Canara Robeco Launches Multicap Fund NFO – Should you invest?

Canara Robeco mutual fund has launched multicap fund NFO which is open now for subscription. It’s an open-ended fund that invests in large cap, mid-cap, and small cap stocks. Such funds can help investors for portfolio diversification and has potential to deliver risk adjusted across market cycles. Should you invest in Canara Robeco Multi Cap NFO? Let me review this multicap fund along listing various risk factors.

Canara Robeco Multi Cap Fund NFO – Issue Details

Here are the NFO issue details.

NFO Opens 07-Jul-23
NFO closes 21-Jul-23
Scheme reopens for continuous purchase/sale 04-Aug-23
Minimum Application Amount Rs  5,000 and in multiples of Rs  1 thereafter
Minimum SIP Rs 1,000 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load 1% exit load if redeeemed within 365 days
Risk Very High Risk
Benchmark Nifty 500 Multicap 50:25:25 Index TRI
Fund Manager Shridatta Bhandwalda
Vishal Mishra

Canara Robeco Multi Cap Fund SID

What is the investment objective of Canara Robeco Multi Cap Fund NFO?

The fund aims to generate long-term capital appreciation through diversified investments in equity & equity related instruments across large cap, mid cap, and 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 equity related instruments as follows: 75% 100% Very high
Largecap companies 25% 50% Very high
Midcap companies 25% 50% Very high
Smallcap companies 25% 50% Very high
Debt and Money Market Securities 0% 25% Low to Medium
Units issued by REITs and InvITs 0% 10% Very high

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

Multicap funds invest across market cap – large cap, 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 fund to “flexicap” if they don’t want to adhere to this rule.

This is how flexicap mutual funds were emerged. 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 by adding “Flexicap” term to existing funds in this category.

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 Canara Robeco Multi Cap Fund NFO?

Here are a few reasons to invest in this fund.

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

2) We have observed in the past that while large cap segment does well during a specific period, mid cap or small cap segment would do well in another market cycle. Hence, this category of mutual funds has potential to deliver consistent risk adjusted returns across market cycles.

Why not to invest in Canara Robeco Multi Cap Fund NFO?

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 (2.5 years), 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 at very high risk.

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

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

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

Performance of existing Multi Cap Funds

Multicap funds has been floated in the last 2.5 years and only a few are retained from the earlier category (old definition). Let us look at the performance in short to medium.

Scheme Name 1 Yrs 2 Yrs 3 Yrs 5 Yrs
Quant Active Fund 24% 15% 39% 23%
Mahindra Manulife Multi Cap Fund 26% 15% 31% 19%
Nippon India Multi Cap Fund 33% 23% 37% 18%
Baroda BNP Paribas Multi Cap Fund 25% 14% 29% 16%
ICICI Prudential Multicap Fund 26% 14% 28% 15%
Invesco India Multicap Fund 25% 10% 27% 14%
Sundaram Multi Cap Fund 20% 12% 27% 14%

Should you invest in Canara Robeco Multi Cap Fund NFO?

Canara Robeco Multi Cap Fund invests a minimum of 25% each in large cap, midcap and smallcap stocks. We could see that in the short term of 1 to 2 years, this category has performed extremely well. While investing in large cap can provide stable returns, investing in midcap and smallcap can provide very high returns in medium to long term. Hence, investing in such multicap fund can provide cyclical opportunities too.

On the other side, such fund investment in the Midcap and smallcap segment is at high risk. Your capital could be at risk.

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 from this category.

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2 comments

  1. Thanks a lot for your posts. It helps a lot in educating us newcomers to the stock market world. But I believe that ETFs are better than mutual funds.

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