Multi-caps for the long haul

A FIVE-YEAR HORIZON ALLOWS THE STRATEGY TO RIDE OUT MARKET WHIPSAWS

- SAIKAT NEOGI

INVESTING IN MULTI-CAP funds offer a dynamic structure that can capture opportunities across large, mid, and small-cap stocks. This balanced approach enables an investor to participate in different market cycles more effectively.

Multi-cap funds, by mandate, are required to invest a minimum 25% each in large, mid, and small-cap stocks. This ensures balance between stability and growth, making them an attractive core allocation, especially in a market with narrow leadership and cyclical sector churns.

Multi-cap funds have shown higher long-term performance in recent years as compared with diversified funds. Over a five-year period, multi-cap funds have generated an average return of 25.15%, much higher than the 21.3% average return delivered by flexi-cap funds.

While both categories benefit from diversified exposure, the mandated minimum 25% allocation to each of large, mid, and small-caps in multi-cap funds has helped them capture broader market participation—especially the strong performance of mid and small caps in recent years.