Mirae Asset has launched Multicap Fund NFO, which will be available for subscription starting July 28, 2023. This fund is open-ended and invests in stocks of large cap, mid-cap, and small cap companies. Multicap funds like these can assist investors in diversifying their portfolios and have the potential to provide risk-adjusted returns across different market cycles. Now, let’s review this multicap fund, considering its potential benefits and various risk factors, to help you decide if investing in Mirae Asset Multicap NFO is suitable for you or not.
Also Read: Bajaj Finserv Flexi Cap NFO Review
Mirae Asset Multicap Fund – NFO Issue Details
Here are the NFO details.
| NFO Opens | 28-Jul-23 |
| NFO closes | 11-Aug-23 |
| Scheme reopens for continuous purchase/sale | 22-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 TRI |
| Fund Manager | Ankit Jain |
What is the investment objective of Mirae Asset Multicap Fund NFO?
The investment objective of the scheme is to provide long-term capital appreciation from a portfolio investing predominantly in Indian equity and equity related securities of large cap, mid cap, 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 equity related instruments as follows: | 75% | 100% | High |
| Largecap companies | 25% | 50% | High |
| Midcap companies | 25% | 50% | High |
| Smallcap companies | 25% | 50% | High |
| Debt securities (including securitized debt & debt derivatives) and money market instruments | 0% | 25% | Low to Medium |
| Units issued by REITs and InvITs | 0% | 10% | Medium to High |
Multicap Funds vs. Flexicap Mutual Funds – What’s the Difference?
Multicap funds invest in stocks of different market capitalizations, including large-cap, mid-cap, and small-cap stocks. However, SEBI (Securities and Exchange Board of India) introduced a new rule stating that Multicap funds should invest a minimum of 25% in each of the large-cap, mid-cap, and small-cap segments. Alternatively, AMCs have the choice to either follow this rule or rename the fund as “flexicap” if they do not wish to comply.
This is how flexicap mutual funds emerged. Flexicap funds used to be known as Multicap funds until January 2021. Since then, most mutual fund houses have changed the names of their funds in this category by adding the term “Flexicap.”
Under the new definition, multicap mutual funds must invest at least 25% in each of the large-cap, mid-cap, and small-cap stocks. Beyond this requirement, they have the flexibility to invest based on the fund’s investment objective.
On the other hand, flexicap funds invest in stocks across all market capitalizations (large-cap, mid-cap, and small-cap) without any minimum investment restrictions. This gives the fund manager the flexibility to make investment decisions, particularly when a certain market segment is underperforming.
Why to invest in Mirae Asset Multicap Fund NFO?
Here are a few reasons to invest in this fund.
1) This fund ensures that at least 25% of the investments are made in large-cap, mid-cap, and small-cap stocks. This can be beneficial for investors as it helps diversify their portfolio across different market segments.
2) Based on past observations, we have noticed that different segments of the market, such as large-cap, mid-cap, and small-cap, perform well during different periods. As a result, this type of mutual fund has the potential to deliver consistent returns, considering the level of risk, throughout various market cycles.
Why not to invest in Mirae Asset Multicap Fund NFO?
One should consider some of these risk factors / negative factors before investing.
1) This fund will allocate a minimum of 25% to large-cap, mid-cap, and small-cap stocks. It’s important to note that this type of portfolio allocation is relatively new, only around 2.5 years old. As a result, we don’t yet know how this allocation will perform in the medium to long term.
2) The fund will invest in small-cap and mid-cap stocks. While these stocks have the potential to provide high returns over the long term, it’s crucial to understand that they come with a higher level of risk.
3) Up to 25% of the fund’s portfolio will be invested in debt instruments. It’s important to be aware that investing in debt instruments carries certain risks, including interest rate risk, re-investment risk, credit risk, and liquidity risk.
4) Additionally, the fund will allocate up to 10% to REITs and InvITs, which are considered to be high-risk investments.
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 have emerged in the past 2.5 years, and only a few funds have been retained from the previous category (based on the old definition). Now, let’s examine the performance of these funds in the short to medium term.
| 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% |
You may like: 5 Top Performing Mutual Funds in the last 20 years
Should you invest in Mirae Asset Multicap Fund NFO?
Mirae Asset Multicap Fund ensures a minimum investment of 25% in each of the large cap, midcap, and smallcap stocks. In the short term of 1 to 2 years, this category has shown exceptional performance. While investing in large cap stocks can provide stable returns, investing in midcap and smallcap stocks has the potential to yield very high returns in the medium to long term. Therefore, investing in this multicap fund can offer opportunities that follow market cycles.
However, it’s important to note that investing in the midcap and smallcap segments of such funds carries high risk. Your capital could be at risk.
For high-risk investors with a medium to long-term perspective, investing in this scheme could be suitable. Alternatively, if you prefer not to invest in these new multicap funds, you can consider some of the existing funds from this category.
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