Returns given by mutual fund schemes are vital to evaluate their overall worthiness and their ‘pull’ factor for prospective investors. Although experts tend to emphasise that investors should look beyond the past performance of fund schemes, but invariably – the past returns are still assessed as one of the key factors to evaluate a scheme’s potential.
Recently, Motilal Oswal AMC’s Akhil Chaturvedi told MintGenie in an interview that investors should ideally look at the fund house’s pedigree instead of the past returns of its fund schemes.
Before we proceed further, we would define the multi-cap funds. They are diversified equity funds that invest in the stocks across market capitalisations i.e., large cap, small cap and mid cap. Investments are made in different proportions to meet the fund’s investment objective.
According to the capital markets regulator Securities Exchange Board of India (SEBI), these funds are supposed to hold a minimum of 25 percent funds in small, mid and large-cap stocks.
It is significant to note that multi cap funds are different from flexi cap funds (a category that was created in November 2020) in a way that they do not have any restriction of investing a minimum threshold in one category of funds i.e., small or mid-caps. The only restriction is to invest a minimum of 65 percent of funds in the equity.
On the other hand, multi caps are meant to allocate a minimum of one-fourth funds in each of the three categories of capitalisation spectrum.
When we assessed the past five-year-performance of multi cap funds, we discovered that two fund schemes gave more than 14 percent while the third one was quite close at 13.56 percent in terms of regular returns. The direct returns of these schemes were naturally higher than these.
As we can see in the table below, Mahindra Manulife Multi Cap Badhat Yojana’s CAGR (compound annual growth rate) was 14.25 percent, and Quant Active Fund’s CAGR was 21.97 percent. At the same time, Nippon India Multi Cap Fund’s CAGR was 13.56 percent. It is vital to mention here that these returns were higher than 12 percent returns delivered by the benchmark index of Nifty 500 Multicap 50:25:25 TRI.
|Mutual fund||5-year-returns (%)|
|Mahindra Manulife Multi Cap Badhat Yojana||14.25|
|Quant Active Fund||21.97|
|Nippon India Multi Cap Fund||13.56|
(Source: AMFI; regular five-year returns as on Oct 20, 2022)
Details of the top-performing multi cap mutual funds:
Mahindra Manulife Multi Cap Badhat Yojana: The scheme was launched on May 11, 2017. It has given a return of 14.26 percent since inception. In other words, if someone had invested ₹10,000 at the time of scheme's launch, it would have swelled to ₹20.515.
The fund is managed by Fatema Pacha. The key constituent stocks of the fund scheme are SBI, ICICI Bank, Infosys, ITC, Maruti Suzuki India, Axis Bank, Bajaj Finance, Zee Entertainment, Canara Bank and Clearing Corporation of India.
The sector-wise portfolio holdings indicates that the fund scheme invested 22.6 percent in financial services, 13.60 percent in industrial manufacturing, 9.66 percent in IT, 7.47 percent in consumer goods, 6.72 percent in automobile and 4.27 percent pharma.
Quant Active Fund: This scheme was launched in March 2001. It has three fund managers Ankit Pande, Vasav Sahgal and Sanjeev Sharma.
The scheme has given a return of 19.23 percent since inception. This means if someone had invested ₹10,000 in the scheme at that time, it would have grown to ₹4,35,420 by now.
The key portfolio constituents are ITC, Ambuja Cements, Adani Ports and Special Economic Zone, State Bank of India, Larsen & Toubro, Patanjali Foods, IRB Infra Developers, Fortis Healthcare, Linde India and Escorts Kubota.
The industry wise allocation shows that the mutual fund has invested in diversified FMCG (10.86%), Cement and cement products (10.84%), banks (9.3%), construction (7.31%), agricultural food and other products (6.24%), transport infrastructure (5.61%) and telecom services (4.07%).