Reliance Small Cap not for risk adverse investors

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Reliance Mutual Fund has launched a new fund named as Reliance Small Cap Fund, an open ended equity scheme. The new fund offer (NFO) price for the scheme is Rs 10 per unit. The new issue is open for subscription from Aug. 26, 2010 and closes on Sept. 09, 2010.

The fund aims to invest primarily in smallcap stocks. Since such stocks offer high growth potential with higher volatility, offers high returns combined with high risk.``

This fund is suitable for those aggressive investors who have the appetite to bear high risk with view to gain high returns than any equity diversified fund or may like to have an exposure to small cap stocks.

Reliance Small Cap Fund will primarily invest in the small cap stocks. However depending on the views of the fund manager and market conditions fund manager have the flexibility to select stocks from other than small cap basket but up to 35% of AUM.

Small Cap stocks for the purpose of the Fund are stocks whose market capitalization is in between the highest and lowest market capitalization of companies on BSE Small Cap Index, which is from Rs 28.10 billion to Rs 1.55 billion at the time of investment. Smaller companies may be under researched which may provide an investment opportunity to benefit in the long run and also offer high growth potential.

``But while investing in this fund an investor should keep in mind that the smaller companies stock could be illiquid in highly volatile market. Reliance Mutual carries an impressive image; almost all the equity funds are generating good returns for investors. So, one may hope that this theme may generate good return in a long run. This new fund provides an opportunity to the investors to diversify their investment portfolios into the small cap asset class,`` it concluded.

The scheme offers two options viz. growth (which includes bonus option too) and dividend option with both payout and reinvestment facility. The fund will be managed by Sunil Singhania and will be benchmarked against BSE Small Cap Index.