Why Your Portfolio Needs Multi-Cap Funds

Multi-cap funds seem to be the flavour of the season. After Tata MF, Edelweiss MF and Mirae Asset MF coming up with them last year, DSP MF launched a multi cap fund in 2024.

- PRIYA KAPOOR

In 2020, the market regulator changed the mandate of multi cap funds. Since then 19 multi cap mutual funds have come into existence with total assets under management (AUMs) of INR 78,415 crore, as on June 30, 2023, according to AMFI (Association of Mutual Funds in India) data. A year ago, the number stood at 14 with total assets under management (AUM) of INR 53,297 crore, as on June 30, 2022.

WHAT ARE MULTI-CAP FUNDS?Multi-cap funds are mutual funds that invest a minimum of 25 percent in each of the categories of funds across market capitalization i.e., small cap, large cap and mid-cap. In other words, these schemes are mandated to invest a minimum of 75 percent of funds in a pre-defined ratio, leaving the leeway of remaining 25 percent only.

SEVERAL BENEFITS: Diversification: Your portfolio gets diversified without much effort. Multi-cap funds invest in large-cap, mid-cap, and small-cap stocks, due to which investors get exposure to companies of different sizes. “While diversification may limit gains from a specific asset class, it balances risk and reward for long-term investment success. Multi Cap funds are particularly beneficial for those who seek exposure to different asset classes with smaller investments, offering stability, diversification, and professional management.” says Shaily Gang, Head, Products, Tata Asset Management.