MFs may take up to 27 days to liquidate small cap funds

Several mutual fund houses have declared the results of stress tests mandated by the Association of Mutual Funds in India (AMFI).   The stress test  were to be conducted for the small and mid-cap schemes, based on February data and were to be submitted by March 14. The test is meant for investors to understand how liquid their mutual fund assets are. The test will also keep the MFs on their toes regarding liquidity and be prepared for any sudden redemptions.

AMFI’s move was based on markets regulator Sebi’s concern over ‘froth’ in the small and mid-cap scheme, amid huge inflows into the schemes.

Edelweiss Mutual Fund said it will take two days to liquidate 50% of the portfolio in its mid-cap fund and just one day to liquidate 25%. In the small-cap fund, it would take three days to liquidate 50% of the portfolio and two days to liquidate 25%.

Nippon India Small Cap Fund, which runs the largest small-cap scheme with assets under management (AUM) of Rs 46,000 crore, said it would need 27 days to sell half of its portfolio.

Quant Mutual Fund said it will take six days to liquidate 50 per cent of its portfolio for the Quant Mid Cap Fund and 22 days for the Quant Small Cap Fund. The time taken for 25 per cent portfolio liquidation is three days for Quant Mid Cap Fund and 11 days for Quant Small Cap Fund.

Axis Small Cap Fund, with an AUM of Rs 19,606 crore, said it would need 28 days to liquidate 50 per cent of its portfolio.

DSP Small-Cap Fund, which has an AUM of Rs 13,703 crore as of February-end, revealed that it will take 32 days to sell 50 per cent of its portfolio.