What Is a Small Cap Equity Fund?

Small and medium-cap funds do not refer to the size of the fund itself, but to the direction of fund investment. If the fund invests in large-cap stocks, it is a large-cap fund, and if it invests in small-cap stocks, it is a small-cap fund, which has nothing to do with the size of the fund.

Small and Medium Cap Funds

Some funds will indicate in the prospectus that their key investment is large-cap stocks or small-cap stocks, but style drift usually occurs during actual operation. Financial model analysis can effectively determine to avoid this

Funds that invest in small and medium-cap stocks are not equal to small- and medium-cap funds

Since the launch of the "small and medium-cap" fund in 2010, since the second half of 2009, various fund companies have frequently issued funds named after small and medium-cap. At present, there have been 18 "small and medium-cap funds" in the market, of which 12 were established after the second half of 2009, such as Cinda Australia Bank Small and Medium Cap, China Merchants Small and Medium Cap, China-Europe Small and Medium Cap, Xincheng Small and Medium Cap, Everbright Prudential's small- and medium-cap market, Hifton's small- and mid-cap market, Norder's small-cap and mid-cap market, and so on, may be related to the increase in small- and medium-cap stocks since the second half of 2009 has far exceeded the large-cap stocks.

As the name suggests, "small and medium-cap" funds should invest mainly in small and medium-cap stocks. But in fact, by examining the heavy stocks and industry configuration of the "small and medium-cap" funds in the current market, it is found that most of them are "small and medium-cap"

According to the terms of the fund, the fund named after the small and medium-cap market is not the same as the fund that invests in small- and medium-cap stocks. From the perspective of the "small- and medium-cap" fund as a whole, it does not show a clear tendency to invest in small and medium-cap stocks. In the case of small and medium-cap stocks, it is still necessary to carefully select funds named after small and medium-cap stocks. In general, there is a positive correlation between the size of "small and medium-cap" funds and their tendency to invest in small and medium-cap stocks. From historical data, among the earlier established "small and medium-cap" funds, Guangfa's small-cap market went up and down with the index, with better performance in bull markets and lagging in bear markets. Compared with other "small and medium-cap" funds established earlier, the Golden Eagle medium- and small-cap stocks tend to invest in small- and medium-cap stocks. Many newly issued "small and medium-cap" funds are still in the period of building positions, and their subsequent performance and investment style of fund managers need to be further tracked.