Multi-Cap Funds: The Newest Trend To Explore In 20213 min read
A multi-cap fund invests in a variety of firms across various market capitalizations. A multi-cap fund’s goal is to offer capital growth while reducing risk through asset allocation across cap curves.
SEBI defines a multi-cap fund as one with a minimum 25% allocation to large caps, 25% to mid-caps, and 25% to small caps.
Because of their multi-cap nature, they offer a number of advantages and should be included in every investor’s portfolio. Let’s have a look at the benefits:
1. Benefits of Adding a Multi-Cap Fund to your Portfolio
#1 Diversification across the cap curve:
Multi-cap funds invest in large, mid, and small-cap companies across a variety of industries. Fund managers are not limited by the size of the company and can select those that best meet the fund’s investment objective. Large caps can help to keep a portfolio stable, while mid and small caps can help to boost capital.
#2 Suitable for any market condition:
Multi-cap funds can invest in companies that are expected to profit from increased economic activity. This allows the fund manager to adjust the cap curve allocation in accordance with the scheme mandate, picking overarching themes that drive economic and earnings development growth.
#3 May Offer better risk-adjusted returns compared to single cap funds:
Fund managers can regulate risk by reducing allocation to riskier segments of the market and minimizing its impact by increasing allocation to companies that are poised to deliver because they can invest across all market caps and tweak allocation based on the direction of the market, as defined by SEBI
2. What are the Risks of Investing in Multi-Cap Funds?
Since these schemes also invest in mid-cap and small-cap stocks, they are riskier than large-cap schemes that invest mostly in large companies. In a robust economic environment, the fund manager of a multi-cap fund can increase his exposure to mid and small-sized companies to benefit from earnings.
The fund manager can also choose to move investor money from shares of mid-cap companies to large-cap companies to take a shelter when they expect prolonged down periods. Hence you may find volatility in this segment of funds.
Multi-cap funds offer a superior risk-return trade-off, safeguarding investors from the downside while also generating upside. These funds are appropriate for investors with a moderate risk appetite and a 5-year investment horizon.
3. What Multi-Cap Fund should you Explore?
One of the good option to explore is the Axis Multicap Fund NFO. The NFO opened on November 26th 2021 and is closing on December 10th 2021. It will provide investors with an opportunity to explore large, mid, and small-cap stocks in one investment.
Explore Axis Multicap Fund NFO
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Paytm Money Ltd SEBI Reg No. INA100009859 Regd Office: 136, 1st Floor, Devika Tower, Nehru Place, Delhi – 110019. The NFO or New Fund Offer/offering is non-Exchange traded products and Paytm Money Ltd (PML) is acting as an agent for distributing the same. Please note all disputes with respect to the distribution activity, would not have access to the Exchange investor redressal forum or Arbitration mechanism. This information is purely based on publicly available data (Data source: SEBI, https://www.axismf.com, Scheme Information Document) and in no way to be considered as advice or recommendation.
