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DSPBR Small & Midcap Fund: Diversified midcap fund with good track record

Sun, Aug 16, 2015

Source : Khyati Shah, Citrus Interactive

DSP Blackrock Small and MidCap Fund is an open ended equity scheme which concentrates its investment primarily on equity and equity related securities, which are not part of the top 100 stocks by market capitalization. The primary objective of this fund is to create long term capital appreciation from the portfolio. The fund is benchmarked against CNX Midcap Index and it came into existence in November 2006. The fund has an AUM of Rs. 1,964 crore as of end-July 2015.

Fund Performance

DSP Blackrock Small and Mid Cap fund has outperformed its benchmark index as well as equity diversified category average over the last 6 months, 1 year, 3 years and 5 years as well as year-to-date. The fund has performed well since its Inception.

Scheme Name	YTD	6 months	1-Year	3-Years	5-Years	Since Inception
DSP Blackrock Small And Mid Cap Fund	10.89	7.22	38.22	32.98	17.51	16.83
CNX Midcap Index	9.1	4.61	26.67	24.18	10.27	12.49
Category Average	8.37	2.83	26.7	26.57	14.19	NA
Rank	38/158	20/158	23/155	33/146	26/136	NA

Figures are in % as on July 31, 2015; Figures above 1-year are in CAGR

DSP Blackrock Small and Mid Cap fund has consistently outperformed its benchmark during the last 5 calendar years. It has also outperformed the equity diversified category average in all calendar years barring CY 2011 and 2013 (both years in which CNX Midcap Index gave negative returns). The performance in 2010, 2012 and 2014 has been commendable.

	2010	2011	2012	2013	2014
DSP Blackrock Small And Mid Cap Fund	29.62	-27.21	45	1.65	70.53
CNX Midcap Index	19.16	-31	39.16	-5.1	55.91
Category Average	19.54	-24.07	34.15	5.26	54.2
Rank	7/132	112/139	20/143	118/147	32/150

Figures are in % as on July 31, 2015

Portfolio Characteristics:

Sector Concentration: The concentration of the fund in the top three, five and ten sectors is much lower than the category median.

	Top 3	Top 5	Top 10
DSP Blackrock Small And Mid Cap Fund	21.33	31.26	53.2
Category Median	35.89	49.3	69.62

Company Concentration: The fund is diversified with concentration in top three, five and ten companies in its portfolio is much lower than the category median

	Top 3	Top 5	Top 10
DSP Blackrock Small And Mid Cap Fund	14.92	23.82	40.89
Category Median	18.06	26.59	43.92

Sector & Company Concentration signifies that the funds maintain a fairly diversified portfolio.

Number of equity holdings: As of July 31, 2015, the fund holds 55 stocks which are higher than the category median of 47 stocks in the diversified equity segment.

The top 5 sectors in the portfolio had an allocation of 31% which is lower than the category average of 49%. The fund’s exposure to cyclical stocks currently is 79% followed by defensives with 8% & services with 8%. The Top five holding are Hindustan Petroleum Corporation Ltd., Techno Electric & Engineering Company Ltd., SRF Ltd., Ashok Leyland Ltd., SKS Microfinance Ltd.

Risk Measures:

The fund has a Standard Deviation which is higher than the category median. Owing to a mid- and small-cap heavy portfolio the fund is more volatile. Beta (measured over last three years) indicates that the fund has lower market risk level compared to the equity diversified category median.

	Standard Deviation	Beta
DSP Blackrock Small And Mid Cap Fund	1.03	0.8
Category Median	0.9	0.89

Risk-adjusted Returns:

In terms of Sharpe ratio (measured over last three years) fund has delivered marginally lower risk-adjusted return which can again be explained owing to its pure mid-cap nature. However, in terms of Treynor Ratio the fund has higher systematic risk-adjusted return compared to the equity diversified category.

	Sharpe	Treynor
DSP Blackrock Small And Mid Cap Fund	0.09	0.14
Category Median	0.08	0.09

Process

DSP Blackrock Small and Mid Cap Fund is an open ended fund that invests in companies that are not part of the top 100 stocks by market capitalization. At least 65% of the fund will be invested in the above class of securities and the balance 35% of the fund can be invested in top 100 stocks by market cap. The maximum limit of investment in debt and money market securities is 10%.

This funds main objective is to invest in the future large cap stocks that are either part of the small or mid cap basket in the current market. Such investment is based on the premise that relatively small companies will increase their earnings and grow into larger, more valuable companies. The stock selection is based on the bottom up, stock by stock basis, with consideration given to low Price/Equity, Price/Book, Price/Sales, growth potential, margin improvement, cash flows amongst others.

The fund’s expense ratio is 2.40 per cent which is slightly higher than the category average of 2.36 per cent. 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 requirement for the fund is Rs. 1,000.

Fund Managers

The fund is jointly managed by Apoorva Shah and Vinit Sambre. Apporva Shah is managing this scheme since March 2008 and Vinit Sambre since July 2012. Apoorva has done PGDM from the IIM Ahemdabad, and brings with him over 27 years of experience in banking and investment. He is with the fund house for last 9 years and had previously worked as Portfolio Advisor & Head of Products and in Institutional Equity Sales with DSP Merrill Lynch Ltd. He is also the Fund/Co Fund Manager for DSPBR Equity Fund, DSPBR Top 100 Equity Fund, DSPBR Focus 25 Fund, DSPBR Opportunities Fund, DSPBR Tax Saver Fund and DSPBR Balanced Fund.

Vinit Sambre has an experience of over 15 years and with the fund house for last 8 years. He has worked earlier with DSP Merrill Lynch as a part of its Global Private Client business and with IL&FS Investsmart Limited as an Equity Analyst in their PMS division. He manages/co manages DSPBR Technology.com Fund, DPPBR Micro Cap Fund and DSPBR MIP Fund (equity portion).

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DSPBR Small and Midcap Fund has a decent track record of long term performance with a fairly diversified portfolio of mid/small cap stocks. 2011 and 2013 have not been a good years for mid cap stocks in general. However, in the years when midcaps have done well such as in 2010, 2012 and 2014 the fund has outperformed the CNX Midcap Index by a wide margin. With the markets becoming more positive, we expect the midcap index to perform better than the Sensex or Nifty. Some of this is already reflected in the year-to-date performance of DSPBR Small & Midcap Fund and it is among the best performing mid cap funds. The fund can be a good choice for investors having higher risk appetite and willing to put their bets on small and midcap stocks.

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