Mirae Asset Small Cap Fund: A Valuable Proposal? – Opinions on Equitymaster news

November 12, 2025

In early 2025, Mirae Asset Mutual Fund – a popular fund house that manages assets of over Rs 2.1 trillion (tn) – launched the Mirae Asset Small Cap Fund.

At that time, the price-to-earnings ratio of the Nifty Smallcap 250 index was around 30. Today, the price-to-earnings ratio of this index is around 28.6, slightly lower than the five-year average of 28.9.

The Nifty Smallcap 250 Total Return Index (TRI) is down -3.6% but has delivered a three-, five- and seven-year compound average growth rate (CAGR) of 22.7%, 28.5% and 19.3% respectively.

This is despite several adverse macro factors that have come into play over the past decade such as demonetization, the COVID pandemic, wars, trade wars, geopolitical tensions, etc.

Due to the type of returns generated, investors have been lured into small cap mutual funds. And one fund that is turning heads is the Mirae Asset Small Cap Fund.

Since its launch in January 2025, the fund’s assets under management have grown 2.6 times and currently stand at over Rs 27 billion (billion).

Fund overview

Mirae Asset Small Cap Fund is an open-ended equity fund that mainly invests in small-cap stocks.

The fund invests 65-100% of its assets in small cap companies, i.e. 251st and above, on a full market capitalization basis. A maximum of 35% of the total assets may be invested in companies other than small caps.

The plan may also invest up to 50% of its net assets in equity derivatives for hedging, non-hedging and portfolio rebalancing purposes.

Further, it has a mandate to invest up to 35% of its total assets in foreign mutual funds/ETFs/foreign securities.

It may also invest up to 35% of its total assets in debt and money market instruments (including securitized debt up to 20%) for defensive and liquidity purposes.

In addition, up to 10% of the total assets can be invested in units issued by REITs and InvITs.

However, the fund does not invest or engage in:

• Short selling
• Credit default swaps
• Unrated debt instruments
• Advance loans
• Debt instruments with special features defined under clause 12.2 of SEBI Master Circular dated June 27, 2024
• Fund-of-fund schemes

Given the asset allocation and subcategorization, the investment objective of Mirae Asset Small Cap Fund is to generate capital growth by investing primarily in small cap equities.

From time to time, the fund manager will also seek to invest in other equities and equity related securities to achieve optimal portfolio construction.

There is no guarantee that the investment objective of the scheme will be achieved. The scheme does not guarantee/indicate any returns.

The fund has shown an attractive absolute return of 18.7% since inception in January 2025 (under the direct plan), which is significantly higher than its benchmark, the Nifty Smallcap 250 – TRI.

The fund is co-managed by Varun Goel and Siddharth Srivastava.

Doel has approximately 18 years of experience in fund management and equity research.

Prior to Mirae Asset Mutual Fund, he was a fund manager for equity AIF funds at Nippon Life India AIF Management Ltd. He has also worked with Motilal Oswal Asset Management Company Limited, Karvy Stock Broking, KC Securities and Kotak Securities.

He holds a B.Tech from IIT Delhi and a PGDM (Finance & Marketing) from IIM Lucknow.

Srivastava has over 14 years of experience in financial services and equity markets. At Mirae Asset Mutual Fund, he leads the overall responsibilities of passive investment products.

Before joining Mirae, he was a Senior Manager at NSE Indices Ltd. and prior to that he was a Senior Associate at Morgan Stanley Capital International.

Srivastava also has a B. Tech and an MBA (Tech).

Mirae Asset Small Cap Fund – Snapshot

What is the investment strategy of Mirae Asset Small Cap Fund?

The fund follows a bottom-up approach to its portfolio construction. The focus is on building a portfolio of strong growth companies, which reflect the most attractive investment ideas at any time.

The emphasis is on companies with robust business models, sustainable competitive advantages over their competitors and high return ratios.

The goal is to create a robust portfolio to avoid concentration risk and liquidity risk. To avoid liquidity risks, the fund managers will monitor trading volumes in a particular stock before investing.

When approaching debt instruments, the investment team uses a top-down approach for interest rate mapping, sector allocation, along with a bottom-up approach for security/instrument selection.

In the bottom-up approach for debt instruments, it assesses the quality of the security/instrument (including the financial health of the issuer) and the liquidity of the security.

The credit quality of the portfolio will be maintained and monitored using internal research capabilities and input from external sources such as independent credit rating agencies.

What is the portfolio of Mirae Asset Small Cap Fund?

The fund has a well-diversified portfolio of 65-80 stocks, spread across sectors.

As per the October 2025 portfolio, the fund has 80 stocks in its portfolio, of which approximately 61% are small caps, 15% large caps and 12% midcaps.

The top 10 stocks comprise 22.6% of total assets and include names like Karur Vysya Bank (3.2%), Cholamandalam Financial Holdings (2.9%), Godawari Power and Ispat (2.4%), etc.

Among the different sectors, the fund’s top 3 sectors are healthcare (13.4%), finance (10.2%) and capital goods (9.6%), which make up 33.2% of the portfolio.

The fund currently holds approximately 5.1% in cash and cash equivalents and 0.8% in domestic mutual funds.

What are the historical returns of the Mirae Asset Small Cap Fund?

Since inception in January 2025, the fund has delivered an absolute return of 18.7% (under the direct plan), which is significantly higher than its benchmark, the Nifty Smallcap 250 – TRI.

As of November 10, 2025, compound annualized rolling returns over the past three months and six months are 5.8% and 18% higher, respectively, than the Nifty Smallcap 250 – TRI, which returned 3% and 13.3%, respectively, during these periods.

However, the fund has yet to establish its longer-term track record, and it would be unwise to be seduced by short-term performance, which may or may not be sustained in the future.

What about the risks?

Mirae Asset Small Cap Fund carries a very high risk, and this is categorically indicated on the risk-o-meter.

The fund has yet to establish a three-year track record of evaluating standard deviation (a measure of risk) and risk-adjusted returns using sharp and sortino ratios.

Should you add Mirae Asset Small Cap Fund to your watchlist?

Although the short-term performance is attractive, it is wise not to base your investment decision on this as it may or may not hold up in the future.

It’s important to note that a popular mutual fund isn’t necessarily the best for your portfolio.

It would be wise to let the fund achieve at least a three-year performance record before even considering it for your watchlist. The real test for the fund is when it performs well in both market crises and bull phases.

A small cap fund should be part of the satellite equity mutual fund portfolio, provided you are willing to take high risk and have an investment horizon of seven to eight years or more. But care must be taken to identify the winners.

Be a thoughtful investor. Choose your mutual fund schemes wisely.

Have fun investing.

Disclaimer: This article is for information purposes only and does not constitute any investment advice or recommendation to buy/hold/sell any fund. The returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you must choose the right fund to achieve your financial goals. If you are unsure about your risk tolerance, please consult your investment advisor/adviser. Investments in mutual funds are subject to market risks; read all scheme-related documents carefully. Registration granted by SEBI, registration as IA with Exchange and certification by NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

With more than twenty years of experience in investments and personal finance, Rounaq Neroy leads the content activities at PersonalFN. Rounaq brings to the table potentially the best investment ideas and perspectives to help investors make wise decisions. Since 2009 he has been an integral part of PersonalFN (an employee of Equitymaster).