- The Advantage of a Close Ended fund is that the Fund Manager has sufficient time to build a stable portfolio by identifying companies which have the potential to grow faster and not worry about having to sell the same in case of a redemption.
- The Advantage of THIS particular NFO is that not only is the fund close ended, but investors have the option of investing through monthly SIPs. Innovative.
- Small Cap Space is universally acknowledged to be under valued, under researched and under owned.
- True, Small Caps are highly volatile but the advantage of investing through SIP in the L&T Emerging Business Fund NFO is that this volatility would be an asset as it would help in accumulating at lower NAV. And small caps are known to bounce back more strongly as compared to large caps.
- On an average, only seven analysts cover stocks in the bottom 300 compared to 43 covering top 100 stocks. Thus, if the Fund Manager does uncover a potential blue chip, the gains could be phenomenal.
- According to study done by L&T Mutual fund, a startling 41% of Small and Micro Caps are still quoting at a valuation less than 12 PE.
- And, in Large Cap, it is just reverse with 52% of Large Cap quoting at higher than 20. Thus huge Valuation gap exists.
- Small Caps are not only highly volatile, but they also suffer from low volume and less liquidity.
- The recent Bull run has resulted in even Small Caps gaining, thus making the task of finding Winners much more difficult.
Since the economy is expected to bounce back sharply in the coming 2-3 years, Small Caps, as a result, could also see good gains. The timing of this Fund is thus apt.