Multi-cap funds will now have to invest at least 25% each in large-, mid- and small-cap segments. While the fund managers still have a chance to give 25% portfolio Gain by increasing exposure to a segment in which they perform well, this takes away their ability to reduce exposure to a segment that performs well, thus making the fund more strict in terms of market cap exposure, And therefore, there must be risk with NS fund manager Choose to increase the allocation to small caps. If Shweta wants to benefit from the long-term growth prospects of medium and small sized companies, she may find this a good way to participate. The fund can also be used for capitalization with allocation to large-caps acting as a safety buffer in the mid-cap and small-cap segments. Large-cap allocation of multi-cap funds will limit downside risk in volatile markets.
The flexi-cap category of equity funds, on the other hand, will invest at least 65% of the total assets in equity investments without any defined limits in terms of investments they should take in the large-, mid- or small-cap segment . These have the facility to change the market cap allocation as per the point of view of the fund manager. In a bull market, these schemes will increase the mid-cap and small-cap allocation, while in bear market These will reduce mid-cap and small-cap exposure and shift to large-cap. Shweta would like to explore multiple flexi-cap funds and choose a large-cap oriented flexi-cap fund if she is looking for a steady ride with mid- and small-caps that boost returns.
Although multi-cap and flexi-cap funds may sound alike, there are significant differences in investment mandates. Simply put, if Shweta wants to invest in different market cap segments, she can invest in multi-cap funds. However, if he is not sure which market cap segments are suitable for his investment needs and wants the fund manager to decide which segment to invest in as per the market conditions, then he can invest in flexi-cap funds. can do He should choose from the two strategies on the basis of risk and return expectations.
(Content on this page is courtesy of Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Aarti Bhargava and Labh Mehta.)