When mutual funds stop accepting fresh funds for investments, it’s not always a cause for concern for investors. DSP BlackRock Micro Cap Fund is a case in point. It has stopped accepting fresh inflows for both lumpsum investments and systematic investment plans (SIPs), effective February 20. As an investor you need not worry about such moves and there are enough alternative investment options, according to investment advisors.
The fund, which invests in small and mid-cap stocks, cited liquidity challenges and soaring valuations as key factors which led to the decision, adding that large inflows into the scheme may prove detrimental to the interests of the existing unit holders. DSP BlackRock Micro Cap Fund had assets under management of ₹4,780 crore as of January 31. Existing SIPs continue in the scheme.
Consultants pointed out that this was not the first time a mutual fund had stopped accepting fresh funds. In the past, funds like IDFC Premier Equity Fund, Franklin India Prima Fund and others had stopped accepting fresh inflows.
“When a fund focused on investing in small-cap firms already has over 50-60 stocks under its scheme, the scope for investing further is limited,” said Manish Saluja, Founder, Prime Wealth Advisors, a wealth management firm. “The fund has become fat and there would be limited opportunity to buy and sell,” he said, adding it did not mean this was the end of the road for investors who could look at similar schemes from other funds like Franklin India Smaller Companies Fund.
“The fund was investing in companies beyond the top 300,” said Chirag Gokani, Founder and Principal advisor, Wealthwiz Advisors. “After a point, opportunities to invest become limited and the fund cannot take big exposure in single companies. It is a wise decision to stop fresh inflows.”
