Tata Multicap Fund NFO – Issue details, Risk Factors and Review

Tata mutual fund has launched multicap fund NFO that would open for subscription on 16th January, 2023. 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 large cap, 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 Tata Multicap NFO? Let me review this multicap fund along with providing various risk factors.

Also Read: 5 Mutual Funds with highest SIP returns in last 10 years

Tata Multicap Fund – NFO Issue Details

Here are the NFO issue details.

Scheme Opens 16-Jan-23
Scheme Closes 30-Jan-23
Scheme reopens for continuous purchase/sale Within 5 working 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 > 12% of investment within 1 year – 1%
Risk Very High Risk
Benchmark Nifty 500 Multicap 50:25:25 TRI
Fund Manager Mr. Rahul Singh
Max TER 2.25%

Tata Multicap Fund SID

What is the investment objective of Tata Multicap Fund NFO?

The investment objective of the scheme is to generate long-term capital appreciation from a portfolio of equity and equity related securities across market capitalization.

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

Tata Multicap Fund NFO – Issue details, Risk Factors and Review

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% Medium to low
Units issued by REITs and InvITs 0% 10% Very high
ADR/GDR/Foreign securities/Overseas ETFs 0% 20% Very high
Mutual Fund Units 0% 20% 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 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 Tata 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.

Why not to invest in Tata Multicap 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 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 very high risk.

3) This mutual fund would invest up to 20% 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, re-investment risk, credit risk and liquidity risk.

5) This fund also invests up to 10% in REITs and InvITs which is 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

Multicap funds has been floated in the last 23 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  1 Yr 2 Yrs 3 Yrs
Nippon India Multicap Fund 9.6% 27.2% 19.6%
Quant Active Fund 7.0% 29.9% 36.1%
Kotak Multicap Fund 6.7%
Kotak Multicap Fund 6.7%
IDFC Multicap Fund 6.0%
IDFC Multicap Fund 6.0%
HDFC Multicap Fund 5.7%
ICICI Prudential Multicap Fund 1.2% 17.4% 16.3%
ITI Multi Cap Fund 0.7% 9.4% 9.0%
Sundaram Multi Cap Fund Series I -0.3% 14.6% 16.6%
Sundaram Multi Cap Fund Series II -0.3% 14.6% 16.7%
Axis Multicap Fund -2.4%
Aditya Birla Sun Life Multi Cap Fund -2.7%
Mahindra Manulife Multi Cap Badhat Yojana -2.9% 22.7% 22.6%
Invesco India Multicap Fund -4.2% 16.6% 18.7%
Baroda BNP Paribas Multi Cap Fund -5.2% 17.8% 20.1%
Sundaram Multi Cap Fund -5.2% 18.5% 18.5%

Also Read: 10 Best SIP Mutual Funds to invest in 2023

Should you invest in Tata Multicap Fund NFO?

Tata Multicap 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.

On the other side, such fund investment in 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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Suresh KP

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