DSP BLACKROCK MICROCAP FUND suspended fresh sales a few months ago after witnessing a surge in inflows on the back of chart-topping performances in recent years.

It was facing a challenge in building decent-sized positions apart from limited number of opportunities at prevailing valuation. To accommodate the higher corpus, it has had to expand its portfolio from around 60 stocks in December 2015 to 80-odd stocks, resulting in a longer tail in the portfolio and diluting exposure in its top bets. The fund has cut exposure to over-priced stocks and tapped cheaper bets, while ensuring that liquidity position is comfortable.

It may not be able to sustain earlier alpha (margin of outperformance over the benchmark), but continues to offer a superior risk-reward profile in its category.