Edelweiss Mutual Fund has filed a draft paper with market regulator SEBI for a Small-Cap Fund. The investment objective of the scheme is to generate long-term capital appreciation from a portfolio that predominantly invests in equity and equity-related securities of small-cap companies.

The scheme would invest 65-100 per cent in equity and equity-related securities of small-cap companies, and 0-35 per cent in equity and equity-related securities of other companies, or in debt and money market instruments.

The investment approach will be bottom-up stock picking — where investments will be selected primarily on the basis of specific criteria relevant to the company in question rather than general macroeconomic considerations.

There will be no particular bias towards any sector, the offer document said.

Nifty Smallcap 250 TR index is the benchmark index for the scheme.

The scheme may also take exposure to fixed income derivatives within the overall limit of 35 per cent for hedging and portfolio rebalancing purposes. The total exposure related to option premium paid will not exceed 20 per cent of the net assets of the scheme.

The scheme may invest in foreign securities up to 50 per cent of the permissible investments of net assets of the scheme.

“The scheme may engage in stock lending. Not more than 20 per cent of the net assets of the scheme can generally be deployed in stock lending and not more than 5 per cent of the net assets of the scheme will be deployed in stock lending to any single counter party,” the offer document said.

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