Network FP had recently conducted an UpSkill session on 7th July 2021 with Vasant Kamath, CEO, smallcase on the topic “The smallcase investing for retail investors & financial advisors”. During this insightful session, many of our ProMembers had queries revolving around the platform and its mechanisms. Understanding the relevance, we have got your queries addressed in this week’s ThinkTank Journal.

About smallcase:

smallcase is a fintech company that offers a platform to invest in model portfolios of stocks, Exchange-traded funds (ETFs), REITs (Real estate investment trusts), etc. representing a theme or a strategy. The company was founded in 2015 by Vasanth Kamath, Anugrah Shrivastava, and Rohan Gupta. The idea came in as founders wanted to build a platform to provide better investment products for Demat account holders/stock investors.

To know more about smallcase watch the video here on YouTube

Few of the important queries raised during the session are highlighted below in the Q&A Section. All the questions have been answered by the smallcase team.

1) Who can curate smallcases on your platform and what are the licenses needed for it? (by Neel Panchal)

Registered Investment Advisors (RIA), Research Analysts (RA), and PMS license holders can curate smallcases on the platform.

2) How can we know the portfolio of that smallcase? Is there any document, like factsheet? (by Vikram Gopaldas Chag)

Yes, smallcase offers a downloadable PDF-based factsheet for each one of our portfolios which consists of details of the rationale behind how the portfolio was curated, financial ratios, performance metrics, CAGR, and rebalance schedules. These PDFs can be accessed by all our clients/partners by visiting the smallcase portfolio of your choice on smallcase.com, clicking on the factsheet button, and downloading the PDF.

3) Is backtesting audit of portfolios done by the smallcase? (by Rajesh Gada)

CAGR of the smallcases shown on the platform is calculated only on the basis of live data and no backtested data

On the past performance graph –

1. There is a dedicated live tab for users to check the live performance of the smallcase

2. The backtested data is clearly called out by labeling it as the backtested data in the max graph

The system calculates the live data automatically and the backtested data is populated as per the details shared by the manager. The launch date of the portfolio is also mentioned on the portfolio profile & factsheets.

4) What is the minimum investment required in smallcase portfolio? How many retail investors have invested via smallcase so far across India? (by Suraj Jagdale)

The minimum investment varies depending on the smallcase. We have fee-based smallcases in which the minimum investment starts from Rs. 15,000/- and goes as high as Rs. 3,00,000/-

5) Do you see anytime in the future SEBI bringing in smallcase ticket size on par with PMS because the risk remains the same as it is managed by a fund manager? (by Puneet Agarwal)

“We cannot compare smallcase with PMS as we’d be comparing apple to oranges. However, we’ll try our best to answer your question.

smallcase empowers SEBI-registered intermediaries (advisors and analysts) to make their strategies available. It is not a fund management product. The entire control of funds, securities, and execution lies with the client only. Also, the risk profile and financial goals of both investors might be entirely different.

6) Apart from ticket size what are the other differences between smallcase & PMS houses? (by Anand Gupta)

Ticket sizes for PMS start at Rs. 50 Lakhs whereas we do not have the same requirement on the smallcase platform. Unlike a PMS, where the holdings are structured in a pooled format, clients own the stocks in their respective Demat accounts when they subscribe to a smallcase.

7) Does direct and regular plans exist on the smallcase too? (by Charudutt Deshpande)

We do not have any regular/direct plans on smallcase. If you were referring to subscription fees, we wish to inform you that all our portfolios have the same pricing structure irrespective of whether the client has come through a distributor or directly over to the platform.

8) How is the fee charged? Does the fee model allow to charge fixed fee and on percentage basis? What is the sharing model with portfolio curator? (by Pankaj Gera)

The pricing structure depends on the manager who is curating the portfolio. On average, aum-based fee smallcases charge between 1.5% to 2.5% per annum and flat fee smallcases charge between Rs. 3,500/- to Rs. 15,000/- per year. The sharing structure depends on the manager with whom you wish to empanel. Managers usually share around 50% of the gross fees.

9) If an advisor is empanelled with smallcase, can they market all the strategies available on smallcase to their clients? (by Rajesh Gada)

You will need to tie up with individual managers on the platform. Our team will assist you in selecting the right managers to work with depending on your requirements. We do not currently have any restrictions on the number of managers you can tie up with on smallcase.

10) Can you explain your revenue module? What are the risk factors when anyone is associated with the platform? (by Nitin Sawant)

smallcase charges a platform fee to all the SEBI registered advisors on the platform. Additionally, we also provide and charge for Gateway facilities offered to our Gateway clients. With respect to the risk element, we wish to inform you that all the securities/stocks are purchased by the client through his broker directly into the client’s own Demat account. smallcase is not a custodian of any securities/portfolios offered on the platform.

11) How is smallcase different from large organizations, like Motilal Oswal, offering broking & distribution services to investors having 2.5/ 5/ 10 Lakhs ticket size? (by Saurabh Agnihotri)

With smallcases, users can invest with India’s top 12 brokers, including Motilal Oswal. Whereas, Motilal Oswal’s products are limited to their users. Moreover, there are smallcases that require a minimum investment amount of just Rs. 15,000.

12) What happens in case a stock cannot be sold due to illiquidity for different reasons (in case of rebalancing) (by Vivekh Pathak)

In such a scenario, smallcase offers a “Repair” option which will enable the selling of that particular stock on the next trading day.

13) At last, what is the process to get registered with smallcase?

You may write to us at partnerdesk@smallcase.com to become a partner with the managers and we will revert back to you promptly.

Hope you loved the new format of ThinkTank Journal in the form of Q&A.

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