Small-cap equity funds are investment vehicles that focus on investing in companies with small market capitalizations. These companies are often in the early stages of growth and development, with significant potential for expansion. They may operate in niche markets, have innovative business models, or offer unique products or services.

Investing in small-cap equity funds can offer investors exposure to companies with high growth potential. Small-cap companies, with their agility and ability to adapt quickly, have the potential for substantial revenue and earnings growth. As a result, small-cap funds can provide investors with the opportunity to participate in the early stages of a company's growth trajectory.

Small-cap equity funds can also provide diversification benefits to a portfolio. By investing in a range of small-cap stocks across various sectors and industries, the fund aims to spread risk and reduce the impact of any individual company's performance on the overall fund's returns. However, it's important to note that small-cap stocks are generally considered riskier than large-cap or mid-cap stocks due to factors such as limited resources, lower liquidity, and higher volatility.