Big Things Come In Small Cases

Smallcase Technologies is trying to ignite investor interest by offering an alternative to mutual funds. Its run has been good so far. Next? A million strong investor base by March 2020.

- Aveek Datta

Gopal Prabhu, a Bengaluru-based it professional, is a financially conscious person who started saving for his retirement four years ago. Like many of his generation, the 29-year-old digital native isn’t afraid to experiment with new financial instruments. One such experiment was in 2017 when Prabhu invested in Realty Tracker, an equity investment instrument from tech startup smallcase Technologies. In the same year, he also invested in a mutual fund (MF) offered by one of the top fund houses in the country. In two years, the MF has given Prabhu a 9% return, whereas Realty Tracker has yielded 11%.

“I came across smallcase for the first time when I got a Zerodha [online brokerage] account. It was a new way of investing in equities, which I found to be a little simpler than directly investing in single stocks,” says Prabhu.

Smallcase Technologies offers a technology platform where orders for varying quantities of multiple stocks in its investment instruments can be placed at one click. The company calls its products smallcases, which are essentially baskets of stocks or exchange-traded funds (ETFs) picked thematically. For instance, Realty Tracker is built on the theme of real estate developers doing well on the back of the government’s housing schemes and the sector touching $180 billion in value by 2020.

At a time when retail investors are shying away from choppy equity markets, companies like smallcase Technologies could ignite their interest to invest. In essence, smallcases and MFs are similar, but differ in these aspects: First, unlike MFs, which issue units of an underlying portfolio to an investor, shares in smallcases are directly held by the investor, who is free to buy or sell more of the same or different stocks; second, smallcase Technologies does not charge any expense ratio—a percentage of total funds under management which an MF charges to cover expenses.