WhiteOak Capital Invests Across Five Competing Funds

When an asset management company (AMC) launches a small-cap fund, investors generally expect it to build its own portfolio of small-cap stocks using its in-house research team. WhiteOak Capital has taken a different approach.

Instead of launching its own small-cap fund, WhiteOak Capital has introduced a Fund of Funds (FoF) that invests in small-cap schemes managed by other AMCs. Nearly 96.8% of its portfolio is spread across five mutual fund schemes from different fund houses.

The WhiteOak Capital Diversified Equity Small Cap Active Fund of Funds has allocated money to schemes managed by Abakkus, Bajaj Finserv, Motilal Oswal, DSP and Groww.

The portfolio disclosure as of October 31, 2026, shows an asset base of ₹80.74 crore. Its New Fund Offer (NFO) was open from September 28 to October 12, 2026. Since the scheme has only recently been launched, it is too early to assess its performance across different market cycles.

The interesting part is that WhiteOak has chosen to combine the investment strategies of five competing fund houses rather than build its own small-cap portfolio.

Where has the fund invested?

According to the October 31, 2026 portfolio disclosure, the allocation across the underlying schemes is as follows:

The largest allocation is to Abakkus Small Cap Fund at 24.13%, followed by Bajaj Finserv Small Cap Fund at 19.56%.

Four of the five underlying schemes have allocations ranging between 19% and 24%, while Groww Small Cap Fund has the smallest allocation at 14.46%.

These figures represent a portfolio snapshot as of October 31, 2026. The allocation can change as the fund manager reviews the underlying schemes, rebalances the portfolio, or deploys fresh inflows.

About the fund

Here are the key details of the WhiteOak Capital Diversified Equity Small Cap Active FoF:

• Structure: An open-ended Fund of Funds investing predominantly in equity-oriented small-cap mutual fund schemes. The scheme proposes to invest 95% to 100% of its assets in such schemes.
• Fund managers: Ashish Agrawal, Bhavin Patadia and Nikunj Sampat.
• Benchmark: Nifty Smallcap 250 TRI.
• Minimum investment: ₹500 lump sum and ₹100 for SIPs during the NFO. Investors should check the latest scheme documents for ongoing investment requirements.
• Exit load: 1% if units are redeemed or switched out within one year of allotment. No exit load thereafter.
• Risk: Small-cap investments carry high market volatility and liquidity risks.

As the scheme is relatively new, investors should also keep in mind that there is not enough performance history to judge how it behaves during different market conditions.

Why choose a Fund of Funds structure?

A Fund of Funds invests in other mutual fund schemes instead of directly purchasing stocks or bonds.

In this case, WhiteOak's FoF gives investors exposure to five small-cap mutual fund schemes managed by different AMCs through a single investment.

The idea is to reduce the difficulty of selecting one small-cap fund and trying to identify which fund manager might outperform in the coming years. WhiteOak CEO Aashish Somaiyaa has spoken about the approach of holding a handful of funds with different investment styles. The expectation is that their performance may vary across market conditions, with some schemes performing better when others lag.

Another potential advantage is flexibility. The FoF manager can change allocations between underlying schemes without investors having to redeem their FoF units and reinvest elsewhere.

Such internal portfolio changes do not trigger capital gains tax directly for the investor at the time of the switch. Tax implications arise when the investor redeems units of the FoF itself.

However, this convenience comes with its own costs and tax considerations.

How is the fund taxed?

This is an important difference between a regular small-cap mutual fund and a Fund of Funds.

A regular equity-oriented mutual fund is generally taxed at 20% on short-term capital gains (units held for 12 months or less) and 12.5% on long-term capital gains exceeding ₹1.25 lakh in a financial year, subject to applicable conditions.

However, WhiteOak's Small Cap FoF invests in units of other mutual fund schemes rather than directly in equity shares. It does not automatically qualify for equity-oriented taxation simply because its underlying funds invest in small-cap stocks.

Under the applicable non-equity tax treatment, gains on FoF units held for 24 months or less are taxed at the investor's income-tax slab rate. Gains on units held for more than 24 months are taxed at 12.5%, without the ₹1.25 lakh exemption available to qualifying equity-oriented funds.

Investors should check the scheme's tax classification and confirm the applicable treatment with a tax adviser before investing.

The cost of investing through multiple funds

A Fund of Funds has an additional layer of expenses because investors indirectly bear the costs of the underlying mutual fund schemes as well as the FoF itself.

The five underlying schemes in WhiteOak's portfolio are Direct Plans, each with its own expense ratio. The FoF also has expenses associated with managing the overall portfolio.

It is important to note that this is a maximum limit and not necessarily the actual expense ratio being charged. Investors should check the latest factsheet to understand the combined cost of investing.

Over the long term, expenses matter because they directly affect the returns investors take home.

Does investing in five small-cap funds mean better diversification?

Not necessarily.

Each of the five underlying funds already holds a diversified portfolio of small-cap stocks. Combining them can spread investments across different fund managers and investment styles. However, it can also lead to considerable overlap in stock holdings.

For example, if all five schemes invest in the same set of popular small-cap companies, the FoF may end up with fewer unique stock exposures than the number of underlying schemes suggests.

There is another possibility worth considering. When several active funds are combined, the high-conviction stock picks of individual fund managers may get diluted.

Instead of benefiting from the distinct investment approach of one or two managers, the FoF could end up behaving more like a broader small-cap portfolio.

With four of the five underlying schemes receiving broadly similar allocations, this is something investors should monitor.

The actual level of diversification and portfolio overlap can only be assessed by examining the underlying schemes' latest stock holdings.

What should investors look at?

Before considering an investment in WhiteOak's Small Cap FoF, there are a few factors worth evaluating:

Underlying fund performance: How have the five underlying schemes performed across different market cycles? The FoF itself does not yet have a meaningful long-term track record.

• Portfolio overlap: Do the five schemes hold similar stocks, or do they offer genuinely different investment exposures?
• Total expense ratio: What is the combined cost of the FoF and its underlying schemes?
• Fund manager strategy: How frequently will the FoF manager review and rebalance allocations? Changes to the underlying fund line-up are expected to be relatively infrequent.
• Tax treatment: How will gains be taxed when investors redeem their FoF units? The applicable holding period and tax classification matter.
• Exit load: Investors should understand the one-year exit-load condition before making an investment.

The bigger question

WhiteOak Capital's approach adds an interesting dimension to active small-cap investing in India.

Rather than building its own small-cap portfolio, the AMC has chosen to combine the investment strategies of five other fund houses through a single product.

The structure offers convenience and flexibility, but it also brings additional expenses, tax considerations and the possibility of overlapping stock holdings.

Ultimately, the question is whether combining several active small-cap funds can improve the investment experience or dilute the stock-picking edge that active management is meant to deliver.

The answer will become clearer as the FoF builds a longer track record and its portfolio evolves over time.

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