Mahindra Manulife Small Cap Fund Direct Growth: An Analytical Overview
- Fund Name: Mahindra Manulife Small Cap Fund Direct Growth is a promising equity small cap mutual fund, aiming for long-term capital appreciation through investments in small cap companies.
- Fund Type: This fund falls under the Equity Small Cap category, designed for investors seeking very high risk-return profiles.
- Fund Manager Background: Managed by Abhinav Khandelwal and Manish Lodha, this fund benefits from their strategic insights and deep market understanding, leveraging a diversified portfolio of small-cap stocks to generate substantial returns.
Holding Analysis or Portfolio Breakdown
The fund’s portfolio is well-diversified across various sectors, with top 15 stock holdings including:
- Tri-Party Repo (TREPS) – 7.93%
- Century Textiles & Industries Ltd. – 2.76%
- REC Ltd. – 2.56%
- Coal India Ltd. – 2.54%
- Godrej Industries Ltd. – 2.48%
- Grasim Industries Ltd. – 2.47%
- Cholamandalam Financial Holdings Ltd. – 2.31%
- Reliance Industries Ltd. – 2.24%
- Minda Corporation Ltd. – 2.07%
- Indian Bank – 2.00%
This allocation reflects a balanced approach between high-yield potentials and risk management.
Returns and Rankings in Their Category
Since its inception on December 12, 2022, the fund has offered impressive average annual returns of 59.32%. It ranks competitively within its category, with a remarkable performance that highlights its ability to outperform peers.
How Old is the Fund
The Mahindra Manulife Small Cap Fund Direct Growth has been operational since December 12, 2022, showcasing a strong start in its relatively short existence.
Analysis Based on Provided Data
Pros:
- Exceptional Performance: With an average annual return of 59.32%, the fund has demonstrated its capability to deliver high returns.
- Low Expense Ratio: At just 0.20%, the fund’s expense ratio is significantly lower than the category average, indicating efficient management and potentially higher net returns for investors.
- Noteworthy Fund Management: Managed by experienced professionals, the fund is positioned well for strategic growth in the small-cap sector.
Cons:
- Higher Risk: Being a small-cap fund, it carries a very high-risk profile, which might not be suitable for all investors.
- Short Track Record: As a relatively new fund, it lacks a long-term performance history, which can make it challenging to predict future performance accurately.
Conclusion: The Mahindra Manulife Small Cap Fund Direct Growth stands out for its exceptional returns, low expense ratio, and strategic management. While its high-risk profile and short history may deter some investors, those with a higher risk tolerance and a focus on small-cap investments may find this fund a lucrative option for potential high returns. Investors should consider their investment goals, risk tolerance, and the fund’s characteristics before making an investment decision.
TLDR: Mahindra Manulife Small Cap Fund Direct Growth
For High-Risk Investors: This fund is an attractive option for investors with a high-risk tolerance, aiming for substantial returns over the long term (>5 years). Its focus on small-cap stocks offers high growth potential but comes with significant volatility.
For Medium to Low-Risk Investors: Not recommended due to its very high risk associated with small-cap investments.
Time Horizon:
- Long Term (>5 years): Suitable due to the potential for high returns from small-cap growth over time.
- Medium Term (1-5 years): May be considered by high-risk investors, understanding the volatility.
- Short Term (<1 year): Not recommended due to high volatility and potential short-term losses.
Analysis:
- Current NAV: ₹15.79 as of 19 Mar 2024, indicating recent fund performance and valuation.
- Turnover Ratio: 64%, a bit high, which suggests frequent trading. While this can capture growth, it may also indicate higher transaction costs and tax implications, impacting net returns.
- Returns in Last 1,3,5 Years: Since its inception on 12 Dec 2022, the fund has shown impressive performance with an average annual return of 59.32%, but lacks 3 and 5-year data due to its recent inception.
- Expense Ratio: At 0.20%, it’s significantly lower than many peers, indicating efficient management and more of the investment going towards growth.
- Advanced Ratios:
- Sharpe Ratio: 3.39, high, suggesting good risk-adjusted returns.
- Alpha: 28.27, indicating the fund has significantly outperformed its benchmark on a risk-adjusted basis.
Peer Comparison:
- Performs exceptionally well in its category with one of the highest returns and a low expense ratio.
- Turnover ratio is higher than some peers, suggesting more active management.
Pros:
- High potential returns for risk-tolerant investors.
- Very low expense ratio enhances net returns.
- Impressive Sharpe ratio and Alpha indicating strong performance relative to risk and peers.
Cons:
- Very high risk from small-cap focus, not suitable for low to medium risk investors.
- High turnover ratio could lead to higher costs and tax implications.
- Limited historical performance data due to recent inception.
Conclusion: The Mahindra Manulife Small Cap Fund Direct Growth is most suited for investors with a high risk tolerance and a long-term investment horizon. Its low expense ratio and exceptional returns to date are attractive, but the fund’s volatility and high turnover rate must be considered.
Analysis of Mahindra Manulife Small Cap Fund Direct Growth
Current NAV
The Net Asset Value (NAV) of Mahindra Manulife Small Cap Fund Direct Growth as of 19 Mar 2024 is ₹15.79. NAV represents the per-unit value of the fund’s assets minus its liabilities, giving investors an idea of what each unit of the mutual fund is worth.
Turnover Ratio
With a turnover ratio of 64%, this metric indicates the fund’s trading activity. A high turnover ratio, like 64%, suggests the fund frequently buys and sells securities, which could lead to higher transaction costs and tax implications. For long-term investors, a lower turnover ratio is typically more desirable as it indicates a buy-and-hold strategy. However, in actively managed small-cap funds targeting growth, a higher turnover might be necessary to capture opportunities.
Returns in Last 1,3,5 Years
Since its inception on 12 Dec 2022, the fund has not been operational for 3 or 5 years, making such data unavailable. However, it has provided an impressive average annual return of 59.32% since inception, showcasing strong short-term performance.
Expense Ratio
The fund charges a low expense ratio of 0.20%, which is below the average for its category. A lower expense ratio means more of the fund’s returns are passed on to the investors, making it an efficient choice for cost-conscious investors.
PE Ratio
The Price to Earnings (PE) ratio of the fund’s portfolio is not directly mentioned but is a crucial metric for assessing the valuation of the stocks within the fund. A lower PE ratio might indicate that the fund is focused on undervalued or growth-at-a-reasonable-price (GARP) stocks.
Sharpe Ratio
The Sharpe Ratio of 3.39 is significantly high, indicating that the fund has provided excellent risk-adjusted returns. This metric is particularly relevant for investors as it helps gauge the returns of an investment compared to its risk.
Cat Exp Ratio, Cat PE Ratio, Cat Sharpe Ratio
- Cat Exp Ratio (Category Expense Ratio): The average expense ratio for the category is 1.24%, making the fund’s expense ratio much more competitive.
- Cat PE Ratio (Category Price to Earnings Ratio): The average PE ratio for the category is 43.94. While the fund’s specific PE ratio isn’t provided, comparing it to the category average could offer insights into its valuation relative to peers.
- Cat Sharpe Ratio (Category Sharpe Ratio): With the category average Sharpe Ratio at 2.65, the fund’s Sharpe Ratio is higher, indicating better risk-adjusted performance compared to its peers.
Pros and Cons Based on Given Data
Pros:
- High Returns: The fund has shown remarkable returns since inception, albeit in a very short timeframe.
- Low Expense Ratio: Its low expense ratio enhances net returns to investors.
- High Sharpe Ratio: Indicates excellent risk-adjusted returns.
Cons:
- High Turnover Ratio: Could lead to higher transaction costs and tax liabilities.
- Short Operational History: The fund has a limited track record, making long-term performance assessment challenging.
- Very High Risk: As a small-cap fund, it is subject to higher volatility and risk, making it unsuitable for risk-averse investors.
Conclusion: The Mahindra Manulife Small Cap Fund Direct Growth appears to be a promising option for investors with a high risk tolerance and seeking growth in the small-cap segment. Its low expense ratio and high Sharpe Ratio are indicative of efficient management and solid risk-adjusted returns. However, its high turnover ratio and the inherent risks associated with small-cap investments suggest it may be more suited for investors who are comfortable with short-term volatility for potentially higher long-term gains.
Top Holdings Company
The Mahindra Manulife Small Cap Fund Direct Growth has a diversified portfolio emphasizing small-cap companies. The top holdings include:
- Tri-Party Repo (TREPS) – 7.93%
- Century Textiles & Industries Ltd. – 2.76%
- REC Ltd. – 2.56%
- Coal India Ltd. – 2.54%
- Godrej Industries Ltd. – 2.48%
- Grasim Industries Ltd. – 2.47%
- Cholamandalam Financial Holdings Ltd. – 2.31%
- Reliance Industries Ltd. – 2.24%
- Minda Corporation Ltd. – 2.07%
- Indian Bank – 2.00%
This selection demonstrates the fund’s strategy to invest in a mix of high-liquidity repos and solid small to mid-sized companies across various sectors, aiming for growth and risk mitigation.
Advanced Ratios
- Standard Deviation: 14.07, indicating the fund’s return volatility and risk level.
- Beta: 0.81, showing the fund’s market sensitivity. A beta less than 1 suggests it is less volatile than the market.
- Sharpe Ratio: 3.27, which is high, signifying superior risk-adjusted returns compared to the market.
- Sortino Ratio: 4.64, highlighting the fund’s ability to generate excess return over the risk-free rate while considering negative volatility.
- Alpha: 28.27, illustrating the fund’s performance relative to its benchmark, indicating significant outperformance.
Peer Comparison
Compared to its peers, the Mahindra Manulife Small Cap Fund Direct Growth stands out with a lower expense ratio (0.20%) and higher returns (average annual returns of 59.32% since inception). Here’s how it stacks up against some peers:
- Quant Small Cap Fund (G): Higher returns but also a higher expense ratio.
- Nippon India Small Cap Fund (G): Lower returns and higher expense ratio.
- HDFC Small Cap Fund, Axis Small Cap Fund, SBI Small Cap Fund: These funds show varying levels of performance and expense ratios, with Mahindra Manulife offering a competitive advantage through its lower costs and higher short-term returns.
Fund House and Investment Objective
Mahindra Manulife Investment Management Private Limited manages the fund, aiming for long-term capital appreciation by investing in a diversified portfolio of equity and equity-related securities of small-cap companies. The fund’s strategic investment in small-cap stocks aims to exploit growth opportunities in this segment while navigating the inherent volatility through diversification and active management.
Pros:
- Diversified portfolio with a balanced mix of repos and equity to mitigate risks.
- Exceptionally low expense ratio increases net returns to investors.
- High advanced ratios (Sharpe, Sortino, Alpha) indicate superior risk-adjusted performance and management’s outperformance.
- Strong short-term performance relative to peers.
Cons:
- High turnover ratio could imply higher transaction costs and tax implications.
- The very high-risk profile associated with the small-cap segment may not suit all investors.
- Limited operational history since December 2022, providing a shorter track record for assessment.
In conclusion, the Mahindra Manulife Small Cap Fund Direct Growth presents a compelling option for investors seeking growth in the small-cap sector, emphasizing its low expense ratio and strong management performance. However, the inherent risks associated with small-cap investments and the fund’s relatively short history necessitate a cautious approach, ideally suited for investors with a high-risk tolerance and long-term investment horizon.
Is It Following Any Indices or Benchmark?
The Mahindra Manulife Small Cap Fund Direct Growth benchmarks itself against the S&P BSE 250 Small Cap – TRI. This index serves as a performance comparison tool, indicating the fund’s aim to outperform or mirror the small-cap segment of the Indian equity market represented by the top 250 companies after the largest 100, in terms of full market capitalization.
Risk Profile of This Mutual Fund
This mutual fund is categorized under “EquitySmall Cap” with a “Very High Risk” profile. Such funds invest in small-cap companies that may offer high growth potential but come with higher volatility and risk compared to mid-cap and large-cap funds. This fund is suited for investors who are willing to accept significant fluctuations in return for the possibility of high returns.
Market Cap Weightage
Based on the information provided, the fund primarily invests in small-cap companies, as reflected in its name and category. Although specific percentages of investment in large-cap, mid-cap, and small-cap companies are not provided, the fund’s focus on small caps can be inferred from its benchmark, the S&P BSE 250 Small Cap – TRI. The asset allocation section mentions “90.45% Equity”, indicating a predominant investment in equity securities, likely skewing heavily towards small-cap stocks given the fund’s objective.
For Whom This Mutual Fund Is Suitable – The Investor Profile
This mutual fund is most suitable for:
- High-Risk Tolerance Investors: Given its “Very High Risk” profile, it’s best suited for investors who can handle market volatility and the inherent risks of small-cap investments.
- Long-Term Investors: Those with a long-term investment horizon can benefit from the potential high growth of small-cap stocks, as they have more time to ride out market volatility.
- Growth-Oriented Investors: Individuals looking for high growth potential rather than immediate income or dividends. Small-cap stocks often reinvest profits into the business for growth, which can lead to significant capital appreciation over time.
Pros:
- High Growth Potential: Small-cap stocks have a higher growth potential, which can lead to substantial returns over the long term.
- Low Expense Ratio: At 0.20%, the fund’s management is efficient, potentially leading to higher net returns for investors.
- Active Management: The fund is actively managed, aiming to capitalize on market opportunities within the small-cap space.
Cons:
- Higher Volatility: Small-cap stocks are more volatile, which can lead to significant short-term price fluctuations.
- Market Sensitivity: Small-cap companies may be more sensitive to market downturns, economic changes, or interest rate fluctuations.
- Limited Historical Data: With an inception date of 12-Dec-2022, there’s limited historical performance to assess long-term viability.
In summary, the Mahindra Manulife Small Cap Fund Direct Growth is tailored for investors seeking to maximize growth through high-risk, small-cap equity investments. Its benchmark alignment and risk profile indicate a focus on capitalizing on the growth potential of small-cap companies in India, making it an appropriate choice for growth-focused investors with a long-term perspective and a high tolerance for risk.
Risk Profile Analysis
The Mahindra Manulife Small Cap Fund Direct Growth is classified under the EquitySmall Cap category with a Very High Risk rating. This indicates that the fund predominantly invests in small-cap stocks, which are known for their high volatility but also for their potential to offer significant returns over the long term. Small-cap stocks can be more sensitive to market fluctuations, economic downturns, and other risks compared to their mid-cap and large-cap counterparts. This fund is suitable for investors with a high-risk tolerance, who are seeking substantial growth and are willing to accept the potential for large fluctuations in their investment value.
Scheme Information
- Category: Equity Small Cap
- Risk Profile: Very High Risk
- NAV: ₹15.79 as of 19 Mar 2024
- Expense Ratio: 0.20%
- AUM: ₹3,526.63Cr as of 20 Mar 2024
- Inception Date: 12 Dec 2022
- Exit Load: 1% if redeemed within 3 months
- Benchmark: S&P BSE 250 Small Cap – TRI
The scheme aims to generate long-term capital appreciation by investing in a diversified portfolio of equity and equity-related securities of small-cap companies. Given its focus on small-cap investments, the fund carries a very high-risk profile but also presents an opportunity for significant growth, especially for investors with a long-term horizon.
AMC Profile and AUM in Details
Mahindra Manulife Investment Management Private Limited serves as the Asset Management Company (AMC) for the Mahindra Manulife Small Cap Fund Direct Growth. It’s a joint venture between Mahindra & Mahindra Financial Services Limited (MMFSL) and Manulife, a global financial services group. This partnership brings together Mahindra’s strong presence and experience in the Indian market and Manulife’s global expertise in financial services.
- AMC Name: Mahindra Manulife Investment Management Private Limited
- Total AUM: ₹19,322.26 Cr across all schemes under its management.
- Contact Details: Phone – 022-66327900, Email – mfinvestors@mahindra.com.
- Website: http://www.mahindramutualfund.com/
The AMC manages a variety of funds across different asset classes, catering to a wide range of investor needs and risk profiles. The Mahindra Manulife Small Cap Fund Direct Growth, with an AUM of ₹3,526.63 Cr, represents a significant part of the AMC’s portfolio, highlighting investor confidence in the fund’s management and strategy. The AMC’s overall large AUM indicates its capability to manage substantial assets, leveraging its expertise to offer various investment opportunities to its clients.