IDFC Multicap Fund NFO Review – Can such funds provide stable returns

IDFC Multicap Fund NFO Review – Can such funds provide stable returns?

IDFC Multicap Fund NFO Review – Can such funds provide stable returnsIDFC Mutual Fund Launches Multicap Fund – NFO Details and review

IDFC mutual funds has launched Multicap Fund NFO that would open for subscription on 12th November, 2021. It’s an open-ended fund that invests in large cap, mid-cap, and smallcap stocks. SEBI has changed the guidelines earlier where it indicated that multicap funds should invest minimum 25% each in largecap, midcap and smallcap stocks. Many multicap funds have converted into flexicap mutual funds after this guideline has come. Earlier ABSL and Kotak has come up with Multicap fund after this change and now IDFC has launched this multicap fund. Should you invest in IDFC Multicap NFO? Let me review this multi-cap fund along with risk factors.

Also Read: How to protect your mutual fund portfolio from stock market crash?

IDFC Multicap Fund – NFO Issue Details

IDFC Multicap Fund would open for subscription on Friday, 12th November 2021 and closes on Friday, 26th November 2021. Since this is an open-ended mutual fund scheme, it would again open within 5 working days from initial NFO closure date.

Here are the NFO issue details.

Scheme Opens 12-Nov-21
Scheme Closes 26-Nov-21
Scheme reopens for continuous purchase/sale Within 5 working days
Minimum Lumpsum Rs 5,000
Minimum SIP Rs 100 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load 1% if redeemed within 1 year
Risk Very High Risk
Benchmark NIFTY 500 Multicap 50:25:25 TRI
Fund Manager Mr. Daylynn Pinto (equity portion)
Mr. Harshal Joshi (debt portion)
Mr. Viraj Kulkarni (Overseas portion)
Max TER 2.25%

IDFC Multicap Fund SID Link

What is the investment objective of IDFC Multicap Fund NFO?

The fund seeks to generate long term capital appreciation by investing in a diversified portfolio of equity & equity related instruments across large cap, mid cap, small cap stocks.

However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.

What is the allocation pattern in this mutual fund scheme?

This fund investment pattern is as follows:

Type of instruments Min % Max % Risk Profile
Equities and related instruments of which: 75% 100% High
Largecap Companies 25% 50% Medium to High
Midcap companies 25% 50% Medium to High
Smallcap companies 25% 50% Medium to High
International equity and equity funds 0% 25% Medium to High
Debt and Money Market instruments 0% 25% Low to Medium

Multicap Mutual funds Vs Flexicap Mutual Funds – What’s the difference?

Multicap funds invest across market cap – largecap, midcap and smallcap stocks. However, SEBI has bought new rule indicating that multicap funds should invest minimum of 25% each in large cap, midcap and Smallcap segment. SEBI gave an option to AMCs either adhere to this or change the name of the funds to “flexicap” if they don’t want to adhere to this rule.

This is how flexicap mutual funds were evolved. Flexicap funds were erstwhile multicap funds till Jan-2021. Post this, majority of the mutual fund houses have changed the name of the fund to “flexicap”.

As per new definition, multicap mutual funds would invest minimum of 25% each in largecap, midcap and smallcap stocks. Beyond this they can invest based on the investment objective of the fund.

Flexicap funds on other side would invest across market cap i.e., largecap, midcap and smallcap, however do not have any minimum investment restrictions. This gives flexibility to fund manager to take decision to move funds especially when certain segment is under performing.

Why to invest in IDFC Multicap Fund NFO?

Here are a few reasons to invest in this fund.

1) This fund would invest a minimum of 25% each in large cap, Midcap and smallcap which can help investors for portfolio diversification.

2) While investment in large cap stocks would provide stability, investment in midcap and smallcap segment would provide opportunity to invest in multibagger stocks that can generate high returns. Check recent midcap mutual fund rally and small cap mutual fund outstanding performance.

Major risk factors you should consider before investing in such funds

One should consider some of these risk factors / negative factors before investing.

1) This fund would invest a minimum of 25% each in large cap, midcap and smallcap stocks. This kind of portfolio allocation is relatively new, and we do not know how such allocation would perform in medium to long term.

2) This scheme would invest in smallcap and midcap stocks. While such stocks can provide high returns in the long term, these are high risk.

3) This mutual fund would invest up to 25% in foreign equity. Investments in overseas markets has currency risk along with geo-political risk.

4) It invests in debt instruments up to 25% of its portfolio where there is interest rate risk, price risk, credit risk and liquidity risk.

Performance of existing Multicap Funds

Multicap funds has been floated in the last 9-12 months and only few are retained from earlier category (old definition to new definition). Let us look at the performance even though it is for shorter period.

Scheme Name  3 Months 6 Months 1 Year
Quant Active Fund 9.7% 31.7% 85.6%
Mahindra Manulife Multi Cap Badhat Yojana 12.9% 37.9% 79.8%
Nippon India Multi Cap Fund 15.0% 34.2% 78.4%
Baroda Multi Cap Fund 15.7% 37.7% 74.3%
ICICI Prudential Multicap Fund 8.9% 31.1% 67.9%
Invesco India Multicap Fund 6.3% 32.7% 67.3%
Principal Multi Cap Growth Fund 10.9% 33.3% 65.3%
BNP Paribas Multi Cap Fund 11.1% 33.3% 65.0%
Sundaram Equity Fund 10.0% 31.0% 62.2%
ITI Multi Cap Fund 3.2% 17.4% 50.3%
Aditya Birla Sun Life Multi-Cap Fund 10.8% NA NA

Also Read: Nykaa IPO Review – Is it over priced IPO?

Should you invest in IDFC Multicap Fund NFO?

IDFC Mutual Fund Multicap Fund invests a minimum of 25% each in large cap, midcap and smallcap stocks. The definition of multicap funds was different 9 months back. We do not know how this new allocation would benefit investors in short, medium and long term. We have seen that midcap and Smallcap segment has outstanding performance in the last 1.5 years. In the next couple of years, largecap segment can perform well. Hence considering such fund can provide stable returns. High risk investors can invest in this scheme for medium to long term perspective. If you don’t want to test these new multicap funds, you can opt for some of the Best Flexicap Mutual Funds in 2021.

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Suresh KP

3 thoughts on “IDFC Multicap Fund NFO Review – Can such funds provide stable returns?”

  1. Please also give your go/no go analysis on
    1) Edelweiss Large and Midcap Index Fund NFO and
    2) Axis Nifty 50 Index Fund NFO

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