HDFC Multi Cap Fund – NFO Details, Risk Factors and Review
HDFC MF has launched Multi Cap Fund NFO that would open for subscription on 23rd 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 Multi Cap funds should invest minimum 25% each in largecap, midcap and smallcap stocks. Many Multi Cap funds have converted into flexicap mutual funds after this guideline has come. Earlier ABSL, Kotak MF and IDFC MF has come up with Multi Cap fund after this change and now HDFC has launched this Multi Cap fund. Should you invest in HDFC Multi Cap NFO? Let me review this multicap fund along with risk factors.
HDFC Multi Cap Fund – NFO Issue Details
HDFC Multi Cap Fund would open for subscription on Tuesday, 23rd November 2021 and closes on Tuesday, 7th December 2021. Since this is an open-ended mutual fund scheme, it would again open within 5 business days from initial NFO closure date. Here are the NFO issue details.
| Scheme Opens | 23-Nov-21 |
| Scheme Closes | 07-Dec-21 |
| Scheme reopens for continuous purchase/sale | Within 5 business days |
| Minimum Lumpsum | Rs 5,000 |
| Minimum SIP | Rs 500 for 6 months |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | 1% if reedeemed within 1 year |
| Risk | Very High Risk |
| Benchmark | Nifty 500 MULTICAP 50:25:25 |
| Fund Manager | Mr. Gopal Agrawal |
| Max TER | 2.25% |
What is the investment objective of HDFC Multi Cap Fund NFO?
To generate long term capital appreciation by investing in equity and equity related securities of large cap, mid cap and small cap companies.
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 |
| Units issued by REITs and InvITs | 0% | 10% | Medium to High |
| Debt and Money Market instruments | 0% | 25% | Low to Medium |
Multi Cap Mutual funds Vs Flexicap Mutual Funds – What’s the difference?
Multi Cap funds invest across market cap – largecap, midcap and smallcap stocks. However, SEBI has bought new rule indicating that Multi Cap 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 Multi Cap 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, Multi Cap 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 HDFC Multi Cap 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 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.
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 Multi Cap Funds
Multi Cap funds has been floated in the last 10 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 (data as of last week).
| Scheme Name | 3 Months | 6 Months | 1 Year |
|---|---|---|---|
| Quant Active Fund | 12.1% | 25.3% | 87.5% |
| Nippon India Multi Cap Fund | 17.0% | 35.3% | 75.2% |
| Mahindra Manulife Multi Cap Badhat Yojana | 13.8% | 35.0% | 75.0% |
| Baroda Multi Cap Fund | 15.5% | 36.5% | 68.3% |
| Invesco India Multicap Fund | 10.0% | 32.2% | 64.4% |
| Principal Multi Cap Growth Fund | 13.1% | 35.8% | 63.5% |
| BNP Paribas Multi Cap Fund | 11.8% | 32.0% | 62.4% |
| ICICI Prudential Multicap Fund | 10.0% | 28.2% | 60.9% |
| Sundaram Equity Fund | 12.1% | 30.7% | 57.9% |
| ITI Multi Cap Fund | 8.4% | 14.9% | 46.9% |
| Aditya Birla Sun Life Multi-Cap Fund | 11.3% | 30.4% | NA |
Also Read: Nippon India bets on Taiwan growth story and launches Taiwan Equity Fund NFO
Should you invest in HDFC Multi Cap Fund NFO?
HDFC Multi Cap Fund invests a minimum of 25% each in large cap, midcap and smallcap stocks. The definition of Multi Cap funds was different 10 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 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 Multi Cap funds, you can opt for some of the Best Flexicap Mutual Funds in 2021.
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Very clearly SEBI and fund houses are playing a game where SEBI creates a new category in a controversial way to help Fund houses launch NFOs.
When old Multicap fund rules were changed, there was such backlash.
But now fund houses are happily launching NFOs?
Please call out these crooks in your review.
Pradeep, This is already called out. SEBI changed rules, informed AMCs to rename their old fund or continue them and adhere to new rules. Many changed to flexicap funds and some retained. Whoever changed the names have an option to float new funds in multicap category name.
Send me your analysing result about share market,multi cap,mid cap etc.
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