Multi Cap funds invest in stocks across market caps i.e. large cap, mid-cap and small-cap stocks. The Multi Cap category aims to benefit from higher growth potential offered by mid and small caps, while aiming to reduce volatility through its exposure to large cap stocks.

However, a year ago the SEBI has defined new guidelines for multi cap funds with minimum restriction of 25% allocation each in large cap, midcap and small-cap segment. The SEBI gave an option to AMCs either adhere to this or change the name of the funds to “Flexicap”. Flexicap funds were erstwhile Multi Cap funds; they have the freedom to invest across market caps in any proportion without any cap on allocation.

As per SEBI’s new definition, Multi Cap mutual funds would invest minimum of 25% each in large-cap, mid-cap and small-cap stocks. Beyond this, they can invest based on the investment objective of the fund. Investors, who want to get the benefit from a systematic cap allocation rather than having to time and shift allocations across market cycles, may consider investing in Multi Cap funds.

Investors looking for higher long-term growth prospects than pure Large Cap, Mid or Small-cap funds. The Multi Cap fund maintains sizeable allocation to all market caps across market cycles, restricting any fund manager bias and offers access to broad range of growth opportunities.

Joining the bandwagon with ABSL MF and Kotak Mahindra MF, IDFC Mutual Fund has launched IDFC Multi Cap Fund. It is an open-ended equity scheme investing across large cap, mid cap, and small cap stocks.

On the launch of this fund, Mr Vishal Kapoor, CEO of IDFC Mutual Fund said, “At different points of time, different market caps tend to do well, like between 2018 and 2019 large-caps did well, and now we are seeing mid and small-caps doing well in the broader market rally. So, it is not easy to increase or reduce allocations perfectly to coincide with changes in market dynamics. Through a multi-cap fund, investors get a truly diversified equity fund, with adequate exposure across different market caps.”

Table 1: Details of IDFC Multi Cap Fund

Type An open-ended equity scheme investing across large cap, mid cap, small cap stocks Category Multi-cap Fund
Investment Objective The Fund seeks to generate long-term capital appreciation by investing in a diversified portfolio of equity & equity related instruments across large cap, mid cap, small cap stocks. There is no assurance or guarantee that the objectives of the scheme will be realised.
Min. Investment Rs 5,000/- 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
  • If redeemed/switched out within 1 year from the date of allotment – 1% of applicable NAV;
  • If redeemed/switched out after 1 year from the date of allotment – Nil
Fund Manager – Mr Daylynn Pinto
– Mr Harshal Joshi
– Mr Viraj Kulkarni
Benchmark Index NIFTY 500 Multicap 50:25:25 TRI
Issue Opens: November 12, 2021 Issue Closes: November 26, 2021

(Source: Scheme Information Document)  

The investment strategy for IDFC Multi Cap Fund will be as follows:

IDFC Multi Cap Fund aims to predominantly invest across all market capitalization segments viz. large cap, mid cap and small cap companies.

The scheme will invest a minimum of 25% each in large, mid, and small cap stocks, with the balance of 25% providing flexibility to the fund manager to invest across market capitalization segment and/or foreign securities depending on opportunities available at the time.

The scheme will follow a bottom-up approach to investing and will endeavour to be diversified across various sectors and/ or market capitalization segment. The focus of the scheme would be on identifying companies with long-term growth potential, disciplined capital allocation, and sound management pedigree.

IDFC Multi Cap Fund will follow a robust investment strategy with allocation across sectors and market caps, limit mid and small cap exposure and perform quarterly rebalancing of weights. Stock selection will be focused on quality management & track record and strong balance sheet of the companies.

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

Table 2: Asset Allocation for IDFC Multi Cap Fund

Instruments Indicative Allocation (% of net assets) Risk Profile
Minimum Maximum High/Medium/Low
Equity and Equity related Instruments of which: 75 100 Medium to High
Large Cap^ Companies 25 50
Mid Cap^ Companies 25 50
Small Cap^ Companies 25 50
International equity, equity mutual funds* 0 25 Medium to High
Debt Securities and Money Market Instruments (including Government securities, securitised debt) 0 25 Low to Medium

(Source: Scheme Information Document)  

Who will manage IDFC Multi Cap Fund?

Mr Daylynn Pinto (equity portion), Mr Harshal Joshi (debt portion) and Mr Viraj Kulkarni (overseas investment) will be the dedicated fund managers for this scheme.

Mr Daylynn Pinto is a Senior Fund Manager at IDFC Asset Management Company Ltd. He has an experience spanning over 16 years in the mutual fund industry and his qualification includes PGDM and Prior to joining IDFC AMC, he was associated with UTI Asset Management Company Ltd as Fund Manager, responsible for fund management. (July 2006 to September 2016).

IDFC Sterling Value Fund and IDFC Tax Advantage (ELSS) Fund are the other schemes managed by Mr Pinto.

Mr Harshal Joshi is Vice President – Fund Management at IDFC Asset Management Company Ltd. He has an experience spanning over 13 years in Mutual Fund industry and his qualification is PGDBM. Prior to this, he was associated with ICAP India Pvt. Ltd.

The other schemes managed by Mr Joshi are IDFC Arbitrage Fund – Debt portion, IDFC Equity Savings Fund – Debt portion, IDFC All Season Bond Fund, IDFC Cash Fund, IDFC Ultra Short Term Fund, IDFC Money Manager Fund, IDFC Government Securities Fund – Constant Maturity Plan, IDFC Low Duration Fund, IDFC Gilt 2027 Index Fund, IDFC Gilt 2028 Index Fund, IDFC Regular Savings Fund – Debt portion, IDFC Hybrid Equity Fund – Debt portion, IDFC US Equity Fund of Fund – Debt portion and IDFC Fixed Term Plans.

Mr Viraj Kulkarni is Associate Vice President – Fund Management at IDFC Asset Management Company Ltd. He is a CFA, PGDM (Finance) and B.Tech. (Electronics) and has an overall experience of 9 years. Prior to this, he was associated with Franklin Templeton Asset Management (India) Pvt. Ltd. as a Management Trainee, Goldman Sachs Services India as Analyst, Wealth Management Technology. Mr Kulkarni also manages IDFC US Equity Fund of Fund.

Fund Outlook – IDFC Multi Cap Fund

IDFC Multi Cap Fund aims to generate long-term capital appreciation by investing in a diversified portfolio of stocks spread across large cap, mid cap, small cap segment.

The scheme will be actively managed with certain restrictions to mid and small cap allocations. The fund has mandated allocation towards Large cap, Mid cap and Small cap segments with each at minimum 25%. There is no cap on large cap allocation. The portfolio will be actively rebalanced on a quarterly basis to bring back weights in line with the prevailing strategy.

The fund endeavours to have a wide representation of sectors across market caps. Stock selection will place prime importance on quality management, track record of return of capital (dividend or buyback) and strong balance sheet.

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. This makes it a risky investment proposition

The scheme is suitable for investors with high-risk tolerance and a long investment horizon to gain significant returns. More importantly, your investment objective should align with the fund.

This article first appeared on PersonalFN here

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