Small-cap funds face specialist shortage

Talent crunch

- Srushti Vaidya & Apoorva Ajith

Small-cap funds, the most sought-after category that has attracted a majority of investor money in the past three years, have a problem—spotting specialized talent to run investments.

As a result, several of them have managers running both large-cap and small-cap mutual funds or have co-management teams in place or, in some instances, have even the chief investment officers (CIOs) listed as the primary fund manager of small-cap funds.

Investors have put over ₹1.35 trillion into small-cap funds in three years through February, yet the number of fund managers equipped to run these schemes, which demands a distinct skill set, remains limited.

Assets managed by small-cap mutual funds more than doubled to ₹3.64 trillion in February from ₹1.32 trillion in February 2023. Number of folios, as mutual fund accounts are termed, in the segment also more than doubled to 28 million during the period, according to the Association of Mutual Funds of India or Amfi.

Mint analysed all the small cap schemes and found that there are 31 asset management companies (AMCs) that offer both small-cap and large-cap schemes. Of these, 12 mutual funds have the same manager overseeing both large-cap and small-cap funds.