In the past few years, market capitalization across large-cap, mid-cap, and small-cap has grown multi-fold. It is a solid indicator that there is an increase in the participation of investors in the equity markets, plus signalling that the investors’ confidence to meet their long-term financial goals through equity investments is high.

As you probably know, Multi-cap funds provide its investors with the stability of large-cap stocks along with the potential to generate alpha through mid-cap and small-cap stocks. This type of mutual fund seeks to achieve the optimal portfolio balance in both favourable and unfavourable market conditions. Hence, fund managers may actively identify and select stocks to capitalize on opportunities across market caps by aligning the portfolio with the prevailing market conditions.

The Multi-cap portfolio can alleviate the irrational fear investors feel on their wealth creation journey with a powerfully effective synthesis of equity and equity related instruments across market capitalisation and the aim to curb downside risk.

Long term investors aiming to build wealth to meet their long-term financial goals with a potentially better risk-return trade-off may consider investing in Multi-cap funds that offer consolidation through a single solution. SBI Mutual Fund has launched SBI Multi-cap Fund, an open-ended equity scheme investing across large-cap, mid-cap, small-cap stocks universe.

On the launch of this fund, Mr. Vinay M. Tonse, MD & CEO at SBI Mutual Fund said, “SBI Multicap Fund will provide relative stability to investors’ portfolios by investing in large caps, potential growth opportunities with mid-caps and higher alpha potential with small cap exposure over the long term. The fund seeks to offer a balance to the investor’s portfolio through this multi-cap exposure. We believe with the SBI Multicap Fund investors will get a strong pedigree of investment expertise across market cap and in one fund.”

Table 1: Details of SBI Multi-cap Fund

Type	An open-ended equity scheme investing across large cap, mid cap, small cap stocks.	Category	Multi-cap Fund
Investment Objective	To provide investors with opportunities for long term growth in capital from a diversified portfolio of equity and equity related instruments across market capitalization. However, there can be no assurance that the investment 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/SWP/STP	Available
Plans	Direct Regular	Options	Growth IDCW (Income Distribution cum Capital Withdrawal)
Entry Load	Not Applicable	Exit Load	NIL – If units purchased or switched in from another scheme of the Fund are redeemed or switched out up to 10% of the units (the limit) purchased or switched on or before 1 year from the date of allotment. 1% of the applicable NAV – If units purchased or switched in from another scheme of the Fund are redeemed or switched out in excess of the limit on or before 1 year from the date of allotment NIL – If units purchased or switched in from another scheme of the Fund are redeemed or switched out after 1 year from the date of allotment
Fund Manager	Mr. Rama Iyer Srinivasan Mr. Mohit Jain	Benchmark Index	NIFTY 500 Multicap 50:25:25 TRI
Issue Opens:	February 14, 2022	Issue Closes:	February 28, 2022

(Source: Scheme Information Document) 

The investment strategy for SBI Multi-cap Fund will be as follows:

SBI Multi-cap Fund will follow a bottom-up approach to stock-picking and choose companies across sectors. The scheme will invest in a diversified portfolio of stocks across market capitalization. Large Cap Stocks – 1st -100th company in terms of full market capitalization. Mid Cap: 101st to 250th company in terms of full market capitalization. Small Cap: 251st company onwards in terms of full market capitalization.

As the core of the investment process, each stock in the investible universe goes through a rigorous multi step analysis, i.e., the 7-Step Research process. The exposure across these stocks will be in line with limits/classification defined by AMFI/SEBI from time to time. The scheme may seek to invest opportunities in foreign securities, including ADR/GDR/Foreign equity and overseas ETFs and debt securities subject to Regulations. Such investments may not exceed 25% of the net assets of the scheme.

The scheme may also take derivative positions up to 50% of the maximum permissible allocation, based on the opportunities available, mainly for hedging and portfolio rebalancing. Further, it may also invest in the hybrid securities viz. units of REITs and InvITs for diversification and subject to necessary stipulations by SEBI from time to time. Subject to the Regulations and the applicable guidelines, the scheme may also engage in Stock Lending activities.

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

Table 2: Asset Allocation for SBI Multi-cap Fund

Instruments	Indicative Allocation (% of net assets)		Risk Profile
	Minimum	Maximum	High/Medium/Low
Equity and Equity related instruments: Minimum investment in equity & equity related instruments (including derivatives) – 75% of total assets in the following manner:	75	100	High
Large Cap Companies	25	50
Mid Cap Companies	25	50
Small Cap Companies	25	50
Debt securities (including securitized debt^ & debt derivatives) and money market instruments	0	25	Low to Medium
Units issued by REITs and InvITs*	0	10	Medium to High

^The scheme may invest in securitized debt up to 50% of the debt portfolio.

* The exposure will be in line with SEBI limits specified from time to time.

(Source: Scheme Information Document) 

Who will manage SBI Multi-cap Fund?

Mr. Rama Iyer Srinivasan and Mr. Mohit Jain will be the designated fund managers for this scheme.

Mr. Rama Iyer Srinivasan holds degrees in M. Com & MFM and has an experience of more than 28 years in equities. Prior to joining SBI Funds Management Ltd., he was with Future Capital Holdings, where he headed ‘Public Markets.’ Principal PNB AMC, Imperial Investment Advisors (associate of Oppenheimer & Co), Indosuez W. I. Carr Securities, Motilal Oswal Securities, Sunidhi Consultancy, and Capital Market Publishers.

At SBI Funds Management Ltd., Mr Srinivasan currently manages SBI Equity Hybrid Fund (equity portion), SBI Focused Equity Fund, SBI Small Cap Fund, SBI Magnum Children’s Benefit Fund – Savings Plan & Investment Plan (equity portion), SBI Tax Advantage Fund – Series II, & III (along with Ms. Nidhi Chawla), SBI Long Term Advantage Fund – Series IV (along with Ms. Nidhi Chawla), V & VI, SBI Magnum Global Fund, and SBI Flexicap Fund.

Mr. Mohit Jain will be managing the overseas investments of the Scheme Chartered Financial Analyst (CFA) and B.E (Engineering). He joined SBI Funds Management Limited (SBIFML) in May 2015 as a Credit Analyst and has over 8 years of experience in the area of financial services. Prior to joining SBIFML, he was working with CRISIL Limited as Research Analyst.

At SBI Funds Management Ltd., Mr. Jain currently manages SBI International Access – US Equity FoF.

Fund Outlook – SBI Multi-cap Fund

The SBI Multi-cap Fund aims to provide investors with opportunities for long term growth in capital from a diversified portfolio of equity and equity related instruments across market capitalization. The scheme through its bottom-up stock picking strategy seeks to build an optimised high conviction portfolio.

The scheme follows an unconstrained, sector agnostic approach and has a strong pedigree of investment expertise across market capitalization. The Investable universe is expanding with the inclusion of new age businesses focussing on niche segments with newer technologies. Thus, the scheme will endeavour to cautiously explore newer businesses with promising future potential at reasonable valuations backed by robust fund management.

The scheme offers investors a one-stop solution with diversification across market cap, unlike holding on to individual stocks. 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%.

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. The fund manager’s ability to construct the Multi-cap portfolio remains to be seen, and it will influence the performance of this scheme.

In addition, the looming threat of the Omicron variant and the US federal reserve’s announcement of reduction in stimulus may poses a major risk to economic growth. The margin of safety appears to be narrow, and the clear direction for the equity market from the current elevated levels is unknown. These, among many other factors, may affect the scheme’s performance, and the portfolio may face higher volatility in the near term. This makes multi-cap mutual fund schemes like SBI Multi-cap Fund a risky investment proposition.

Thus, the scheme is suitable only for investor looking for long term wealth creation, seeking to have an unbiased flavour of market caps. Ensure you have a high-risk appetite; a long investment horizon of at least 5-7 years and that your investment objectives are aligned with the fund.

This article first appeared on PersonalFN here