NFO UPDATE: BOI AXA SMALL CAP FUND

BOI AXA Small Cap Fund

(An open ended equity scheme predominantly investing in small cap stocks)

NFO Opens: November 28, 2018

NFO Closes: December 12, 2018

Scheme Re-opens: December 27, 2018

Dear Readers,

It gives us immense pleasure to present to you an NFO update i.e. BOI AXA Small Cap Fund, a new fund opportunity for investors to invest pre-dominantly in Equity and equity related instruments of Small Cap companies.

This Product is suitable for Investors who are seeking*:

1. Long Term Capital appreciation,
2. Investment pre-dominantly in equity and equity related instruments of Small Cap companies.

*Investors should seek their financial advisor if they are not clear about the suitability of the product.

Let us try to understand this product in details.

What are Small Cap Funds?

Small-cap stocks are generally defined as the stock of publicly traded companies that have a market capitalization ranging less than ₹500 crores. Technically speaking, as underlying companies are young and seek to expand aggressively, they are more volatile and vulnerable to losses during downtime in the market, and equal chances of growing exponentially during the upward trend.

What makes Small Caps interesting?

1. Diamonds in the rough:

• Exhibit higher returns as they remain out of the spotlight until they attain a noteworthy size in terms of revenues and profits.
• Inefficiencies in price discovery mean potential for higher returns, typically lesser number of analysts track these companies, and the institutional ownership is lower vis-à-vis large caps.

2. A breeding ground for multi baggers:

• Between 2013 to 2018, 25% (77 out of 333) of all companies in the small cap universe were five-fold baggers. (Source: BOI AXA IM research, Bloomberg)
• Small caps have been defined as 251st company onwards in terms of full market capitalization. All remaining companies are Mid-Caps or Large Caps.

3. The best category to invest:

• Despite the recent sharp decline, the Small Cap Category continues to be one of the best performing categories among Equity Mutual Funds over the long run. (Refer Category Comparison

CATEGORY	3 YEARS RETURN*	5 YEARS RETURN*
Small Cap Funds average returns	9.11%	21.40%
Mid Cap Funds Average Return	8.40%	20.20%
Large Cap Funds Average Returns	7.80%	12.60%
Multi Cap Funds Average Returns	8.50%	15.70%

 *Past Performance may not sustain in the future.

• The Small Cap category returns have outperformed the BSE Small Cap Total Return Index, annualized returns (8.97%, 20.30%) over 3 years and 5 years as on October 31, 2018. (Source: Value Research)

Why should you invest in Small Caps now?

1. Attractive time to enter:

• The recent under performance to Large Caps provides an attractive entry point to invest.
• Small Caps are the undiscovered gems that have exhibited stark out performance over the years.

2. Short term volatility – Not exclusive for small caps:

• Small Caps are perceived to be more volatile, however, volatility is not exclusive to small cap investing.
• Long-term volatility in small caps is not too different as compared to Large Caps and Mid-Caps.

Why BOI AXA SMALL CAP FUND?

• BOI AXA Small Cap Fund invests predominantly in equity and equity related securities of small cap companies.
• Under normal market conditions, the fund will invest 65% to 100% of assets in a diversified portfolio constituting equity and equity related instruments of small cap companies with sustainable business models, and potential for capital appreciation.
• The fund has the flexibility to invest upto 35% of its assets in equity and equity related instruments of companies other than small cap companies.

While the fixed income component of the portfolio is expected to provide some buffer from the volatility of small caps, a 65% portion of the portfolio will always be invested in small cap equities.

Type of Scheme	An open ended equity scheme predominantly investing in small cap stocks.
Scheme Characteristics	Minimum Investments in Equity & Equity related instruments of small cap companies – 65% of total assets.
Investment objective	The investment 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 is no assurance that investment objective of the scheme can be realized.
Fund Manager	Mr. Saurabh Kataria and Mr. Ajay Khandelwal.
Benchmark	Nifty Small Cap 100 Total return Index.
Investment Plans	The scheme has two plans- Regular Plan and Direct Plan.
Investment Options	Growth Options and Dividend Option ( Dividend Re-investment and Dividend Pay-out option).
Minimum Application	Rs. 5000 and in multiplies of Rs. 1/- thereafter.
Minimum Additional Investment	Rs. 1000 and in multiples of Rs.1/- thereafter.
Load Structure	Entry Load- NA, Exit Load- 1% if redeemed within 1 year from the date of allotment.

We, at Richvik, aim at providing best services to our clients and recommend them the funds which shall suit their portfolio the best. To know more on Investments in this NFO, feel free to contact us.

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