What should investors look at while buying a smallcap fund? Anand Varadarajan answers

economictimes.indiatimes.com:

«I think there are three things that we need to look at when we are buying small caps. As a portfolio manager, I think the challenges are that you need to find a stock which you want to invest into, you need to get a reasonable amount of quantity and you need to get it at a price that you want to invest at,» says Anand Varadarajan, Tata Asset Management.What is the factor behind Tata Small Cap Fund? What will you say and then is it just lump sum investment that has been halted or is it also the SIP or STP could you please explain that? I think there are three things that we need to look at when we are buying small caps.

As a portfolio manager, I think the challenges are that you need to find a stock which you want to invest into, you need to get a reasonable amount of quantity and you need to get it at a price that you want to invest at. So, first things first, let me also mention in the same breath that we are very constructive on small caps as a category.

It is not that we are not finding opportunities. I think the three reasons that I mentioned in terms of the stock, quantity and price to come together for us to make an investment.

Sometimes you find these three things coming together, sometimes it takes time. And if your performance is strong, if you continue to get strong inflows, what happens is your cash levels in the portfolio starts going up and you may take time to deploy because all the other three things in terms of finding the right opportunity and at a price that you wish to invest may not be coming simultaneously.

So, we thought it was perhaps prudent to slow down the flows and allowing only SIP investors to invest in the fund and stop lump sum investments in the small cap fund. So, it just slows down the