What is Multi Cap Fund

 

Should you invest in SBI Multicap Fund NFO

SBI mutual fund will shortly be in launching a New Fund Offer (NFO) for a multicap equity fund, SBI Multicap Equity Fund. The NFO launches on February 14 and closes on February 28, 2022

What are Multicap Funds?

Multicap mutual funds are diversified equity mutual fund schemes which invest across market cap segments i.e. LARGE CAP, MID CAP and SMALL CAP. Multicap funds are mix of above three caps. Multicap Funds are new concept , earlier there used to be  individual cap funds like Large Cap funds, or Mid cap Funds or Small Cap funds , but now SEBI has approved a new category of Fund called Multicap fund which is a mix of all three caps.  As per SEBI’s circular in September 2020, multicap funds must invest at least 25% of their assets in large cap stocks, at least 25% in midcap stocks and at least 25% in small cap stocks. Investors should note that multicap funds will have minimum 50% exposure to midcaps and small caps.

What is Large Cap , Mid Cap & Small Cap

In short these are Equity funds of Large Companies , Mid Size Companies & Small size companies. 

How Multicap Funds work :

 We all know that economy of any country keeps changing . Different segments of the market outperform each other in different market conditions ..When market is in bear mode  Large caps usually outperform small and madcap & When market is in bull mode Midcap and small cap stocks tend to outperform  Large cap. So multicap funds adjust itself as per market scenario , when market is in bear mode Fund manager increases the proportion of Large cap as per need and when market is in bull mode Fund manager reduces proportion of Large cap and increases mid cap and small cap  giving the best optimum result.

 Should you Invest in SBI Multicap Fund

 SBI MF house is Launching Multicap Fund on 14^th Feb till 28^th Feb , during this NFO period fund is available at a Price of Rs. 10 per unit . After that fund  will be available as per NAV of the day .

 SBI Mutual Fund has a proven track record of delivering superior performance across product categories i.e. large cap funds, mid cap funds and small cap funds.

SBI MF’s long term track record gives us the confidence about SBI Multicap Fund’s alpha creation potential in the future too.

What are  strategies of SBI MF to create higher returns in Multicap Fund

1.     The fund will not have any sector or style bias as the outcome of portfolio selection will be based on the analyst recommendations, the company said in its statement. “The Fund combines the strength of high conviction stock ideas of the sector analysts that will be selected from the fund house’s active coverage universe (~350 companies). The high conviction ideas recommended by the analysts are arrived at after a robust 7-step research process wherein ranks and confidence scores are assigned to each recommendation.."

2.    Unconstrained, sector agnostic approach.

3.    Active Stock Management with Bottom-up strategy.

4.    High Conviction Play through Analyst Portfolio.

5.    Style Agnostic with broader opportunity set for stock selection.

6.    Strong pedigree of Investment Expertise across market cap.

7. The fund offers MITRA SIP feature, which will let investors invest through a Systematic Investment Plan (SIP) and simultaneously register a Systematic Withdrawal Plan (SWP) which will be activated at the end of the SIP period to generate tax-efficient regular cash flows.

 

Conclusion  :

     SBI  Multicap Fund  will be  an ideal investment option for investors who would like a mix across market cap as they provide diversification of opportunities and growth potential while getting the benefit of limiting downside risk and who have a investment time horizon of minimum 3 years for best result as the fund will be a pure equity fund and such funds are volatile in short period of time.

@Ajit Kumar Singh