Investors face a common dilemma about the category of mutual funds they should invest in. So if you want exposure to large caps, mid-caps and small-caps stocks in one portfolio without investing in these segments individually you can consider Multicap schemes.

Multicap funds are diversified equity funds that invest in company stocks from different market capitalizations and sectors to capitalize on the opportunities across market caps and generate optimal returns.

In September 2020 a year ago, SEBI defined new guidelines for the Multicap segment. Multicap funds are mandated to invest across market caps with a minimum allocation of 25% in each large-cap, mid-cap, and small-cap stocks. Later, SEBI introduced a new category called ‘Flexicap’, which holds a flexible allocation across market caps, without any restricted limit.

However, check your risk appetite before investing in Multicap or Flexicap funds as both have a high-risk high-return aspect.

Kotak Mahindra Mutual Fund has launched Kotak Multicap Fund, an open-ended equity scheme investing across large-cap, mid-cap, small-cap stocks.

On the launch of this fund, Mr Harsha Upadhyaya, President & CIO – Equity at Kotak Mahindra AMC said, “The equity Market is a Triveni Sangam of Large-cap, Mid-cap and Small cap stocks with each having its own return and risk profiles. At Kotak Mutual Fund, we have added value to our investors by outperforming benchmark indices regularly across most time periods in all three categories – small-cap, mid-cap and large cap-funds and thus, are now offering the power of all 3 in one fund. We follow a disciplined investment process of BMV i.e. by focusing on Business scalability & sustainability, Management Quality and Valuation parameters. We are also committed to the principles of Environmental, Social and Governance (ESG) factors.”

Table 1: Details of Kotak Multicap Fund

Type An open-ended equity scheme investing across large cap, mid cap, small cap stocks. Category Multi-cap Fund
Investment Objective The investment objective of the scheme is to generate long-term capital appreciation from a portfolio of equity and equity related securities across market capitalization. However, there is no assurance that the objective of the scheme will be realized.
Min. Investment Rs 5000/- and in multiples of Re 1 thereafter. Additional purchase Rs 1000/- and in multiples of Re 1 thereafter. Face Value Rs 10/- per unit
SIP/STP/SWP Available
  • Direct
  • Regular
  • Growth
  • Income Distribution cum Capital Withdrawal Option
Entry Load Not Applicable Exit Load
  • For redemption / switch out of up to 10% of the initial investment amount (limit) purchased or switched in within 1 year from the date of allotment: Nil.
  • If units redeemed or switched out are in excess of the limit within 1 year from the date of allotment: 1%
  • If units are redeemed or switched out on or after 1 year from the date of allotment: NIL
Fund Manager – Mr Harsha Upadhyaya
– Mr Devender Singhal
– Mr Abhishek Bisen
– Mr Arjun Khanna
Benchmark Index Nifty 500 Multicap 50:25:25 Total Returns Index
Issue Opens: September 08, 2021 Issue Closes: September 22, 2021

(Source: Scheme Information Document)  

The investment strategy for Kotak Multicap Fund will be as follows:

Kotak Multicap Fund will aim to predominantly invest in equity and equity linked instruments across market capitalization viz. large-cap, mid-cap and small-cap companies.

SEBI changed the guidelines earlier, which indicates Multicap funds should invest minimum 25% each in large-cap, mid-cap and small-cap stocks. And apart from this, the scheme can invest based on the investment objective of the fund.

The scheme will maintain the allocation mandated by SEBI and balance 25% will be dynamically allocated with the assistance of the fund house proprietary model. It will optimise overweight of largecaps, midcaps, and smallcaps. This model is based on mean reversion indicators and momentum; the mean reversion helps in timing of overweight and momentum guides on how long the position can stay.

The portfolio construction will be based on a thematic approach to bottom-up stock picking using the Business, Management and Valuation (BMV) model. The selection of sectors would be driven primarily by the growth prospects and valuations of the businesses over a medium to long term as per the discretion of the fund manager.

The fund manager will evaluate the business environment that a company operates in, the capability of the management to execute and scale up the business, and valuation of the company based on fundamentals such as discounted cash flows and PE ratios, etc.

Under normal circumstances, the asset allocation will be as under:

Table 2: Asset Allocation of Kotak Multicap Fund

Instruments Indicative Allocation (% of net assets) Risk Profile
Minimum Maximum High/Medium/Low
Equity & equity related securities 75 100 Medium to High
Debt & Money market instruments 0 25 Low
Units issued by REITs & InvITs 0 10 Medium to High

(Source: Scheme Information Document)  

Who will manage the Kotak Multicap Fund?

Mr. Harsha Upadhyaya and Mr. Devender Singhal for equity investments, Mr. Abhishek Bisen for debt investment and Mr. Arjun Khanna for Overseas investments will be the dedicated fund managers for this scheme.

Mr Harsha Upadhyaya is CIO Equity at Kotak Mahindra Asset Management Co. Ltd. He is Bachelor of Engineering (Mechanical) from National Institute of Technology, Suratkal, Post Graduate Diploma in Management (Finance) from Indian Institute of Management, Lucknow and Chartered Financial Analyst charter from the CFA Institute, US.

Mr Harsha has over two decades of experience in fund management and equity research. Prior to this, he was associated with companies such as DSP BlackRock Investment Managers, UTI Asset Management Co. Ltd, Reliance Group, etc. The other schemes he manages are Kotak Equity Opportunities Fund, Kotak Flexicap Fund, Kotak Tax Saver Fund, and Kotak ESG Opportunities Fund.

Mr Devender Singhal is Fund Manager at Kotak Asset Management CO. Ltd. His qualifications are BA(H) Mathematics, and PGDM (Finance). He has over 18 years of experience in equity research and fund management. Prior to this, he has worked with the PMS divisions of Kotak, Religare, Karvy and P N Vijay Financial Services.

The other schemes he manages are Kotak Asset Allocator Fund, Kotak PSU Bank ETF, Kotak Debt Hybrid Fund, Kotak Nifty ETF, Kotak Banking ETF, Kotak Sensex ETF, Kotak NV 20 ETF, Kotak India Growth Fund Series 4, Kotak Nifty Next 50 Index Fund, Kotak Equity Saving Fund, Kotak IT ETF Fund, and Kotak Nifty 50 Index Fund.

Mr Abhishek Bisen is Senior Vice President and Fund Manager at Kotak Mahindra Asset Management Co. Ltd. His qualifications are BA Management and MBA Finance. Prior to this, he has worked with Securities Trading Corporation Of India Ltd for Sales & Trading of Fixed Income Products apart from doing Portfolio Advisory, merchant banking experience with a leading merchant banking firm.

He also manages these schemes listed here: Kotak Bond Fund, Kotak Gilt fund, Kotak Debt Hybrid Fund, Kotak Gold Fund, Kotak Gold ETF, Kotak Equity Savings Fund, Kotak Equity Hybrid Fund, Kotak Balanced Advantage Fund, Kotak NASDAQ 100 Fund of Fund, and Kotak Nifty 50 Index Fund.

Mr Arjun Khanna is Fund Manager – Equities at Kotak Mahindra Asset Management Co. Ltd. He is a CFA, FRM, MMS (Finance) and B.E (Electronics) and has over 14 years of experience with Mutual Funds in Equity Research. Prior to this, he has worked with Principal Mutual Funds and Citibank N.A.

The other schemes managed by him are Kotak Global Emerging Market Fund, Kotak Asset Allocator Fund, Kotak Pioneer Fund, Kotak NASDAQ 100 Fund of Fund and Kotak International REIT FOF.

Fund Outlook – Kotak Multicap Fund

Kotak Multicap Fund aims to hold a right mix of large-cap, mid-cap and small-cap stocks that work together to create winning opportunities.

The scheme offers investors a way to diversify one’s portfolio with the stability of large caps and low volatility, growth of mid caps and smalls caps with higher returns and high volatility. This scheme’s disciplined and focused approach along with the bottom-up investing strategy is directed towards identifying opportunities to invest in fast growing sectors/companies across the spectrum.

The scheme will be actively managed by the fund managers and if they spot an investment opportunity in mid-cap and small cap segments, the allocation towards it may increase. This makes the scheme a high-risk high-return investment proposition.

Although the presence of large-cap stocks could offset some of the risk, with half of the assets invested in mid-cap and small-cap companies, the scheme will be prone to higher volatility in the short term. Therefore, it is suitable for investors with high-risk tolerance.

You must ensure to have a long investment horizon of at least 5-7 years to gain significant returns and your investment objective should align with the fund.

This article first appeared on PersonalFN here

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