In this article, we will discuss the most important things you need to know about the Axis small cap funds. We will also see in which sectors the Axis small cap funds are invested. Also, we will see the minimum amount required to invest in monthly SIP and one-time investments. But before we move on let’s quickly understand:

## What is a small cap fund?

Funds that are invested in all companies except for the top 250 companies as per the market capitalization are small-cap funds. Companies that have a market capitalization of lower than 5000 crores comes under the small-cap fund category. These mutual funds are popular among investors because of their high returns. Also, as per the analysis, small-cap funds outperform large-cap funds but are much riskier.

## Axis Small Cap Fund

Axis small cap fund was launched in Nov 2013. As it is a small-cap fund, its major portions are invested in companies other than the top 250 companies. In its portfolio, there are 57 companies where all the investments are made.

Currently, the fund manager of Axis small cap fund is Anupam Tiwari, and he has been managing funds since 23rd Sept 2016. He is a Charted Accountant with more than 13 years of experience. Before joining the Axis Mutual Funds, he was working as an associate with Principal Mutual Fund (July 25, 2011-Sep 21, 2016), Reliance Life Insurance Ltd. (Sep 22, 2010-Jul 15, 2011) and Reliance MF (Mar 21, 2005-Sep 21 2010).

**Benchmark index: **Nifty Smallcap 100 TRI

**Assets Under Management (AUM):** ₹4854 Cr (As of 30th April 2021)

**Expense Ratio:** 1.95%

The Axis small cap fund uses a bottom-up approach to select its stocks. A bottom-up approach is an approach where the fund manager focuses on the company’s attributes such as price to earnings ratio, etc., along with sector attributes. The fund manager identifies and invests the money in companies that have good growth-opportunity in their respective sectors.

As it is an equity fund, 89.6% of the assets are allocated in equity securities, 10.06% are invested in debt or cash equivalents and 0.33% in other funds.

## Key Features

- Axis small cap fund is an open-ended scheme, where Growth and Income Distribution Cum Capital Withdrawal (IDCW) both options are available.
- It allows the investors to invest in lump-sum as well as SIP investments.
- Lump-sum Investments starts at ₹5000
- Additional investment ₹100.
- SIP investment starts from ₹500.
- No entry load.
- If up to 10% of the units are redeemed within 1-year, there will be no exit load, but if more than 10% of units redeem within 1-year, an exit load of 1% will be charged. However, for investors that redeem units after 1-year, there is no exit load.
- Investments are dominantly made in equity, therefore, taxed as equity. If redeemed within 1-year, Short Term Capital Gain (STCG) will be taxed @15%. If redeemed after 1-year, Long Term Capital Gain (LGCT) will be taxed @10% (Only if the total gain is more than ₹1,00,000 in one year.)

### Axis Small Cap Fund- Past Returns

1 year | 3 years | 5 years | 7 years | Since Inception (Nov 2013) | |
---|---|---|---|---|---|

Axis Small Cap Fund | 98.58% | 21.64% | 19.93% | 20.63% | 23.79% |

S&P BSE 250 Small Cap TRI | 130.66% | 9.23% | 15.09% | 12.88% | – |

### Asset Allocation of Axis Small Cap Fund

Let’s see the category-wise asset allocation.

Category | Percentage investments |
---|---|

Large Cap | 0.88% |

Mid Cap | 7.52% |

Small-Cap | 71.61% |

Other Equity | 9.6% |

Others | 10.39% |

The majority of the funds are located in mid-cap and small-cap mutual funds.

### Axis Small Cap Fund- Sector Allocation Category

### Risk Ratio

Trailing | Fund | Category | Index |
---|---|---|---|

Alpha | 9.43 | 2.17 | 11.19 |

Beta | 0.78 | 0.92 | 0.84 |

Standard Deviation | 24.32 | 28.40 | 29.83 |

Sharpe | 0.92 | 0.62 | 0.56 |

R^{2} | 90.45 | 93.92 | 20.65 |

Let us understand the meaning of each term in detail.

#### Mutual Funds alpha and beta

Alpha is the excess return generated by the mutual fund compared to the benchmark return for a given amount of risk taken by the scheme. It indicates the performance of the portfolio. Therefore, Alpha represents the fund manager’s ability to manage risk and to generate higher returns than the benchmark.

Beta is the measure of the volatility of the portfolio or scheme in comparison to the benchmark. It represents the sensitivity of the mutual fund with respect to the market movement. If the beta value is lower than 1 it denotes lower volatility whereas higher than 1 denotes higher volatility.

**Standard Deviation in Mutual Fund**

Standard deviation represents the volatility of the mutual fund in the past. In simple words, a higher standard deviation signifies greater volatility. Therefore, many investors use the terms standard deviation and volatility interchangeably.

**Sharpe Ratio**

Sharpe ratio is the ratio of return compared to the risk taken by investors. In simple words, it is a measure of risk. It was named after William F Sharpe, a Nobel laureate and professor of finance, at Stanford University.

Higher the Sharpe ratio better the portfolio performance. It is inversely proportional to the standard deviation. Therefore, without any additional information, one can not determine, if the Sharpe ratio is good or bad. It means, when funds of different companies in the same sector are compared, then the higher the Sharpe ratio better the fund’s performance.

For example, the Sharpe ratio of company X is 1.5. With this information, one can not determine if the company is good or bad. However, if the Sharpe ratio of company Y which is in the same sector is 1.2, then we can say company X is better than company Y.

**R**^{2}

^{2}

It shows the relation between the Average return and the benchmark return. The value of R2 ranges from 0 to 100, where a higher value means the fund moves with the benchmark. A mutual fund with an **R ^{2}** value between 85 to 100 is considered good as it closely co-relates to the index.

##### Calculation of alpha and beta in mutual funds

We can derive the mathematical formula of beta from the mathematical equation of the Capital Asset Pricing Model (CAPM).

**Fund return = Risk free rate + Beta X (Benchmark return – risk free rate)**

Where, Risk-free returns are returns in which the risk is zero, such as government bonds, treasury bills etc.

Therefore, beta is equal to,

**Beta = (Fund return – Risk-free rate) ÷ (Benchmark return – Risk-free rate)**

As we have seen, alpha is the difference in actual return versus the benchmark return (that was predicted by CAPM). Therefore, alpha equals to,

**Alpha = Fund return – Risk-free rate – Beta X (Benchmark return – risk-free rate) **

### Key points

Number of stocks | 57 |

Top 10 stocks holdings | 38.73% |

Top 3 sectors holdings | 36.34% |

Price to book ratio | 4.25 |

Price to earnings ratio | 31.78 |

## FAQ

**Is it safe to invest in Axis Small Cap Fund – Regular Plan?**

Axis small cap fund generates high returns by investing in equity instruments. But, as per SEBI’s latest guidelines that calculate risk grade, the investments under Axis small cap fund comes under the very high-risk category.

**How Long should you Invest in Axis Small Cap Fund – Regular Plan?**

The investment horizon for investing in Axis Small Cap Fund- Regular Plan should be more than 3 years. The investment horizon is the minimum time for an investor to hold the portfolio to reduce the risk and ensure more predictable returns.