WhiteOak Capital has launched its first small-cap product, the WhiteOak Capital Diversified Equity Small Cap Active FOF, which will invest at least 95% of its assets in other fund houses' small-cap funds. According to reports from Value Research, this marks a significant departure for the fund house, which has never previously launched a small-cap fund. The NFO is scheduled to close on October 12, 2026.
CEO Aashish Somaiyaa explains that the fund addresses a key investor challenge in small-cap investing - the tendency for winners to rotate frequently. As reported by Value Research, Somaiyaa notes that the index drops 20-30% almost every other year, with leading funds constantly changing. The fund will own 4-5 of the 36 small-cap funds available, with each fund having different investment styles to perform well in different market conditions. The strategy aims to ensure the basket ranks in the top half each year and sometimes inside the top quarter.
The fund maintains competitive costs with a total base expense ratio capped at 2.1%, including underlying fund charges. According to Value Research, WhiteOak's own layer cannot exceed twice the underlying funds' weighted expense ratio. For example, if underlying funds average 0.55%, the regular plan tops out at 1.65%. The fund is taxed as a non-equity fund, with gains turning long-term after two years at 12.5% tax rate, compared to one year for regular equity funds. SIPs start at ₹100 with units redeemed within a year carrying a 1% exit load.
The fund's selection process involves rigorous analysis of 36 small-cap funds using metrics such as information ratio and downside capture to narrow the field to 9-10 funds. As reported by Value Research, the fund house conducts questionnaires and in-person meetings to ensure each manager's stated approach matches their actual portfolio. The fund expects line-up changes every couple of years at most, with fresh inflows maintaining each fund near its target weight. The strategy allows investors to maintain 30-35% in small caps within their overall equity allocation while avoiding the need to constantly switch between funds.
According to Value Research, Somaiyaa's pitch emphasizes the simplicity of choosing the category once and allowing the basket to handle fund selection. The fund house has maintained its cautious approach, avoiding volatile themes like PSU, defence and power during their peak periods from 2022-2024. The fund's structure allows switches within the basket to attract no tax, while the investor's SIP continues uninterrupted, providing a steady approach to small-cap exposure.
