Multi-Cap Funds Make For An Appealing Choice

Are you planning to include a multi-cap fund in your portfolio but are concerned about its performance, investor participation, assets under management size, growth potential and the choices available? Rakesh Deshmukh takes a closer look at the world of multi-cap funds to uncover comprehensive details that will help you make a well-informed decision

Multi-tasking is a term that you may have come across several times in today's day and age. It refers to the ability of a person to manage more than one chore at a time. In the corporate world, we encounter the word multinational quite often, which implies that an organisation has operations in more than one country. In the world of investing, you may have observed that some investors employ a multi-strategy approach, combining one or more strategies in the market to minimise the risk and earn more returns. The same meaning applies to what we refer to as multi-cap funds.

As the name suggests, a multi-cap fund invests in a diversified portfolio of equity and equity-related stocks across companies of varying market capitalisations including large-cap, mid-cap and small-cap. This type of fund allows investors to gain exposure across different market segments without requiring them to individually manage investments in each category. Multi-cap funds were introduced by the Securities and Exchange Board of India (SEBI) in October 2017 and provide a convenient and streamlined approach for investors.

Instead of managing separate investments in largecap, mid-cap and small-cap categories, investors can now achieve diversified exposure through a single fund. Each fund allocates its investments differently, making the multi-cap fund category suitable for investors seeking to align with their risk tolerance. Unlike funds focused solely on large-cap, mid-cap or small-cap stocks where fund managers are constrained by specific portfolio definitions, multi-cap funds offer flexibility. This flexibility allows fund managers to capitalise on investment opportunities across the entire market spectrum.