Review: Standard Chartered Small & Midcap Equity Fund

In this article, I aim to cover the review of Standard Chartered Small & Midcap Equity Mutual Fund .
Standard Chartered Mutual Fund has come out with its newly launched fund called Standard Chartered Small and Mid cap Equity Fund . This scheme is currently open with it NFO period, so people willing to subscribe to it may apply before 15th February. This fund is a close-ended equity scheme with a duration of 3 years and another important point to notice is that this fund scheme comes with an automatic conversion into an open-ended equity on the completion of 3 years.

All things remain the same. They have declared an investment objective (now-a-days it has become a formality)- to generate capital appreciation from a diversified portfolio of equity and equity related instruments in small and mid cap stocks. There are 2 options for investors - dividend or growth option. Dividend option gives you reinvestment facility

Charges:

The NFO has no entry load charges as it is of close-ended nature. However, after conversion of the scheme into open ended (after 3 years) there will be 2.25% an entry load charged for purchases of less than Rs. 5 crores.
No exit load during the closed ended scheme period if the investment redeemed before the date of maturity. After the conversion of the scheme into open-ended, it may charge 1% an exit load for redemption of investment units within 1 year from the date of subscription.

As per the details The scheme will invest up to 65-100% in equities and equity related instruments included in the CNX Midcap Index or equity and equity related instruments of companies which have a market capitalization lower than the highest components of CNX Midcap Index, of which small cap stocks shall be 15-50% of net assets and mid cap stocks shall be 50-100% of net assets. The scheme will invest 0-35% in equity and equity related instruments of companies, which have a market capitalization higher than the highest component of CNX Midcap Index i.e. in equity and equity related instruments of companies with market capitalization above the defined small, mid cap stocks. Investments in derivatives may be up to 100% of the net asset of the scheme. Investments in securities lending shall be up to 100% of equity investments in the scheme.

Apart from that, there are some vague reasoning quoted on the official website (http://www.standardcharteredmf.com/equityschemes/small&midcapequityfund.asp):

Reason 1: There are enough opportunities in an overpriced" market:
Who knows what is under-priced, what is over-priced and what is fairly priced?

Reason 2: Small and mid-cap stocks have higher growth rates:
Really? Who took the beatings when the stock markets went for a tail-spin recently? The Nifty and Sensex with Large Caps were the once which managed to recover. The mid and small caps are the ones which are still facing the heat.

Reason 3: Burn-out risk for smaller companies has considerably declined:
Really? No financial expert would accept that.

Reason 4: Selection based on the position in the growth - cycle stage:
Is it that easy to identify the growth companies from thousands of mid cap and small cap companies?

Reason 5: Picking winners in the Small/Mid Cap requires skill:
And the people at Standard Chartered have that skill – don’t they? Can you please guarantee a 1% return over the 3 year period?

Ultimately, this is another similar mutual fund with thousands of them already in the market. However, the Nil NFO charges during the first 3 years make it attractive for investors who want to bet on the mid-cap and small-cap stocks. There is no information present on the website about the other charges like Fund management fee, administrative charges, etc. No tax benefits are available. One may try his luck by betting !

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