Bajaj Finserv MF plans small-cap fund in January-March 2024, says CEO Mohan

Bajaj Finserv Asset Management Ltd (BFAML) plans to launch a small-cap focused mutual fund (MF) scheme in January-March 2024, according to its Chief Executive Officer Ganesh Mohan.

This would be followed up with a large- and mid-cap focused scheme, as the recent entrant in the MF industry looks to broaden its bouquet of debt and equity offerings.

“We have filed the papers and applied for the small-cap equity fund. We are looking at the first quarter of next calendar year for launch,” Mohan told businessline here.

The fund house, which got its licence in March this year, has been launching products since then and its Assets Under Management (AUM) stand at about ₹ 6,000 crore now. 

Of this, the equity-side AUM is about ₹2,300 crore. The fund house has already launched seven products, including three on equity side (flexi-cap, arbitrage and balance advantage fund).

BFAML is eyeing launch of a small-cap focused scheme when small-caps as a category have been on a roll this calendar year. In CY2023, so far, Nifty Smallcap has delivered a 40 per cent year-on-year growth, surpassing Nifty Midcap (38 per cent) and Nifty 50 (12 per cent).

Full buoquet  

“Over the next 12-18 months, we will be in a launch mode getting our full bouquet of products into the market,” Mohan said.

BFAML recently closed its NFO for Balanced Advantage Fund (BAF). For the first time in the country, this BAF product not only had a fundamental model but had also factored in the sentiment of the markets.

Meanwhile, being a late entrant, this fund house is looking to differentiate in a crowded market (BFAML is 41st player) and is betting on its unique investment philosophy to make a mark.

“We could get our edge from three areas — information edge, quantitative edge (how you process information) and behavioural edge. So we are positioning ourselves on behavioural edge,” he said.

Behavioural edge

Creating alpha out of information edge is very difficult these days, as information has exploded and no longer acts as a differentiator anymore. “If everybody has the same information, how can you outperform the crowd? Information acts as a thin edge. It will get you to the race, it won’t make you win the race. On the quantitative edge, there is room to differentiate. In the next three-five years, given all the technology that is coming into the industry this will get standardised,” he said.

As part of behavioural edge, this fund house will look at having the right kind of tools, nudges, templates that will minimise the impact of fund managers’ own biases on decision making, Mohan said.

Also, under behavioural edge, since markets behave like a pendulum and oscillate between greed and fear to the fair value, “can we identify which position the market is in and take advantage of that and see how crowd has over or under reacted,” he said, adding that these are two components of its behavioural edge strategy. 

Globally, there is a lot of emphasis on behavioural finance, while it is not much prevalent in India, he said. “We see behavioural edge as a very important aspect of future,” Mohan said.

Investors are always driven by sentiments, narrative, trends, fear and greed, he said, adding that there is always a human element to investment decisioning. “We are trying to bring the entire field of behavioural finance to investing in the country. This will be our fundamental differential. Behavioural finance in the field of investing is going to play an increasing role,” he said. 

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