A few months ago, SEBI introduced categorisation of Mutual Funds and, in the category of equity funds, it had brought forth Multicap Funds also as a separate category. Let us analyse the features of multicap funds as below:-
Under this separate category, a minimum of 65% of the funds should be equity-based investments. It can be invested in lage cap, mid cap and small cap and any percentage as investment. The concerned fund manager is given full liberty to create this type of multicap fund and establish a portfolio based on his allocations.
For whom it is most suitable?
These multicap funds are most suitable for two categories of people such as a) those who are not able to decide whether to invest either in large cap or mid cap or small cap investments and b) those who allow their fund managers to use their full discretion in deciding the allocations.
Sometimes, we may hesitate to invest in mid and small cap funds or after a few years, we may regret for not having invested in mid and small cap funds. Under these circumstances, the multicap funds will take care.
Depending on the stock market fluctuations, the fund managers will operate and handle the large cap, mid cap and small cap investments. This will ensure the positive results of stability from large cap investments as well as growth aspects from mid and small cap investments. This will be useful for those who loathe varieties of investments in large numbers and those who would not be keen to get confused by classification of large, mid and small cap funds.
Again, as the large cap funds are substantial in multi cap fund portfolio, the net reduction in the value of large cap funds at the time of fall in market would be minimal. Similarly, when the market is up, this multicap will fetch us more returns than the pure large cap funds.
Normally, these multicap funds keep the NIFTY 500 or BSE 500 index as their benchmark. These funds will further have 50-80% in large cap stocks and the balance in mid and small cap stocks in their portfolio, depending upon the performance of the particular company and market situations respectively.
Generally, these multicap funds will increase their holdings in the large cap stocks during the phase of bearish trend and mid and small cap stocks during the phase of bullish trend in the stock market. So much so, the efficiency and the decision-taking ability of these fund managers are the vital aspects.
In short, those who plan to invest in just a couple of funds, this multicap fund category is most suitable.
Let us see a few multicap funds operating under this exclusive category which does not include the ‘focussed funds category’.
UTI Equity Fund
This fund currently handles more than Rs.7,800/- crores investments. The fund manager is Ajai Thyagi. While this fund was at a slow pace a few years back, now it is operating comfortably with progress. Bajaj Finance, IndusInd Bank, HDFC Bank, YES Bank, Infosys etc. are some of the prominent holdings. The minimum SIP under this scheme is Rs.500/- only. Out of its total investment, 66% forms large cap and the remaining percentage is on mid and small cap stocks.
Mirae Asset India Equity Fund:
This is one of the well-performing multicap funds which has been continuously good. Currently, it has around Rs.8,500/- crores investment to its credit. The fund managers are Neelesh Surana and Harshad Boravakke. It has given more weightage for HDFC Bank. Reliance Industries, Infosys, ICICI Bank, Kotak Mahendra Bank etc. are the chief holdings. Percentagewise, Mirae has allotted 85% for largecap and the remaining 15% for mid and small cap stocks.
Principle Multicap Growth Fund:-
P.V.K.Mohan has been the fund manager of this for the past seven years. It handles funds worth Rs.690/- crores and HDFC Bnk, ICICI Bank, SBI, Infosys and Reliance Industries are its top holdings. It focuses on finance, FMCG and construction fields. Its 60% fund is allotted for large cap and the balance for mid and small cap stocks.
Motilal Oswal Multicap 35 Fund:-
This fund was launched in April 2014 and it is yet to complete 5 years. It manages around Rs.13,900/- crores overall and its manager is Snigdha Sharma. It has allotted 80% of the funds for large-cap and the balance for mid and small cap stocks. In the past 1, 2 and 3 years, it has beaten the category average. Its top holdings are HDFC, HDFC Bank, Maruthi, IndusInd Bank and Eicher Motors.
Kotak Standard Multicap Fund:-
This fund presently handles around Rs.21,000/- crores worth investments. Its fund manager is Harsha Upadhyaya who has been efficiently handling the funds operations. It operates in the ratio of 80: 20 % on large and mid-cum-small cap investments respectively. HDFC Bank, Reliance Industries, L & T, HDFC and Infosys are its major holdings.
Obviously, the multicap funds work in all seasons and under all circumstances. Why don’t you examine and consider the possibility of including this in your overall portfolio.
(This article written by Chokkalingam Palaniappan , Director,Prakala wealth management (www.prakala.com) in Tamil for Naanayam Vikatan magazine dt 29/7/18 has been reproduced in English by P.S.Ramamurthy)