Introducing Motilal Oswal Multicap Fund
Motilal Oswal Mutual Fund has launched a multi-cap fund which opened for subscription today. The fund is open-ended and invests in large, mid and small cap equities. These mutual funds can help investors diversify their portfolios and have the potential to provide risk-adjusted returns across various market cycles. Motilal Oswal Multicap Fund New fund offerings? What risk factors should investors consider before investing in such funds?
Motilal Oswal Multicap Fund – NFO Issue Details
More details on NFOs are as follows:
| Fund Name | Motilal Oswal Multicap Fund |
| NFO opens | May 28, 2024 |
| NFO is closed | June 11, 2024 |
| Scheme for continuous purchase/sale resumes | Within 5 business days |
| Minimum application amount | 500 rupees, and thereafter in increments of 1 rupee |
| Minimum SIP | 500 for 12 months, Rs. |
| Fund Net Asset Value | 10 during the NFO period, Rs. |
| Entry Load | zero |
| End Load | 1% if you exchange within 15 days |
| danger | Very high risk |
| standard | Nifty 500 Multicap 50:25:25 TRI |
| Fund Manager | Ajay Khandelwal Atul Mehra Niket Shah Santosh Singh Rakesh Shetty |
Motilal Oswal Multicap Fund SID
What is the investment objective of Motilal Oswal Multicap Fund?
The plan’s investment objective is to achieve long-term capital appreciation by investing primarily in equity and equity-related instruments of large, mid-cap and small companies.
There can be no assurance that the investment objective of the Scheme will be achieved.
What is the allocation pattern in this mutual fund scheme?
The investment pattern of this fund is as follows:
| Instrument type | Min % | Max % | Risk Profile |
|---|---|---|---|
| Stocks and stock-related products include: | 75% | 100% | Very expensive |
| Large companies | twenty five% | 50% | Very expensive |
| Mid-Sized Business | twenty five% | 50% | Very expensive |
| Small Cap Companies | twenty five% | 50% | Very expensive |
| Debt and Money Market Instruments | 0% | twenty five% | Low to moderate |
| Units issued by REITs and InvITs | 0% | Ten% | Very expensive |
Multicap Funds vs Flexicap Mutual Funds – What is the Difference?
Multi-cap mutual funds are required to invest at least 25% each in large-cap, mid-cap and small-cap stocks. Beyond this requirement, they are given flexibility to invest based on the fund’s investment objective.
Flexicap funds, on the other hand, invest in stocks of all market capitalisations (large cap, mid cap and small cap) without any minimum investment restrictions, which gives the fund manager flexibility in making investment decisions, especially when a particular market segment is underperforming.
Why Invest in Motilal Oswal Multicap Fund?
Here are some reasons to invest in this fund:
- The fund invests at least 25% in large-, mid- and small-cap stocks, which is beneficial for investors as it helps in diversifying the portfolio across different market segments.
- Historical data has shown that different segments of the market such as large cap, mid cap, small cap etc. perform well in different cycles. As a result, this type of mutual fund has the potential to generate consistent returns through different market cycles, considering the level of risk.
Why not invest in Motilal Oswal Multicap Fund?
You should consider some of these risk/negative factors before investing.
- The fund allocates a minimum of 25% to large, mid and small cap stocks with negative contributors. This type of portfolio allocation is relatively new, having been introduced only around 3.5 years ago, so it is unclear how this allocation will perform in the medium to long term.
- The fund invests in high-risk small and mid-cap stocks.
- Up to 25% of the Fund’s portfolio will be invested in debt securities that are subject to interest rate risk, reinvestment risk, credit risk and liquidity risk.
- Additionally, the fund plans to allocate up to 10% to REITs and InvITs, which are considered high-risk investments.
- Investors should go through all the risk factors set out in the Scheme Information Document (SID) before investing in such schemes.
Performance of existing multi-cap funds
Multi-cap funds have come into existence over the last three years and only a few funds have been retained from the previous category based on the earlier definition.Now let us examine the short to medium term performance of these funds.The one year returns are given as annualized percentage.
| Scheme name | 1 year | 3 years | 5 years |
|---|---|---|---|
| Mahindra Manulife Multicap Fund | 56% | 26% | 26% |
| Nippon India Multicap Fund | 55% | 33% | twenty three% |
| Baroda BNP Paribas Multicap Fund | 49% | twenty five% | twenty three% |
| Invesco India Multicap Fund | 46% | twenty one% | twenty two% |
| ICICI Prudential Multicap Fund | 49% | twenty four% | 20% |
| Sundaram Multi Cap Fund | 45% | twenty three% | 20% |
| ITI Multicap Fund | 60% | 20% | 19% |
| Union Multicap Fund | 44% | – | – |
| Tata Multicap Fund | 33% | – | – |
| LIC MF Multi Cap Fund | 48% | – | – |
| HDFC Multicap Fund | 51% | – | – |
| Axis Multi Cap Fund | 52% | – | – |
| Aditya Birla Sun Life Multicap Fund | 42% | twenty two% | – |
| HSBC Multi Cap Fund | 63% | – | – |
| Bank of India Multi Cap Fund | 53% | – | – |
| Kotak Multicap Fund | 61% | – | – |
| IDFC Multicap Fund | 44% | – | – |
| Bandhan Multicap Fund | 44% | – | – |
| SBI Multicap Fund | 34% | – | – |
Should you invest in Motilal Oswal Multicap Fund?
Motilal Oswal Multicap Fund invests a minimum of 25% each in large cap, mid cap and small cap stocks. In the short term (1-2 years), this category has performed well. While investments in large cap stocks give stable returns, investments in mid and small cap stocks have the potential to generate very high returns in the medium to long term. Hence, investing in this multicap fund offers you the opportunity to align with the market cycle.
However, investors should note that investments in the mid and small cap segment carry a high degree of risk and may put their capital at risk.
High risk investors can invest in such funds. If you are not going to test with new funds, you can invest in existing mutual funds in the multi-cap category.
Suresh KP is the Founder of Myinvestmentideas. He is a NISM Certified Investment Advisor and NISM Certified Research Analyst. He has been involved in analyzing financial markets for the last 20 years. He can be reached at suresh@myinvestmentideas.com.
