of low liquidity, vulnerable to business cycles etc., which prompts for a need of an expert in identifying the right small- cap company which can create long-term wealth.
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What is a Small-cap Fund?A small-cap fund invests a minimum of 65% of the fund’s corpus in equity & equity related instruments of small-cap companies. Small-cap funds tend to benefit from opportunities as listed below:
- Diverse opportunities across sectors: Opportunities in small-caps are more as they have a much higher representation in a very diverse set of sectors when compared to large-caps.
- Niche segments: Small-caps have new and emerging business models which cater to a specialized segment of the markets.
- Under-researched and Under-owned: Very few small-cap stocks are tracked or followed by the sell-side analyst community at large. Therefore, it provides the fund managers an opportunity to identify high growth, quality stocks possibly available at mispriced valuation. Also, exposure to small-caps by institutional investors is lower relative to their exposure to bigger businesses, leading to some in-efficiencies in the market.
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What is the Investment Strategy followed by UTI Small Cap Fund?UTI Small Cap Fund will endeavor to invest in companies that have scalable business models, are run by seasoned management and generate high return on invested capital. The Fund would pursue a pure bottom-up approach for stock picking, therefore agnostic to sectors and would maintain a well- diversified portfolio. The Fund primarily focus on 3 segments mentioned below for its portfolio construction:
- Business Scalability: Focuses on high and consistent growth companies with sustainable business models, long growth runway and run by seasoned managements.
- Turnaround Strategy: Invests in sound businesses going through a temporary weak operating business phase. Focus on undervalued opportunities that benefit from a potential mean reversion.
- Transformational Change: Invests in businesses undergoing a transformational change, hence becoming a potential re-rating candidate.
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What is Scalability in a Business?Scalability in a business means, its ability to grow with lower capital requirements, making them more efficient and compound wealth for its investors. These are the businesses which can generate high return on invested capital (RoIC) year after year and are also market leaders in their respective industries. Some of the other attributes of scalable businesses are leveraging outside resources, automate business operations, product innovation through extensive investment in research and development etc.
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What is a Business Turnaround? What is Turnaround Strategy?When a business that has experienced a period of poor performance and moves into a period of a financial recovery, it's called a turnaround. Turnaround strategy attempts to build a margin of safety by buying above average companies (in terms of past track record) at a weak phase in their operations which could potentially revert to long-term averages in terms of valuation or on the basis of operating metric. This strategy can also be called as picking businesses that are undervalued, but has high potential for earnings revival. However, such opportunities are generally limited and are exposed to higher risk or might take longer periods to play-out.
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What is Transformational Change?A shift in the internal business structures, processes and culture resulting from a change in the management or underlying business strategy as in the past. It occurs in response to or in anticipation of structural change in the business environment or technology or management and is enacted over a period of time.
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What are the key risks associated to investing in Small-cap Funds?UWhile the upside of investing in a portfolio of small-cap companies is their growth potential, they are not free from certain unique risks. Placed are a few key risks associated to investing in small-cap funds.
- Relative Volatility: Small-cap stocks are more susceptible to volatility due to their size. Usually, its price fluctuation in the short-term can be way higher than its peers in mid and large segment. While, downward market movement can be adverse for a small-cap fund, in upward market trend such funds may give the highest returns as compared to large-cap or mid-cap funds.
- Lower Liquidity and Impact Cost:
- Liquidity: A stock's liquidity generally refers to how quickly shares of a stock can be bought or sold without substantially impacting the stock price. Given that small cap companies tend to issue fewer shares than larger companies, are often have less liquidity and are also more difficult to exit a position at the market price.
- Impact cost: It is the cost that a buyer or seller of stocks incurs while executing a transaction due to the prevailing liquidity condition on the counter. In other words, this is a cost that the buyers/sellers incur due to lack of market liquidity. Impact cost does vary for different transaction sizes and are dynamic in nature and depends on the outstanding orders. Since, small-caps are less liquid, relative impact cost is higher for the stocks.
Order Book Buy Quantity Buy Price Sell Quantity Sell Price 1000 98 1000 99 2000 97 1500 100 1000 96 1000 101 -
How are the underlying portfolio risks of investing in small-caps are mitigated in UTI Small Cap Fund?Our 360⁰ risk assessment framework enables the fund to mitigate the underlying risks and is aligned to gain from small cap companies and select mid cap companies having growth opportunities.
- Research Framework: In-house proprietary research process & methodology “ScoreAlpha” helps in identifying good stocks and avoiding poor stocks. The Fund would have blend of both growth and value investment style with a tilt towards growth.
- Portfolio Concentration: Maintain judicious portfolio diversification across stocks and sectors. The Fund would target for having 60-70 stocks across the sectors.
- Position Sizing: Based on the relative conviction, market depth and overall stock level risks. The Fund would have a cap of 5% allocation at stock level.
- Portfolio Review: Continuous evaluation and monitoring of risk parameters and companies in the portfolio. The Fund will pursue pure bottom-up approach and focus is on each company as individual businesses and how they are placed from a long-term perspective rather than looking at the short-term or broader sectoral plays.
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How is UTI Small Cap Fund unique from its peers?
- A true-to-label fund: The Fund will endeavor to have zero exposure in large-caps names, however, a mid-cap growing to large cap may be part of the portfolio.
- Judicious diversification: The Fund with its diversified exposure aims to strike a balance risk and reward by following a patient approach towards companies in the portfolio and with right mix of companies with Return on Capital Employed (RoCE) and Cash flow profile. This is likely to aid in mitigating sharp return divergence and volatility of the portfolio.
- Leverage of Experienced Team & ScoreAlpha Strategy: UTI’s rich experience in research and fund management, coupled with coverage of large cross section of companies in small-cap universe will help the Fund in picking quality stocks and also avoid the poor ones.
- No size constraints: Bigger funds in the category often have restrictions on inflows. Higher size and increasing inflows mean difficult to find quality opportunities in the small-cap space and also not easy to deploy money or exit stocks without incurring heavy impact cost. UTI Small Cap Fund being a new offer can fully benefit from exploring the opportunities without much limitations.
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Who should invest in UTI Small Cap Fund?
- Risk Allocation: Investors looking to add a high risk strategy to balance an overall conservative portfolio construct.
- Return Expectation: Investors seeking to take advantage of higher growth potential relative to other diversified equity funds and willing to ride the underlying portfolio volatility.
- Investment Route: Investors looking for allocation either on lump sum or staggered route (SIP/STP).
- Time Horizon: Investors looking for investments over medium to long-term horizon.
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Why invest in UTI Small Cap Fund?Investing in UTI Small Cap Fund gives an edge owing to investment processes, experienced fund management and benefit from the growth opportunities of small-cap and select mid-caps in the long- run.
- Growth Opportunity: Aims to exploit ample growth opportunities of small caps and select mid- caps
- Portfolio Diversification: A well-diversified portfolio of scalable businesses with long growth runway
- Risk Mitigation: 360⁰ risk assessment framework to identify good stocks and avoid poor stocks
- Investment Approach: Pursue bottom-up stock selection approach to pick businesses with healthy financials and potential for sustenance of margins over a period of time
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Scheme Related Documents