{"id":2015,"date":"2020-06-15T08:13:51","date_gmt":"2020-06-15T08:13:51","guid":{"rendered":"https:\/\/blog.certifiedfinancialguardian.com\/?p=2015"},"modified":"2020-06-15T08:13:56","modified_gmt":"2020-06-15T08:13:56","slug":"can-boi-axa-multi-cap-funds-strategy-work-wonders-for-investors","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2020\/06\/15\/can-boi-axa-multi-cap-funds-strategy-work-wonders-for-investors\/","title":{"rendered":"Can BOI AXA Multi Cap Fund’s Strategy Work Wonders for Investors?"},"content":{"rendered":"\n

It is observed that after every big market\n crash, the equities markets tend to bounce back to make for a bull run.\n The recent market crash that happened due to the lockdown and liquid \ntap running thin, the market’s valuation has dropped. This seems like a \ngreat opportunity to consider investing in equities.<\/p>\n\n\n\n

But the question arises is which segment as the very nature of volatility of the equity markets prevails, and the slowdown woes will continue for few more quarters. The mutual fund houses are of the view that there is potential to gain wealth if invested wisely now. As mentioned earlier historically the markets deliver after a downturn as seen below.<\/p>\n\n\n\n

Graph: The bouncing of index over the years…<\/em><\/strong><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

\n\nData as on June 12, 2020
\n(Source: ACE;MF) \n\n<\/p>\n\n\n\n

If you see, the market had slumped but slowly it’s rising, and it would not be easy to pick stocks. So several notable fund houses including BOI AXA Mutual Fund believe a multi-cap fund is the best bet for investment.<\/p>\n\n\n\n

Hence BOI AXA Mutual Fund launched BOI AXA\n MultiCap Fund. According to the fund house, volatility in Multi Caps is\n lowest across almost all time periods. Thus providing relatively a \nbetter investment choice to investors on a risk-adjusted basis. Multi \nCaps deliver consistent returns with relatively lower volatility.<\/p>\n\n\n\n

While constructing a multi-cap fund’s \nportfolio as per the norms, there are no restrictions to invest across \nmarket cap categories. This category offers investors the ability to \ntake advantage of changing market dynamics, so multi-cap funds offer \nalmost similar returns to better performing diversified mutual funds \nduring various time periods.<\/p>\n\n\n\n

As per the asset allocation pattern of \nBOIAXAMF would typically maintain a maximum allocation towards equities \nbased on prevalent market conditions which can be increased. Allocation \nto large caps would provide stability to the portfolio with reasonable \nreturns, whereas its exposure to Mid and Small Caps would be alpha accretive<\/a>.<\/p>\n\n\n\n

[Read: <\/strong> Why You Should Not Ignore Personalized Asset Allocation While Investing<\/a>]<\/p>\n\n\n\n

Note that on the risk-return curve, a multi-cap fund fits in between large-cap funds<\/a> and \n mid-and small-cap funds. So, do note that although  multi-cap funds \n come with some safety element of large caps, they also carry the risk \nassociated with mid<\/a> and small-cap<\/a> funds. Hence investors should consider investing in multi-cap funds<\/a> only if their risk appetite permits, i.e. it is high, and if the investment time horizon is at least 5 years.<\/p>\n\n\n\n

Table 1: Details of BOI AXA Multicap Fund<\/em><\/strong><\/p>\n\n\n\n\n

\n
\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t
Type<\/strong><\/td>\n\t\t\tAn open ended equity scheme investing across large cap, mid cap and small cap stocks<\/td>\n\t\t\tCategory <\/strong><\/td>\n\t\t\tMulti Cap Fund<\/td>\n\t\t<\/tr>\n\t\t
Investment Objective <\/strong><\/td>\n\t\t\tTo generate long term capital appreciation by investing predominantly in equity and equity-related securities across various market capitalisation.
\n\t\t\t
\n\t\t\tHowever, there can be no assurance that the investment objectives of the Scheme will be realized.<\/td>\n\t\t<\/tr>\n\t\t
Min. Investment <\/strong><\/td>\n\t\t\tRs 5,000 and in multiples of Re 1 thereafter<\/td>\n\t\t\tFace Value <\/strong><\/td>\n\t\t\tRs 10 per unit<\/td>\n\t\t<\/tr>\n\t\t
Plans <\/strong><\/td>\n\t\t\t\n\t\t\t
    \n\t\t\t\t
  • Regular<\/li>\n\t\t\t\t
  • Direct<\/li>\n\t\t\t<\/ul>\n\t\t\t<\/td>\n\t\t\t
Options <\/strong><\/td>\n\t\t\t\n\t\t\t
    \n\t\t\t\t
  • Growth*<\/sup><\/li>\n\t\t\t\t
  • Dividend (Pay-out and Reinvestment*<\/sup>)<\/li>\n\t\t\t<\/ul>\n\t\t\t*<\/sup>Default option<\/td>\n\t\t<\/tr>\n\t\t
Entry Load <\/strong><\/td>\n\t\t\tNot Applicable<\/td>\n\t\t\tExit Load <\/strong><\/td>\n\t\t\tNil<\/td>\n\t\t<\/tr>\n\t\t
Fund Manager <\/strong><\/td>\n\t\t\tMr Alok Singh<\/td>\n\t\t\tBenchmark Index <\/strong><\/td>\n\t\t\tS&P BSE 500 Total Return Index<\/td>\n\t\t<\/tr>\n\t\t
Issue Opens <\/strong><\/td>\n\t\t\tJune 10, 2020<\/td>\n\t\t\tIssue Closes: <\/strong><\/td>\n\t\t\tJune 23, 2020<\/td>\n\t\t<\/tr>\n\t<\/tbody>\n<\/table>\n<\/div>\n<\/center>\n\n\n\n

\n\n\n\n(Source: Scheme Information Document<\/a>) \n\n<\/p>\n\n\n\n

How will the scheme allocate its assets? <\/strong><\/p>\n\n\n\n

Under normal circumstances, the asset allocation will be as follows:<\/p>\n\n\n\n

Table 2: BOIAXA MF ‘s Asset Allocation<\/em><\/strong><\/p>\n\n\n\n

\n
\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t
Instruments<\/b><\/td>\n\t\t\tIndicative Allocations (% of total assets)(Minimum – Maximum)<\/b><\/td>\n\t\t\tRisk Profile(High\/ Medium\/ Low)<\/b><\/td>\n\t\t<\/tr>\n\t\t
Equity and Equity Related instruments<\/td>\n\t\t\t65% to 100%<\/td>\n\t\t\tHigh<\/td>\n\t\t<\/tr>\n\t\t
Debt (including Money Market Instruments & units of debt & liquid category schemes).<\/td>\n\t\t\t0% to 35%<\/td>\n\t\t\tLow to Medium<\/td>\n\t\t<\/tr>\n\t\t
Units issued by REITs and InvITs<\/td>\n\t\t\t0 to 10%<\/td>\n\t\t\tMedium to High<\/td>\n\t\t<\/tr>\n\t<\/tbody>\n<\/table>\n<\/div>\n<\/center>\n\n\n\n

^ (including derivative instruments to the extent of 50% of the Net Assets of the Scheme. Investment in derivatives shall be for hedging, portfolio balancing and such other purposes as may be permitted from time to time under the Regulations and subject to guidelines issued by SEBI\/RBI from time to time.)<\/p>\n\n\n\n

Large caps are defined.as 1st -100th company in terms of full market capitalization<\/p>\n\n\n\n

Mid-caps are defined as the 101st -250th company in terms of full market capitalization<\/p>\n\n\n\n

Small caps are defined as 251st company onwards in terms of full market capitalization<\/p>\n\n\n\n

The \nFund would adopt the list of Large Cap, Mid Cap, Small Cap companies \nprepared by AMFI for this purpose in accordance with the SEBI circular \nno. SEBI\/HO\/IMD\/DF3\/CIR\/P\/2017\/114 dated October 06, 2017 and SEBI\/ \nHO\/IMD\/DF3\/CIR\/P\/2017\/126 dated December 04, 2017. If there is any \nupdation in the list of large cap, mid cap, small cap companies, the \nfund manager would rebalance the portfolio (if required) in line with \nthe updated list, within a period of one month.<\/p>\n\n\n\n

The \nScheme may engage in stock lending not exceeding 20% of its net assets, \nand not more than 5% of the net assets would be deployed in stock \nlending to any single counter party. The Scheme does not intend to \nengage in short selling.<\/p>\n\n\n\n

The \nScheme will not make investments in foreign securities or Foreign \nSecuritized Debt. The Scheme will not invest in Structured Obligations \nand Credit Enhancements.<\/p>\n\n\n\n

The \ncumulative gross exposure to Equity, Debt, Money Market Instruments, \nDerivatives and units of REITs \/ InvITs shall not exceed 100% of the net\n assets of the scheme, subject to SEBI circular No. Cir\/ IMD\/ DF\/11\/ \n2010 dated August 18, 2010.<\/p>\n\n\n\n

Scheme shall invest in repo in Corporate Bond up to 10% of the net assets of the scheme<\/p>\n\n\n\n

No investments will be made in securitized debt.<\/p>\n\n\n\n

Pending deployment of funds of the scheme investment in short term deposits of scheduled commercial banks will be as per the provisions of SEBI (Mutual Funds) Regulations, 1996 and relevant SEBI Circulars as amended from time to time. <\/p>\n\n\n\n

(Source:\u00a0Scheme Information Document<\/a>) \u00a0 <\/p>\n\n\n\n

What will the Investment Strategy be? <\/strong><\/p>\n\n\n\n

For Equity Investments: <\/strong><\/p>\n\n\n\n

Under normal market conditions, BOI AXA \nMulti Cap Fund would invest 65% to 100% of its assets in a diversified \nportfolio constituting equity and equity-related instruments across \nmarket capitalization that the fund manager believes have sustainable \nbusiness models and potential for capital appreciation.<\/p>\n\n\n\n

The scheme would follow an actively \nmanaged approach allowing it the flexibility to pursue opportunities \nwithout having any bias in favour of sectoral allocations. The \ninvestment environment, valuation parameters, and other investment \ncriteria will determine the allocation and the investment style.<\/p>\n\n\n\n

Under normal market conditions and \ndepending on the fund manager’s views, the assets of the scheme would be\n invested across stocks that represent a broad range of sectors of the \neconomy, to ensure adequate portfolio diversification.<\/p>\n\n\n\n

Investment approach<\/em><\/p>\n\n\n\n

The fund manager would follow a top-down \napproach to shortlist stocks for portfolio construction of BOI AXA \nMulticap Fund as per the five-step process outlined below.<\/p>\n\n\n\n

Diagram 1: A Clear 5 Step Investment Process<\/em><\/strong><\/p>\n\n\n\n

\"\"\/<\/figure><\/div>\n\n\n\n

\n\n(Source: Scheme Information Document<\/a>) \n\n<\/p>\n\n\n\n

Under the top-down process, the fund manager would look at the global and Indian economy and the domestic policy environment and stock valuations. This would result in the identification of themes that have potential to outperform.<\/p>\n\n\n\n

The final stock selection process would be\n a bottom-up process wherein stocks from the shortlisted themes would be\n picked up based on valuations.<\/p>\n\n\n\n

For asset allocation, the fund manager \nwould take the help of the qualitative framework of MVPS (Macro, \nValuation, Policy, and Sentiment). Sentiment would be gauged from \nfactors like the positive\/negative breadth of the market, \ninflows\/outflows into equity mutual funds, and FPI buying\/selling \nfigures.<\/p>\n\n\n\n

For Debt Investments: <\/strong><\/p>\n\n\n\n

The fund manager will follow a disciplined\n investment process to meet the scheme-specific investment objectives. \nHe will endeavor to construct a well-diversified, high credit portfolio \nthat minimizes liquidity risk and credit risk.<\/p>\n\n\n\n

The fund manager shall evaluate all the \ninvestment proposals to ensure that the credit risk is kept at the \nminimum level. The portfolios will be constructed in such a manner that \nthe obligations to the investors are met at all points in time and under\n all circumstances.<\/p>\n\n\n\n

The alpha to the portfolio will be \ngenerated by managing the interest rate risk across different asset \nclasses and duration buckets. The funds would be managed to keep the \nscheme’s objectives in mind and with a long term investment horizon for \nthe fund.<\/p>\n\n\n\n

Diagram 2: Investment process for debt investments <\/em><\/strong><\/p>\n\n\n\n

\"\"\/<\/figure><\/div>\n\n\n\n

\n\n(Source: Scheme Information Document<\/a>) \n\n<\/p>\n\n\n\n

The investment process will be a five-stage process as outlined in the above diagram. The process will be research-oriented. It will comprise of qualitative as well as quantitative research.<\/p>\n\n\n\n

The macroeconomic call will be taken on \ninterest rate direction through a detailed analysis of various \ninfluencing factors like inflation, money supply, government borrowing, \nprivate sector borrowing, currency market movement, central bank policy,\n domestic fiscal and monetary policy, global interest rate scenario and \nmarket sentiment.<\/p>\n\n\n\n

Interest rate direction call will be \nsupplemented by technical analysis of the market and short term \ninfluencing factors like trader position, auction\/issuance of \ngovernment\/corporate securities, the release of economic numbers, etc. \nInterest rate direction call and anticipation of yield curve movement \nwill form the basis of portfolio positioning in duration terms. Holding \nperiod return analysis will decide the portfolio selection.<\/p>\n\n\n\n

Credit research will be done regularly for\n all companies. Credit research will include reports as well as rating \nrationales and other inputs from external agencies.<\/p>\n\n\n\n

Both qualitative and quantitative inputs \nwill form part of the final decision. Internal credit exposure limits, \nboth for individual companies and groups and counterparty exposure \nlimits for repo transactions will be part of the approved list from the \nrisk management team.<\/p>\n\n\n\n

Asset allocation will be determined based \non holding period detail analysis of spread movement across different \nasset classes over different time periods and time buckets.<\/p>\n\n\n\n

The fund manager with his team will \nclosely coordinate with the risk management team for all credit-related \nissues and exposures. The Investment team at all points in time will \nwork in a manner to maintain flexibility and responsiveness to the \nconstantly evolving market conditions.<\/p>\n\n\n\n

Who will manage the BOI AXA Multi Cap Fund? <\/strong><\/p>\n\n\n\n

Mr Alok Singh will be managing BOI AXA \nMulti Cap Fund. He is the Chief Investment Officer at the fund house \nhaving around 19 years of experience including 15 years in the Mutual \nFund industry.<\/p>\n\n\n\n

Mr Singh is a commerce graduate with a post-graduation degree in business administration and a CFA.<\/p>\n\n\n\n

Before joining BOI AXA Investment Managers\n Private Limited in April 2012 Mr Singh was associated with BNP Paribas \nAsset Management Pvt. Ltd for 7 years and Axis Bank Limited for 4.5 \nyears.<\/p>\n\n\n\n

Some of the other schemes Mr Singh \ncurrently manages at the fund house include BOI AXA Large & Mid Cap \nEquity Fund, BOI AXA Conservative Hybrid Fund, BOI AXA Credit Risk Fund,\n BOI AXA Mid & Small Cap Equity & Debt Fund, BOI AXA \nManufacturing & Infrastructure Fund and BOI AXA Short term Income \nFund.<\/p>\n\n\n\n

Table 3: Performance of schemes managed by Mr Alok Singh<\/em><\/strong><\/p>\n\n\n\n

\n
\n\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t
Scheme Name<\/b><\/td>\n\t\t\tManaging Since<\/b><\/td>\n\t\t\tBenchmark name<\/b><\/td>\n\t\t\tScheme Returns<\/b><\/td>\n\t\t\tBenchmark Returns<\/b><\/td>\n\t\t<\/tr>\n\t\t
BOI AXA Conservative Hybrid Fund<\/a><\/td>\n\t\t\t21-May-2012<\/td>\n\t\t\tCrisil Short Term Bond Fund Index<\/td>\n\t\t\t5.82<\/td>\n\t\t\t9.65<\/td>\n\t\t<\/tr>\n\t\t
BOI AXA Credit Risk Fund<\/a><\/td>\n\t\t\t27-Feb-2015<\/td>\n\t\t\t-17.14<\/td>\n\t\t\t8.40<\/td>\n\t\t<\/tr>\n\t\t
BOI AXA Large & Mid Cap Equity Fund<\/a><\/td>\n\t\t\t16-Feb-2017<\/td>\n\t\t\tS&P BSE 250 LargeMidCap Index – TRI<\/td>\n\t\t\t0.60<\/td>\n\t\t\t4.24<\/td>\n\t\t<\/tr>\n\t\t
BOI AXA Mfg & Infra Fund<\/a><\/td>\n\t\t\tNIFTY 50 – TRI<\/td>\n\t\t\t0.98<\/td>\n\t\t\t5.06<\/td>\n\t\t<\/tr>\n\t\t
BOI AXA Short Term Income Fund<\/a><\/td>\n\t\t\t23-Jan-2020<\/td>\n\t\t\tCrisil Short Term Bond Fund Index<\/td>\n\t\t\t-12.36<\/td>\n\t\t\t11.40<\/td>\n\t\t<\/tr>\n\t<\/tbody>\n<\/table>\n<\/div>\n<\/center>\n\n\n\n

\n\n\n\nNote: Regular plans under growth option have been considered.
\nData as on June 12, 2020
\n(Source: ACE;MF)\n\n<\/p>\n\n\n\n


\nAs seen from the above table none of the schemes seemed to have \nperformed well compared to their benchmark index. This doesn’t give much\n confidence to investors.<\/p>\n\n\n\n

The outlook of BOI AXA Multi Cap Fund: <\/strong><\/p>\n\n\n\n

In the wake of the current economic and \npandemic crisis, there has been a sharp correction in all segments of \nmarket cap, allowing a great value buying opportunity. The PE multiples \nof S&P BSE SENSEX, S&P BSE 100 LargeCap Index, S&P BSE 150 \nMidCap Index and S&P BSE 250 SmallCap Index is 21.47x, 22.16x, \n24.08x, and 28.19x respectively.<\/p>\n\n\n\n

Hence, given the asset allocation, the \nfortune of the scheme will be closely hinged on the performance of the \nstocks held in the portfolio. With no restriction towards any market \ncap, the investment strategy of the fund would be to invest in \nopportunities across sectors and market cap in line with the fund \nmanager’s conviction.<\/p>\n\n\n\n

Moreover, the BOI AXA Multi Cap Fund holds\n the flexibility to have a higher allocation to any market cap category \nto suitably position the portfolio in line with the investment \nobjective. But constructing the portfolio would be a challenging task \nfor the fund managers in the present scenario. Most of the companies \nearnings results have been hit due to coronavirus lockdown. Hence, the \nactive management of stocks remains the key to wealth creation.<\/p>\n\n\n\n

Note that being a multi-cap fund, BOI AXA \nMF does carry a notch higher risk compared to typical large-cap funds; \nthey are usually less volatile than mid-cap funds.<\/p>\n\n\n\n

[Read: <\/strong> Best Multicap Funds to Invest in 2020 to Ride the Economic Recovery Wave<\/a>]<\/p>\n\n\n\n

This article first appeared on PersonalFN\u00a0here<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"

It is observed that after every big market crash, the equities markets tend to bounce back to make for a bull run. The recent market crash that happened due to the lockdown and liquid tap running thin, the market’s valuation has dropped. This seems like a great opportunity to consider investing in equities. But the…<\/p>\n","protected":false},"author":4,"featured_media":2016,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/2015"}],"collection":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/comments?post=2015"}],"version-history":[{"count":1,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/2015\/revisions"}],"predecessor-version":[{"id":2017,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/2015\/revisions\/2017"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media\/2016"}],"wp:attachment":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media?parent=2015"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/categories?post=2015"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/tags?post=2015"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}