SBI Small Cap vs Quant Small Cap vs Nippon Small Cap | Which is the best small-cap fund?

[Music] some debates refuse to settle like who's the biggest star is it shahu Salman or Amir and who is India's greatest cricketer of all time is it Sachin is it vat or is it DYI and which is the best small fun in India is it Quant is it SBI or is it nepon India well we have a divided house right here in it money I would prefer npon India small cap obviously returns are good but I like that the fund manager has invested in more than one 190 stocks it gives me the comfort that it won't face liquidity issues so I like SBI small Cap Fund it has been around for a long time also it has great returns history but the best part is that this one does not fall as much as the small cap index whenever we see the markets correct see as an investor what do you want from a small Cap Fund three things returns returns and returns and Quant small cap delivers it what else do you want we see the same thing in our comment section too so we decided to settle this debate once and for all we are going to compare these three funds on different parameters and we'll tell you how these funds are faed on them but let me tell you one thing at the beginning we are not going to rank them 1 2 or three we are not declaring any winners so why are we doing this well we want to help you pick the fund that is best for you you and by the end of this video you will definitely know where you should [Music] invest hello and welcome to Ed money's YouTube channel but before we begin a quick reminder you're watching this video on our English Channel and if you are or know somebody who wants to understand the basics of Finance we have a channel called as 5 minute Finance all right now let's begin and we will start with with returns we understand that returns comparison is the first thing you will want to know so that's the first thing we will discuss for the returns we looked at the rolling returns of two and four years I know two and four years are short periods to invest in small caps but we Face some limitations here before October 2018 Kanan small fund was a debt fund and it was called Quant income bond fund also the SBI small fund was not a small fund before May 2018 earlier it was a small and Medcare fund so if we take long-term data you won't get a clear picture of the returns now in this short period Kanan small Cap Fund has the best returns followed by nepon India small cap and then SBI small cap and while the performance between Quant and nepon was closed SBI small Cap's recent performance is not that great compared to the other two funds Kanan small cap fouryear average rolling returns are 39% while that of nepon India small Cap Fund are 30% and SBI small Cap Fund is third with 26% now Quant small cap and nepon outperform The Benchmark every time but when it came to the category average nepon bed only 95% of the time while Quant outperformed every time here as well but this is only one way to look at performance we also checked calendar year returns for five years we did so because calendar year return show if the fund has consistently performed year after year Guan smalla fund has the best returns in four out the five years only in 2019 it fell drastically compared to the other two nepon has performed better than SBI in two of the five years which means SBI has done better than nepon small Cap Fund in three of the 5 years so in recent years Quant small fund has better performance than the other two but let's not forget that data is only for the past 5 [Music] years returns are one way to evaluate a fund but they're not necessarily the best parameter remember this guy he's both right and wrong most investors do base their decisions only on returns but once you understand risk things change you will probably never chase returns after that here is why let's say you invest 100 rupees in fund a and fund B and soon after investment fund a Falls 30% and fund B Falls 15% now your investment in fund a will be worth 70 and in fund B it'll be 85 now for 70 to become 100 again fund a needs to gain 43% while fund B needs to gain just 18% to go from 85 to 100 so a fund that falls less is also a great fund all right with that context let's look at how these funds have fared when markets fell now since December 2018 there have been six quarters when the small cap category delivered negative returns so how did our three funds perform well Quan small fund fell more than in category four out of six times while nepon fell only in two quarters out of six SBS small fund however did better than the category five times only in one quarter it fell more than the category so while Quant small care fund has the best performance in the recent past it is also the most volatile fund among the three don't be like this guy so returns and risk should give you a fair picture of the funds but to help you make a better decision we also looked at the investment style of these three schemes [Music] in this section we will discuss three different parameters let's start with the p ratio now the p ratio is one of the indicators that tell you whether a fund follows a value Blended or growth style of investing but a word of caution here a high PE doesn't mean that the fund is investing in stocks that are overvalued the opposite of this is also true a scheme with a low PE doesn't mean it has been investing in undervalued stocks so what does the p ratio of these three funds tells us well SBI small cap consistently has a higher p ratio compared to other funds in the category this indicates that the fund Tils towards the growth style of investing and Quan small fund on the other hand has a lower p ratio compared to other small funds so it Tails towards value investing and nepon sits somewhere in between now we have seen that different styles of investing work in different Market Cycles after covid value investing has done well in India compared to growth but in the past decade growth has worked most of the times now knowing this will help you understand why your fund is doing well or underperforming now we will check how often These funds buy and sell stocks we are looking at it because some investors like funds that buy and hold stocks for the long term they think it shows the fund manager confidence in the stocks he has picked for this we will look at something called as the turnover ratio if the turnover ratio of a fund is 100 it means the the fund manager has changed the entire portfolio in one year so a lower turnover ratio means the fund manager believes in Buy and Hold however the turnover ratio changes every month depending upon what fund managers buys and sells now if you look at the Historical Trend Quant small Cap Fund maintains a higher turnover ratio neon small cap has 206 stocks so in the recent years the turnover ratio has been low as a number of stocks have increased and SBS small fund is somewhere in between the two it is all Al a reflection of their size as a small C fund grows bigger it is not easy to buy and sell too often due to the liquidity constraints in their space next let's look at how these funds invest across market caps now the sebi Mandate says that small cap funds should invest at least 65% in small cap stocks it means these funds can invest the remaining 35% anywhere they like now this 35% investment is crucial if markets fall because large cap stocks or debt funds can cushion the fall to some extent in times when markets rally higher investment in small cap and midcaps can give higher returns so let's look at where these funds invest at present SBI small Cap Fund invests 75% in small caps and 8% in midcaps there is no investment in large caps the remaining assets are held in form of debt and cash now remember that SBI was a small and midcap fund earlier so it has usually maintained allocation to midcaps over the years now the Quant small fund has invested 73% in small cap stocks it has close to 18% allocation to large caps and around 1 and a half% is in midcap stocks and close to 7% in debt but if you look at the trend historically Kanan small fund doesn't follow any pattern in some years it can be heavy on midcaps and another it could favor large caps and despite close to 205 stocks nepon India small Cap Fund has 68% allocation to small caps it invests 17% in midc caps and 11% in large caps even historically it has taken a balanced approach finally we will briefly talk about the number of stocks in their funds portfolios we have seen a trend in the small cap funds as the scheme size grows the fund manager increases the number of stocks in the portfolio small cap stocks have lower liquidity and trading volumes so a fund manager cannot invest heavily in any one stock and if he does that he will find it challenging to buy and sell at the desired price because an investment of a few crores or selling stocks worth of few crores can impact the stock price drastically now as of December 2023 nepon India smalla fund had 206 stocks in its portfolio and that's huge this is primarily due to the large size of the scheme it's the largest small Cap Fund so it needs to find a large number of opportunities to deploy its assets but do know that it has less than 2% allocation to anyone's stock The Only Exception is tube Investments of India which has close to a 3% allocation now Quant small cap holds around 100 stocks it increased the number of stocks in the portfolio as the fund size grew however the fund has close to 10% allocation to Reliance Industries an allocation of more than 3% to a single stock is not uncommon but the SBS small fund portfolio was surprising it holds around 55 stocks for this size small C fund the portfolio can be called concentrated the fund reakes its investment in most stocks at 3% The Only Exception is blue star which has slightly over 4% allocation all right let's now move to our concluding [Music] section the three funds have a completely different appeal Quant Malai fund offers High returns but it is also the riskiest among the three the investing style and stock allocation a dynamic it's rare that the fund invests close to 10% of his Corpus in a single stock SBA small fund may not have the best returns but it offers better downside protection however it has a concentrated portfolio and follows a growth style of investing it also has a high allocation to debt right now so if small caps correct it may cushion the fall better in fact we saw this happen recently between 9 and 15 February small cap stock saw some correction the one we returns for SBS small C fund was 06 whereas Quant and nepon India small C funds fell by 1.56% and 1.93% respectively nepon India small fund is in between the two funds it has decent returns and downside protection its investment style is a blend of growth and value and has a balanced allocation to Mid large and small caps so you tell us in the comment section which one do you prefer and with this we have come to the end of this video if you would like to see a detailed analysis of each of these fund it's available on our Channel go check it out and if you found this video useful do share it with your friends and family I'll see you soon with another video till then take care mutual fund Investments are subject to Market risks read all scheme related documents carefully

Channel: ET Money

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Id: JWgHNLsdRUY

Length: 12min 10sec (730 seconds)

Published: Thu Feb 22 2024