Upcoming NFO: Carnelian Small Cap Fund - know its investment strategy and other key points

Carnelian Mutual Fund has filed draft for Carnelian Small Cap Fund with the Securities and Exchange Board of India (SEBI). Here are key details, including the investment strategy, of the upcoming new fund offer (NFO) of the new small-cap scheme.

"There shall be no exit load levied in case of switch of investments i) between the Plans (i.e. Regular and Direct Plans); and/or ii) between the options (i.e. IDCW and Growth options), within the Scheme/Plan. For any change in load structure, the AMC will issue an addendum and display it on the website/ISCs," the draft scheme document with SEBI said.

The minimum amount required for investing in this scheme is ₹500 and in multiples of Re 1 thereafter.

How will the scheme allocate its assets

The scheme will track Nifty SmallCap 250 TRI. The asset allocation under the scheme will be as follows:

Other liquid instruments in which the scheme may invest include include cash, bank deposits with scheduled commercial banks, government securities, treasury bills, repo on government securities and any other instruments as specified by SEBI from time to time.

Investment strategies

According to the draft scheme papers, the investment approach of the fund will be based on a combination of "top-down and bottom-up research."

"The Fund Manager will endeavour to identify businesses with sustainable competitive advantages, scalable business models, strong management quality, sound corporate governance practices, healthy balance sheets, and long-term earnings growth potential," the document said.

"The scheme may invest across sectors and themes and will seek to construct a diversified portfolio of small cap companies that, in the opinion of the fund manager, are available at reasonable valuations relative to their growth prospects," it added.

The draft papers say that the stock selection process will focus on the following:

• Business quality and growth prospects;

• Earnings visibility and cash flow generation;

• Return ratios and capital allocation efficiency;

• Management capability and corporate governance standards;

• Industry structure and competitive positioning; and

• Valuation attractiveness relative to the company's fundamentals and growth potential.

Who will manage the fund?

Carnelian Small Cap Fund will be managed by Deepak Malik and Viraj Parekh.

Malik is a CFA, with 25 years of experience across organisations, predominantly in investment management industry. He has been , associated with Carnelian Asset Management from September 2023. Previously, he has worked with organisations like Edelweiss Securities, Axis Mutual Fund.

Viraj Parekh has been associated with the AMC since March 01, 2026 where he is responsible for monitoring portfolio performance, portfolio construction, conducting investment research and analysis across sectors and companies. Viraj was a Research Analyst at Carnelian Asset Management & Advisors Private Limited from Feb 01, 2021 to Feb 28, 2026.