As the debate around veteran fund manager S. Naren’s comments on small- and mid-cap valuations and risks with SIPs rages on, CEO of Edelweiss Mutual Fund Radhika Gupta said, “do not fall for the fear-mongering 10-day debates,” on X and LinkedIn.
Last week, S. Naren, the CIO of Prudential ICICI AMC and a highly respected fund manager, commented that small- and mid-cap valuations were absurd, urging investors to get out of the segment lock, stock, and barrel. He also said that SIPs work best in volatile and undervalued asset classes.
The comments have sparked a debate in the mutual fund industry and among fund distributors.
Gupta said in her social media posts that SIP is meant to be a simple savings investment instrument for the common person. In her words, it is “a fill it, shut it, forget it (kind) because most people struggle with markets, market caps, and SIPs.”
There have been contrasting views on how SIPs (Systematic Investment Plans) are not a panacea for good returns, completely independent of market conditions. Thus, overvalued markets (like the current small- and mid-cap market) might hinder SIPs’ ability to offer the same benefit, instead exposing investors to more risk.
In her post on social media, Gupta urged investors to find a good manager and hold for 10 years in a sensible and balanced way. “Don't fall for fear-mongering or 10-day debates,” she said. She elaborated on four points investors should remember during this debate:
- Everything, including mid and small caps, is good in balance. Even an average flexi-cap fund has a 30 percent allocation to this category.
- If you look at the returns of anything from the top of the cycle to the bottom (e.g., 2006 to 2013), they will not look pleasant.
- Liquidity is very important and can be managed. We have disclosed liquidity numbers in our funds well before regulators asked and maintain this liquidity without taking cash calls or holding a lot of large caps.
- The critical thing that no one can disagree about is that the key to making money is to hold on to SIPs for a long time—10 years or more.
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