Mirae Asset has launched the Multicap Fund NFO, which will be open for applications from 28th July 2023. The fund is open-ended and invests in large-cap, mid-cap, and small-cap stocks. Such multi-cap funds can help investors diversify their portfolios and potentially offer risk-adjusted returns over various market cycles. Let us now consider this multi-cap fund and consider the potential benefits and various risk factors to decide whether to invest in this multi-cap fund. Mirae Asset Multicap NFO whether it is suitable for you.
Also read: Bajaj Finserv Flexi Cap NFO Review
Mirae Asset Multicap Fund – NFO Issue Details
Learn more about NFOs here.
| NFO open | July 28, 2023 |
| NFO Closing | August 11, 23 |
| Schemes for continuous purchases/sales are reopened | August 22, 2023 |
| Minimum application amount | 5,000 rupees, thereafter in multiples of 1 rupee |
| Minimum SIP | 1,000 rupees for 6 months |
| NAV of the fund | 10 rupees during NFO period |
| entry road | Nothing |
| end of load | 1% exit load if redeemed within 365 days |
| dangerous | very high risk |
| standard | Nifty 500 Multicap 50:25:25 TRI |
| fund manager | Ankit Jayne |
Mirai Asset Multi-Cap Fund SID
What is the investment objective of Mirai Asset Multi-Cap Fund NFO?
The investment objective of the scheme is to bring in long-term capital growth from a portfolio that primarily invests in Indian equities and large-cap, mid-cap and small-cap equity-related securities.
However, there is no guarantee that the investment objective of the scheme will be achieved..
What is the allocation pattern for this mutual fund scheme?
The investment pattern of this fund is as follows:
| instrument type | minimum% | maximum% | risk profile |
|---|---|---|---|
| Stocks and stock-related products are: | 75% | 100% | expensive |
| large cap companies | twenty five% | 50% | expensive |
| mid-cap companies | twenty five% | 50% | expensive |
| small cap companies | twenty five% | 50% | expensive |
| Debt securities (including securitized debt and debt derivatives) and money market instruments | 0% | twenty five% | low to medium |
| Units issued by REITs and InvITs | 0% | Ten% | medium to high |
Multicap Funds and Flexicap Mutual Funds – What’s the Difference?
A multi-cap fund invests in stocks of different market capitalizations, such as large-cap, mid-cap, and small-cap stocks. However, SEBI (Securities and Exchange Board of India) has introduced new rules that require multi-cap funds to invest a minimum of 25% in each of the large, mid and small cap segments. Alternatively, AMC can choose to follow this rule or rename the fund to ‘FlexiCap’ if it does not wish to do so.
Thus, the FlexiCap Mutual Fund was born. Flexicap funds were known as multicap funds until January 2021. Since then, most mutual funds have renamed this category of funds by adding the term ‘flexicap’.
The new definition requires multi-cap mutual funds to invest at least 25% each in large-cap, mid-cap, and small-cap stocks. Beyond this requirement, you have the flexibility to invest based on your fund’s investment objectives.
Flexicap funds, on the other hand, invest in stocks of all market caps (large, mid and small) with no minimum investment limit. This gives fund managers flexibility in making investment decisions, especially when certain market segments are underperforming.
Why invest in Mirae Asset Multicap Fund NFO?
Here are some reasons to invest in this fund.
1) The fund will ensure that at least 25% of its investments are in large, mid and small cap stocks. This is beneficial for investors as it helps them diversify their portfolios across different market segments.
2) Based on our historical observations, we have found that different segments of the market, such as large-cap, mid-cap, and small-cap, have performed well in different time periods. As a result, this type of mutual fund is likely to deliver consistent returns through various market cycles given the level of risk.
Interested in investing in the Mirae Asset Multicap Fund NFO?
You should consider some of these risk/negative factors before investing.
1) The fund allocates a minimum of 25% to large, mid and small cap stocks. It is important to note that this type of portfolio allocation is relatively new, having been around for only about 2.5 years. As a result, it remains to be seen how this allocation will perform in the medium to long term.
2) The Fund invests in small and mid-cap stocks. It is important to understand that while these stocks have the potential to provide high returns over the long term, they carry a higher level of risk.
3) Up to 25% of the Fund’s portfolio is invested in bonds. It is important to recognize that investing in debt instruments involves certain risks, including interest rate risk, reinvestment risk, credit risk and liquidity risk.
4) In addition, the Fund will allocate up to 10% to REITs and InvITs, which are considered high-risk investments.
5) Investors should consider all risk factors set out in the Scheme Information Document (SID) before investing in any such scheme.
Performance of existing multi-cap funds
Multi-cap funds have emerged in the last two and a half years, but only a few funds have been retained from the previous category (based on the old definition). Now let’s look at the short to medium term performance of these funds.
| scheme name | 1 year old | 2 years | 3 years | 5 years |
|---|---|---|---|---|
| quantitative active funds | twenty four% | 15% | 39% | twenty three% |
| Mahindra Manulife Multicap Fund | 26% | 15% | 31% | 19% |
| Japan India Multi-Cap Fund | 33% | twenty three% | 37% | 18% |
| Baroda BNP Paribas Multicap Fund | twenty five% | 14% | 29% | 16% |
| ICICI Prudential Multicap Fund | 26% | 14% | 28% | 15% |
| Invesco India Multicap Fund | twenty five% | Ten% | 27% | 14% |
| Sundaram Multicap Fund | 20% | 12% | 27% | 14% |
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Should I invest in Mirae Asset Multicap Fund NFO?
The Mirae Asset Multicap Fund guarantees a minimum investment of 25% in each of large, mid and small cap stocks. This category has performed very well over a short period of 1-2 years. Investing in large-cap stocks can provide stable returns, while investing in mid- and small-cap stocks can generate very high returns over the medium to long term. Investing in this multi-cap fund may therefore provide opportunities in line with market cycles.
However, it is important to note that investing in the mid- and small-cap segments of such funds carries a high degree of risk. Your capital may be at risk.
Investing in this scheme may be suitable for high-risk investors with a medium- to long-term perspective. Alternatively, if you don’t want to invest in these new multi-cap funds, you may consider existing funds in this category.
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Suresh KP is the founder of Myinvestmentideas. He is his NISM Certified – Investment Advisor and he is a NISM Certified – Research Analyst. I have been analyzing financial markets for the past 20 years. You can contact me at suresh@myinvestmentideas.com.
