scorecardresearchMulti-cap funds shine brighter than their flexi-caps, report says

Multi-cap funds shine brighter than their flexi-caps, report says

Updated: 23 May 2022, 12:02 PM IST
TL;DR.
With new allocation rules put in place by SEBI, multi-cap funds have outperformed flexi-cap funds,
According to SEBI's circular dated September 11, 2020, multi-cap schemes must have a minimum 25 per cent allocation of their portfolio in large-cap, mid-cap and small-cap companies. In the past year, mid-caps and small-caps have outperformed large-caps.

According to SEBI's circular dated September 11, 2020, multi-cap schemes must have a minimum 25 per cent allocation of their portfolio in large-cap, mid-cap and small-cap companies. In the past year, mid-caps and small-caps have outperformed large-caps.

After more than a year of implementation of new asset allocation rules by the SEBI, multi-cap schemes have delivered returns higher than flexi-cap funds as per a report published in the Economic Times

According to the data shared on the website of Value Research, a mutual funds research firm, the multi-cap funds category has given an average of 10.4 per cent returns in the past year. On the other hand, the flexi-cap funds category has given 8.2 per cent returns in the same period.

There are a few reasons for this. The very structure of asset allocation has worked in favour of multi-cap schemes. According to SEBI's circular dated September 11, 2020, multi-cap schemes must have a minimum 25 per cent allocation of their portfolio in large-cap, mid-cap and small-cap companies. In the past year, mid-caps and small-caps have outperformed large-caps.

The Nifty 100 index has given 8.6 per cent returns while the Nifty Midcap 150 and Nifty Smallcap 250 indices have given 10.3 per cent and 11.3 per cent returns, respectively. Flexi-cap schemes have higher exposure to large-cap stocks than multi-cap funds. Large-cap stocks have corrected in the past year. This has impacted returns in flexi-cap schemes.

At present, according to Value Research, the multi-cap scheme category has almost 47 per cent exposure to large-caps, 37.2 per cent to mid-caps and 15.3 per cent to small-caps. On the other hand, the flexi-cap category has 71 per cent exposure to large-caps, 22 per cent exposure to mid-caps and 6.4 per cent exposure to small-caps.

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Benchmarking mutual funds
First Published: 23 May 2022, 12:02 PM IST