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DSP BlackRock Micro Cap: Sturdy Small cap fund
Sun, Jan 17, 2016
Source : Khyati Shah, Citrus Interactive

DSP BlackRock Micro Cap Fund was 3 years close ended diversified equity fund that has been converted into an open-ended scheme with effect from June 15 2010. The fund aims to generate long term capital appreciation from a portfolio that is substantially constituted of equity and equity related securities, which are not part of the top 300 companies by market capitalisation. The fund is aimed at investors with relatively high risk appetite. It is benchmarked against the S&P BSE Small Cap Index. The fund has an AUM of Rs. 2,413 crores as on December 31, 2015 which has gone up by Rs. 649 crores as compared to last year December 31, 2014 (Rs. 1,764 crores).

 

Performance

DSPBR Micro-Cap Fund has a very good performance track record of consistently outperforming its benchmark index and the equity diversified category average across all time frames as shown from the table given below. Its performance since inception has been better than its benchmark by over 13.59 percentage points. The fund has consistently been in the top quartile in terms of performance as against other funds in the equity diversified space.

Scheme Name

6 Months

1 Year

2 Years

5 Years

Since Inception

DSPBR Micro-Cap Fund

10.67

20.37

55.85

20.84

18.97

S&P BSE Small-Cap Index

6.87

6.76

34.42

4.12

5.38

Category Average

0.08

3.63

26.14

11.22

NA

Rank

4/161

2/158

2/149

6/138

NA

Figures are in % as on December 31, 2015; Returns above 1-year in Compounded Annual Growth Rate (CAGR)

When we look at the calendar year returns it’s quite clear that this fund has beaten its benchmark in all the last five calendar years. Other than the year 2011 and 2013 the fund has consistently outperformed its category average over the years. It has beaten its category average in the year 2012, 2014 and 2015 but it has underperformed in the year 2011 and 2013. The fund has been in the top quartile of its peer-set in the year 2014 and 2015. Due to the nature of the portfolio the fund typically does very well during an up cycle in the markets.

Scheme Name

2011

2012

2013

2014

2015

DSPBR Micro-Cap Fund (G)

-27.16

40.47

3.75

101.8

20.37

S&P BSE Small-Cap Index

-42.16

32.97

-11.23

69.24

6.76

Category Average

-23.95

34.05

5.43

53.99

3.63

Rank

110/138

34/142

102/146

3/149

2/158

All figures in %

Risk: In terms of measures of risk such as standard deviation (measured over last three years), the fund has taken higher risk compared to the category whereas in terms of beta (measured over last three years) the fund has taken lower risk.

 

Standard Deviation

Beta

DSPBR Micro-Cap Fund (G)

1.03

0.74

Category Median

0.95

0.89

 Risk-adjusted Returns: In terms Treynor and Sharpe ratio (measured over last three years), the fund has provided higher risk-adjusted returns than the category median.

 

Treynor

Sharpe

DSPBR Micro-Cap Fund (G)

0.15

0.11

Category Median

0.06

0.07

 

Portfolio Characteristics

Sector Concentration:  The fund’s concentration in the top 3, 5 and 10 sectors is significantly lower than the category median highlighting lesser risk of the fund.

 

Top 3

Top 5

Top 10

DSPBR Micro-Cap Fund (G)

28.5

41.39

60.9

Category Median

33.43

49.44

70.09

 

Company Concentration: The concentration of funds in top 3, 5 and 10 companies in its portfolio is also significantly lower than the category median highlighting lesser risk of the fund.

 

Top 3

Top 5

Top 10

DSPBR Micro-Cap Fund (G)

12.2

19.2

33.27

Category Median

18.69

27.5

44.45

Lesser Sector and Company Concentration signifies the low risk profile of the fund.

Number of equity holdings: The fund currently holds 61 stocks in its portfolio (December 31, 2015), which is higher than the median stock count for the diversified-equity category, which currently stands at 45. Thus, based on equity count the fund runs a diversified portfolio compared to its peer set. Over the past five years the fund has always had a diversified portfolio with the number of equity holdings over this period averaging 50.

Thus, based on criteria such as equity count, sector concentration and company concentration, one can conclude that the funds maintain a fairly diversified portfolio.

Cash allocation: Its cash allocation at the end of December 2015 was 3.68 per cent. The average cash allocation for last five years is 4.82 per cent. Its maximum allocation to cash over last two years was 12.31 per cent in May 2014 and lowest was 1.53 per cent in March 2014. In 2015 it had an average cash allocation of 5.39 per cent.

Portfolio characteristics: The top 5 sectors in the portfolio had an allocation of 41.39% which is lower than the category average of 48.36%. The top 5 sectors include Chemicals, Plastic Products, Pharmaceuticals & Drugs, Steel & Iron Products and Textile.

The fund’s exposure to cyclical stocks currently is 78.32% followed by Defensives with 10.05% and Services with 7.96%. The Top five holdings are KPR Mill Ltd., Indoco Remedies Ltd., SRF Ltd., Navin Fluorine International Ltd. and Aarti Industries Ltd.

In the last six months the fund has bought stocks of Ashiana Housing Ltd., Majesco Ltd., IFB Industries Ltd., Techno Electric & Engineering Company Ltd. and Omkar Speciality Chemicals Ltd. whereas stocks of Strides Shasun Ltd. and Chennai Petroleum Corporation Ltd. have been dropped from the portfolio.

 

Process

DSP BlackRock Micro Cap Fund is an open ended diversified equity fund which aims at long term capital appreciation by predominantly investing in companies which are not part of the top 300 companies by market capitalization. The fund is aimed at investors with relatively high risk appetite. At least 65% of the funds will be invested in equities and equity related instruments of small cap companies (companies other than top 300 market cap companies) and a maximum of 35% can be invested in equity & equity related instruments other than the above mentioned small cap companies or Debt/Money Market instruments. The fund may also seek in investment opportunities in foreign securities including ADRs / GDRs / Foreign equity and debt securities upto a maximum of 25% of the net assets of the Scheme.

The fund’s expense ratio is 1.95% which is much lower than the category average of 2.34%. Like most equity funds the fund has an exit load of 1 per cent on or before one year from the date of investment. Minimum investment in the fund is Rs 1,000.

 

Fund Manager

Mr. Vinit Sambre has 14 Years of Experience in Mutual Fund Industry. He joined DSPBRIM in July 2007, as Portfolio Analyst for the firm's PMS division. Previously, he was with DSP Merrill Lynch as a part of its Global Private Client business. He spent 20 months at DSP Merrill Lynch as Equity Strategist. Prior to DSP Merrill Lynch, he was employed with IL&FS Investsmart Limited as an Equity Analyst in their PMS division. Prior to that, he has worked with UTI Investment Advisory Services as Equity Analyst for the offshore fund – India Growth Fund. Vinit is a Chartered Accountant from Institute of Chartered Accountant of India (Nov'1997). He manages/co manages DSPBR Technology.com Fund, DPPBR Small & Mid Cap Fund and DSPBR Balanced Fund.

Mr. Jay Kothari is a VP & Product Strategist at DSP BlackRock Mutual Fund. Jay Kothari is the dedicated fund manager for overseas investment has an experience of 11 years. He has been with DSP BlackRock Investment Managers since May 2005, and has been with the Investment function since January 2011. Jay joined the firm as a member of the Sales team (Banking) in May 2005. Prior to joining DSPBRIM, Jay worked for Standard Chartered Bank for a year in the Priority Banking division. He holds a degree of Bachelors of management Studies and is an M.B.A. in Finance from Mumbai University. Jay has been managingDSP BlackRock Micro Cap Fundsince March 2013.

 

View

DSP BlackRock Micro Cap Fund has consistently outperformed its benchmark index in the last few years and significantly outperformed the equity diversified segment during periods of recovery in the stock markets. A strong fund management team, well diversified portfolio, low expense ratio, low cash allocation and low turnover in the portfolio are some of its positives and position it favourably as a choice for the small and midcap allocation in your portfolio. This fund is suitable for investors with high risk tolerance, looking for high capital appreciation over the long term. However, investors should note that small and midcap funds are intrinsically more risky than large cap funds, but they have the potential to give higher returns in the long term. This fund is an excellent choice for investor with a slightly higher risk appetite and wanting to ride the rally of the market with a well-managed fund.

To read the previous Citrus Analysis of DSP BlackRock Micro Cap Fund Click here

 
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