Beat volatility with multi-cap funds

● Exposure across segments helps optimise returns

- SAIKAT NEOGI

AS MARKETS ARE volatile, investing in multi-cap funds can help mitigate risks and position the portfolio for higher long-term returns. A multi-cap strategy ensures that investors are not overly concentrated in any single segment.

The average one-year returns of the top 15 funds in the past one year is 34%. While Axis Multicap Fund has given returns of 40% in one year, returns of LIC MF Multicap Fund and Baroda BNP Paribas Mutual Fund were at 38%. Over a three-year period, Nippon India Multi-cap fund has yielded 27%, followed by Kotak Multicap at 26%.

Optimise risks By mandate, these funds invest a minimum of 25% each in large-cap, mid-cap and small-cap stocks, while maintaining a 25% buffer to invest across market caps. This enables the fund manager to optimise returns while managing risks.

This dynamic approach ensures that multi-cap funds can seize opportunities across different segments of the market, irrespective of the market cycle. "The large-cap component ensures stability, while mid- and small-cap stocks contribute to alpha generation during market upswings," says Nirav Karkera, head, Research, Fisdom.