Mirae Asset Small Cap Fund: A Worthwhile Proposition?

At the start of 2025, Mirae Asset Mutual Fund - a popular fund house managing assets over Rs 2.1 trillion (tn) - launched the Mirae Asset Small Cap Fund.

At that time, the PE of the Nifty Smallcap 250 index was around 30. Today, the PE of this index is around 28.6, a tad lower than the 5-year average of 28.9.

The Nifty Smallcap 250 Total Return Index (TRI) is down -3.6%, but over 3 years, 5 years, and 7 years, has delivered a compounded average growth rate (CAGR) of 22.7%, 28.5%, and 19.3%, respectively.

This is despite several adverse macro factors in play in the last decade, such as demonetisation, the COVID pandemic, wars, trade wars, geopolitical tensions, etc.

Due to the kind of returns generated, investors have been enticed to smallcap mutual funds. And one fund that is gaining attention is the Mirae Asset Small Cap Fund.

Since its launch in January 2025, the fund's Assets Under Management (AUM) has grown 2.6 times and is currently over Rs 27 billion (bn).

Fund Overview

Mirae Asset Small Cap Fund is an open-ended equity scheme predominantly investing in small-cap stocks.

The fund allocates 65-100% of its assets in smallcap companies, i.e. 251st and beyond on a full market capitalisation basis. Up to 35% of the total assets may be invested in companies other than smallcaps.

The scheme may also invest up to 50% of its net assets into equity derivative instruments for the purpose of hedging, non-hedging, and portfolio rebalancing.

Further, it holds the mandate to invest up to 35% of its total assets in overseas mutual fund schemes/ETFs/foreign securities.

Also, for defensive considerations and liquidity purposes, it can invest up to 35% of its total assets in debt & money market instruments (including securitised debt up to 20%).

Further, up to 10% of the total assets may 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 having special features defined under clause 12.2 of SEBI Master Circular dated 27 June 2024
• Fund of fund schemes

Given its asset allocation and sub-categorisation, the investment objective of Mirae Asset Small Cap Fund is to generate capital appreciation by investing predominantly in small cap stocks.

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

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

The fund has showcased an appealing 18.7% absolute returns (under the direct plan) since its inception in January 2025, which is noticeably higher than its benchmark, the Nifty Smallcap 250 - TRI.

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

Goel has around 18 years of experience in fund management & equity research.

Before 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 more than 14 years of experience in the field of financial services and stock 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 was associated as a Senior Associate at Morgan Stanley Capital International.

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

Mirae Asset Small Cap Fund - Snapshot

Source: ACE MF

What is the Investment Strategy of Mirae Asset Small Cap Fund?

The fund follows a follows a bottom-up approach for its portfolio construction. The focus is on building a portfolio of strong growth companies, reflecting the most attractive investment ideas at all points in time.

The emphasis is on companies having robust business models, enjoying sustainable competitive advantages as compared to their competitors and having high return ratios.

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

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

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

The credit quality of the portfolio will be maintained and monitored using in-house research capabilities as well as inputs from external sources such as independent credit rating agencies.

What is the Portfolio of Mirae Asset Small Cap Fund?

The fund holds 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 around 61% are smallcaps, 15% largecaps, and 12% midcaps.

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

Among the various sectors, the top 3 sectors of the fund are healthcare (13.4%), finance (10.2%), and capital goods (9.6%), constituting 33.2% of the portfolio.

The fund is currently holding around 5.1% in cash & cash equivalents and 0.8% in domestic mutual fund units.

What Are the Historical Returns of Mirae Asset Small Cap Fund?

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

As of 10 November 2025, the compounding annualised rolling returns over the last 3 months and 6 months are 5.8% and 18%, respectively, higher than the Nifty Smallcap 250 - TRI, which clocked 3% and 13.3% respectively during these periods.

However, the fund is yet to establish its track record over the longer term, and it would be unwise to be lured by the 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 its risk-o-meter.

The fund is yet to establish a 3-year track record to evaluate the standard deviation (a measure of risk), and risk-adjusted returns using sharpe and sortino ratios.

Should You Add Mirae Asset Small Cap Fund to Your Watchlist?

While the short-term performance is attractive, it would be wise not to base your investment decision on it, as it may or may not sustain in the future.

It is important to note that a popular mutual fund may not necessarily be the best one for your portfolio.

It would be prudent to allow the fund to complete at least a 3-year performance track record before even considering it for your watchlist. The true test of the fund is when it performs decently in both market meltdowns and bull phases.

A smallcap fund should be a part of the satellite equity mutual fund portfolio, provided you have the stomach for high risk and an investment horizon of 7-8 years or more. But care needs to be taken to identify the winners.

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

Happy investing.

Disclaimer: This write-up is for information purposes and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully. Registration granted by SEBI, enlistment as IA with Exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.