DSP BlackRock SmallCap Fund

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The aim of the DSP BlackRock Micro Cap Fund is to seek long-term capital appreciation by investing in a portfolio that is substantially constitutes of stocks that are not part of the top 300 companies by market capitalisation. Focus of the scheme is to deliver superior long term performance by selecting stocks of companies those are uncorrelated to broader markets & not sector specific.

A strong outperformance of its benchmark and peers from inception helped this fund earn a four to five star rating during 2015 and 2016, but the rating has slipped to three stars lately.

The flood of inflows prompted the fund house to down its gates to new investments earlier than its peers. Older SIP investments in the fund continue to be allowed.

The fund is both quality and valuation conscious. It selects companies which have great managements, free cash flows, decent long-term ROCEs and competitive advantages. The fund has traditionally featured a low turnover and follows a buy and hold strategy.

DSP BlackRock Micro Cap Fund three and five year returns show that it has outperformed its benchmark by 5 to 11 percentage points and the category by 2 to 3 percentage points. The margin of outperformance has narrowed in the last one year, with the fund trailing significantly behind the benchmark and category. This can probably be attributed to the fund taking a conservative stance on stock choices and valuations in a market driven by strong small-cap momentum.

DSP BlackRock Micro Cap Fund has handled bear phases in 2008 and 2011 very well, losing much less than its benchmark. But in runaway bull markets like 2009, it has tended to lag behind. Investors should, thus, adopt a wait and watch attitude in the current phase of underperformance. The fund’s corpus has climbed to Rs 6,469 crore by January 2018, which could prove an impediment in the small-cap category.

DSP BlackRock Micro Cap Fund is A conservative choice while dabbling in micro-caps.

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