SBI Multicap Fund NFO – Details, Risk Factors and Review

SBI Multicap Mutual Fund - NFO issue details, Review and Risk FactorsSBI Launches Multicap Fund – NFO Details and Review

SBI mutual fund has launched multicap fund NFO that would open for subscription on 14th February, 2022. It’s an open-ended fund that invests in large cap, mid-cap, and small cap 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 in early 2021. Should you invest in SBI Multicap NFO? Let me review this Multicap fund along with risk factors.

Also Read: 5 Mutual Fund Schemes that generated 10x returns in last 10 years

SBI Multicap Fund – NFO Issue Details

Here are the NFO issue details.

Scheme Opens 14-Feb-22
Scheme Closes 28-Feb-22
Scheme reopens for continuous purchase / sale Within 5 business days
Minimum Lumpsum Rs 5,000
Minimum SIP Rs 500 for 12 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load Within 1 year – 0% – Upto 10% units
Within 1 year – 1% – Beyond 10% units
After 1 year – 0%
Risk Very High Risk
Benchmark NIFTY 500 Multicap 50:25:25 TRI
Fund Manager Mr. R. Srinivasan & Mr. Mohit Jain (Dedicated fund manager for overseas securities)
Max TER 2.25%

SBI Multicap Fund SID

What is the investment objective of SBI Multicap Fund NFO?

To provide investors with opportunities for long term growth in capital from a diversified portfolio of equity and equity related instruments across market capitalization.

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
Minimum investment in equity – 75% of total assets in the following manner:
a) Large Cap Companies 25% 50% High
b) Mid Cap Companies 25% 50% High
c) Small Cap Companies 25% 50% High
Debt and Money Market Securities 0% 25% Low to Medium
Units issued by REITs and InvITs 0% 10% Medium to High

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 a minimum of 25% each in large cap, mid cap 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, the majority of the mutual fund houses have changed the name of the fund to “flexicap”.

As per new definition, multicap mutual funds would invest a minimum of 25% each in large cap, 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., large cap, midcap and smallcap, however, do not have any minimum investment restrictions. This gives flexibility to fund manager to take the decision to move funds, especially when certain segment is under performing.

Why to invest in SBI 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 securities. Investments in overseas markets have currency risk along with geopolitical 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.

5) This fund also invests up to 10% in REITs and InvITs which are high risk.

6) Investors should go through all risk factors indicated in the scheme information document (SID) before investing in such schemes.

Performance of existing Multicap Funds

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

Scheme Name  6 Months 1 Year
Quant Active Fund 12.0% 50.7%
Mahindra Manulife Multi Cap Badhat Yojana 10.7% 37.0%
Nippon India Multi Cap Fund 13.9% 34.3%
Baroda Multi Cap Fund 12.0% 32.9%
BNP Paribas Multi Cap Fund 9.0% 30.6%
Sundaram Multi Cap Fund 8.9% 26.9%
Invesco India Multicap Fund 5.3% 24.6%
ICICI Prudential Multicap Fund 6.1% 22.5%
ITI Multi Cap Fund -3.8% 6.0%

Also Read: Best Largecap mutual funds for 2022

Should you invest in SBI Multicap Fund NFO?

SBI Multicap Fund invests a minimum of 25% each in large cap, midcap and smallcap stocks. The definition of multicap funds was different 12 months back. We do not know how this new allocation would perform in short, medium and long term. We have seen that midcap and smallcap segment has outstanding performance in the last 2 years. In the next couple of years, the large cap 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 existing funds itself.

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