What are Multicap Funds? Learn About the Best Multicap Mutual Funds, their Allocation & Returns
Investing can be a tricky business, especially when it comes to choosing the right mutual fund for your portfolio. With so many options available, it can be overwhelming to make a decision. However, one type of mutual fund that has gained popularity in recent years is multicap funds.
These funds offer investors the potential for higher returns while also providing diversification and risk management. If you’re interested in learning more about multicap funds and how they can benefit your investment strategy, then just stick to this blog till the end.
List of Popular Multicap Funds to Invest in 2024
Here is the list of top multicap funds for you to invest in 2024.
| Name | AUM (Rs. in cr.) | CAGR 3Y (%) | CAGR 5Y (%) | Expense Ratio (%) | Volatility (%) | Minimum Lumpsum (Rs.) |
|---|---|---|---|---|---|---|
| Quant Active Fund | 11,249.35 | 26.85 | 35.97 | 0.58 | 18.56 | 5,000.00 |
| Mahindra Manulife Multi Cap Fund | 4,416.50 | 26.49 | 30.61 | 0.37 | 18.62 | 1,000.00 |
| Nippon India Multi Cap Fund | 34,943.27 | 32.23 | 28.61 | 0.75 | 14.66 | 100 |
| Baroda BNP Paribas Multi Cap Fund | 2,609.74 | 24.28 | 26.69 | 1.01 | 15.76 | 5,000.00 |
| Invesco India Multicap Fund | 3,622.96 | 22.30 | 26.37 | 0.66 | 14.47 | 1,000.00 |
| ICICI Pru Multicap Fund | 13,025.40 | 25.40 | 25.20 | 0.94 | 12.42 | 5,000.00 |
| Sundaram Multi Cap Fund | 2,724.92 | 22.14 | 25.03 | 0.88 | 13.65 | 100.00 |
| ITI Multi-Cap Fund | 1,364.42 | 23.99 | 22.25 | 0.5 | 16.72 | 1,000.00 |
| Aditya Birla SL Multi-Cap Fund | 5,984.92 | 20.91 | 0 | 0.68 | 13.88 | 500.00 |
| Kotak Multicap Fund | 13,216.22 | 0.00 | 0 | 0.38 | 16.77 | 100.00 |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data on the top multi cap funds in India in the list is from 22nd August 2024. However, for real-time updates on share price and market trends, visit the smallcase stocks collection today!
Overview of the Best Multicap Mutual Funds
Quant Active Fund
Launched in 2001, Quant Active Fund is one of the best multicap funds in the market, offering investors exposure to a diversified portfolio across large-cap, mid-cap, and small-cap stocks. It has consistently delivered strong returns over the years.
Quant Active Fund has an AUM of Rs. 11,249.35 cr., with a 3-year CAGR of 26.85% and a 5-year CAGR of 35.97%. The expense ratio is 0.58%, and it has a volatility of 18.56%. The minimum lump sum investment is Rs. 5,000.00.
Mahindra Manulife Multi Cap Fund
Introduced in 2018, Mahindra Manulife Multi Cap Fund focuses on investing across market capitalisations to provide balanced growth opportunities. It is among the top multi-cap mutual funds, offering a low expense ratio.
Mahindra Manulife Multi Cap Fund has an AUM of Rs. 4,416.50 cr., with a 3-year CAGR of 26.49% and a 5-year CAGR of 30.61%. The expense ratio is 0.37%, with a volatility of 18.62%. The minimum lump sum investment is Rs. 1,000.00.
Nippon India Multi Cap Fund
Nippon India Multi Cap Fund, a top performer in the multi-cap category, provides diversified equity exposure across different market caps. Launched in 2005, it has become one of the most preferred options for investors seeking growth.
Nippon India Multi Cap Fund has an AUM of Rs. 34,943.27 cr., a 3-year CAGR of 32.23%, and a 5-year CAGR of 28.61%. The expense ratio is 0.75%, with a volatility of 14.66%. The minimum lump sum investment is Rs. 100.00.
Baroda BNP Paribas Multi Cap Fund
Established in 2005, Baroda BNP Paribas Multi Cap Fund offers a diversified investment approach across large, mid, and small-cap stocks. It’s suitable for investors looking for a high-growth potential fund with a focus on long-term capital appreciation.
Baroda BNP Paribas Multi Cap Fund has an AUM of Rs. 2,609.74 cr., with a 3-year CAGR of 24.28% and a 5-year CAGR of 26.69%. The expense ratio is 1.01%, and the fund has a volatility of 15.76%. The minimum lump sum investment is Rs. 5,000.00.
Invesco India Multicap Fund
Launched in 2017, Invesco India Multicap Fund is recognised as one of the best multicap fund direct growth options, offering a balanced portfolio across different market caps with an emphasis on long-term capital growth.
Invesco India Multicap Fund has an AUM of Rs. 3,622.96 cr., with a 3-year CAGR of 22.30% and a 5-year CAGR of 26.37%. The expense ratio is 0.66%, with a volatility of 14.47%. The minimum lump sum investment is Rs. 1,000.00.
ICICI Prudential Multicap Fund
Introduced in 1994, ICICI Prudential Multicap Fund is one of the most established and top multi-cap mutual funds. It invests in a diverse portfolio of stocks across various sectors and market capitalisations.
ICICI Prudential Multicap Fund has an AUM of Rs. 13,025.40 cr., with a 3-year CAGR of 25.40% and a 5-year CAGR of 25.20%. The expense ratio is 0.94%, and the fund exhibits a volatility of 12.42%. The minimum lump sum investment is Rs. 5,000.00.
Sundaram Multi Cap Fund
Launched in 2001, Sundaram Multi Cap Fund offers a diversified investment strategy across various market capitalisations, making it a popular choice for investors seeking exposure to a broad equity market spectrum.
Sundaram Multi Cap Fund has an AUM of Rs. 2,724.92 cr., with a 3-year CAGR of 22.14% and a 5-year CAGR of 25.03%. The expense ratio is 0.88%, with a volatility of 13.65%. The minimum lump sum investment is Rs. 100.00.
ITI Multi-Cap Fund
Launched in 2019, the ITI Multi-Cap Fund is designed to invest across market capitalisations, offering the potential for higher returns with a moderately higher risk profile. It is among the top multi-cap mutual funds for those looking for a diversified equity investment.
ITI Multi-Cap Fund has an AUM of Rs. 1,364.42 crore, with a 3-year CAGR of 23.99% and a 5-year CAGR of 22.25%. The expense ratio is 0.50%, and the fund has a volatility of 16.72%. The minimum lump sum investment is Rs. 1,000.00.
Aditya Birla SL Multi-Cap Fund
Launched in 2021, the Aditya Birla SL Multi-Cap Fund offers a diversified investment strategy across various sectors and market caps. It is a newer entrant in the category but has already established itself as a competitive choice.
Aditya Birla SL Multi-Cap Fund has an AUM of Rs. 5,984.92 cr., with a 3-year CAGR of 20.91%. The expense ratio is 0.68%, and the fund shows a volatility of 13.88%. The minimum lump sum investment is Rs. 500.00.
Kotak Multicap Fund
Kotak Multicap Fund, launched in 2021, is a relatively new fund that offers exposure to a diversified equity portfolio across different market capitalisations. It aims to provide long-term capital appreciation.
Kotak Multicap Fund has an AUM of Rs. 13,216.22 cr. The expense ratio is 0.38%, with a volatility of 16.77%. The minimum lump sum investment is Rs. 100.00.
What are Multicap Funds?
Multicap funds are mutual funds that invest in a diversified portfolio of stocks across market capitalisation levels, including large-cap, mid-cap, and small-cap stocks. These funds aim to balance growth and stability by investing in companies of different sizes and levels of maturity. The primary objective of multi-cap funds is to generate long-term capital appreciation by investing in quality stocks across various sectors of the economy.
Portfolio Composition of Multicap Funds
The portfolio composition of multicap funds varies widely based on the fund manager’s investment strategy, the economic environment, and the market conditions. Typically, multicap funds hold a mix of large-cap stocks, mid-cap stocks, and small-cap stocks in varying proportions. The fund manager may tilt the portfolio towards a specific market capitalization level based on their outlook and investment philosophy.
The best multicap fund invests in different sectors of the economy, including, but not limited to, financials, healthcare, consumer goods, technology, and industrials. The portfolio turnover of the best multicap fund is typically low to moderate, as the fund manager aims to hold quality shares for the long term.
How Do Multicap Funds Work?
Each equity mutual fund channels the pooled investments of its investors into stocks of various companies.
Regulatory guidelines mandate mutual funds to adhere to specific investment criteria. For instance, a large cap fund is restricted to investing in the stocks of the top 100 companies by market capitalisation. Similarly, small cap funds focus on companies ranked below 250, and so forth.
However, the multi-cap category lacks regulatory constraints regarding the size and sector of companies it can invest in. Consequently, these funds have the flexibility to invest in large-cap, mid-cap, and small-cap stocks. The allocation among these stocks varies at the discretion of the fund manager, who adjusts it based on prevailing market conditions.
During periods of economic expansion, the fund manager may increase exposure to mid cap and small cap stocks to capitalise on their rapid growth potential. Conversely, during economic slowdowns, they might favour large cap stocks for greater stability.
Types of Multi Cap Funds
Now that we have understood what is multi cap mutual funds, let’s discuss their types. There are two types of multicap funds: pure multi-cap funds and flexi-cap funds. Pure multi-cap funds are those that invest a minimum of 65% of their assets in equity and equity-related instruments of companies across market capitalisation levels. On the other hand, Flexi-cap funds have no restrictions on their market capitalisation allocation and can invest in companies of any size.
Why Invest in Multicap Funds?
Investing in these funds offers significant advantages, including:
- Enhanced Diversification: Multicap funds provide a broad portfolio by investing in companies across different sizes and sectors. This diversification strategy mitigates risk by spreading investments across various sectors, minimising the impact of underperformance in any single sector or market segment.
- Portfolio Balance: The flexibility to invest in large, mid, and small-cap stocks allows these funds to adapt their portfolio composition based on prevailing market conditions. For instance, if mid and small-cap stocks become overvalued, fund managers can pivot towards large-cap stocks to adopt a defensive stance.
- Exposure to Key Sectors: With the freedom to invest across market capitalisations and industries, investors gain exposure to all major sectors driving the Indian economy forward. This approach ensures that investors do not miss out on potential opportunities within the Indian market.
Advantages of Investing in Multicap Funds
Investment in the best multi cap fund comes with a lot of advantages. Some of them are as follows:
- Diversification: Multicap funds invest across companies of different market capitalisations, sectors, and geographies. This diversification helps in reducing risk as the fund’s portfolio is spread across various sectors and companies.
- Flexibility: The best multicap funds have the flexibility to invest across different market capitalisations, i.e., large-cap, mid-cap, and small-cap companies, depending on market conditions. This enables fund managers to make changes to the portfolio based on market trends, making them less volatile.
- Multicap Fund Returns: Multicap funds can provide higher returns than pure large-cap or mid-cap funds. This is because they can invest in companies of different market capitalisations, depending on market conditions.
- Risk Management: Multi-cap funds invest in companies with different market capitalisations, sectors, and geographies. They can help manage risk by spreading the portfolio across various sectors and companies. This reduces the impact of market volatility on the portfolio. Additionally, the fund manager’s experience and expertise in selecting the right companies can help manage risk effectively.
Limitations of Investing in Multicap Funds
Some of the disadvantages of investing in multi-cap funds are as follows:
- High Expense Ratios: The best multicap funds tend to have higher expense ratios than other types of mutual funds due to their diversified portfolios and active management. This can reduce the fund’s overall returns.
- Difficulty in Managing: The management of multi-cap mutual funds can be more difficult than that of single-market capitalisation funds. This complexity arises from the fund managers’ need to allocate investments across multiple market capitalisation sectors.
- Market Risk: As with any equity investment, multi-cap funds are subject to market risks and volatility. The fund’s performance can be affected by economic, political, and global events that are beyond the fund manager’s control. Therefore, investors should have a long-term investment horizon and be prepared to weather market fluctuations.
Multicap Funds Vs Other Types of Funds
Multicap Funds Vs Large-Cap Funds
These funds are considered more diversified compared to large-cap funds since they can invest in companies across different market capitalisations. Large-cap funds, on the other hand, typically invest in well-established, blue-chip stocks with large market capitalisations.
While large-cap funds may offer stability and relatively lower risk, multi cap funds may provide a higher potential for returns. As they have the flexibility to invest in companies with different sizes and growth prospects. However, multi-cap funds may also come with higher expense ratios and market risks.
Multicap Funds Vs Mid-Cap Funds
When comparing multicap funds to mid-cap funds, it’s important to note that mid-cap funds typically invest in companies with a market capitalisation between $2 billion and $10 billion. Which is smaller than those invested in multicap funds. Mid-cap funds can offer higher growth potential than large-cap funds but also come with higher volatility and risk.
Multicap funds, on the other hand, have the advantage of being able to invest in companies of various sizes and sectors, providing investors with a more diversified portfolio. While mid-cap funds may have the potential for higher returns in a bullish market, multi cap funds may offer more stability and downside protection during market downturns.
Multicap Funds Vs Small-Cap Funds
Small-cap funds typically invest in companies with smaller market capitalisations, which have the potential to provide higher returns but also come with higher risks. On the other hand, multi cap funds invest in a mix of large-cap, mid-cap, and small-cap companies, providing a more diversified portfolio.
While small-cap funds may offer higher returns during market upswings, they can also experience significant losses during market downturns. Multi cap funds, on the other hand, can offer a more stable investment option with lower volatility due to their diversified portfolio.
Multicap Funds Vs Flexi-Cap Funds
Flexi cap and multicap funds are quite similar in their investment philosophy as both have the flexibility to invest across market capitalisations. However, there is a slight difference between the two. Flexi-cap funds have a mandate to invest at least 65% of their portfolio in equity and equity-related instruments. The remaining can be invested in debt or money market instruments.
On the other hand, multi-cap funds have no such restrictions and can allocate their assets across market capitalisations at their discretion. While flexi-cap funds offer greater flexibility in asset allocation, multi-cap funds may offer better diversification benefits due to their ability to invest across market capitalisation.
To Wrap It Up…
Multi-cap funds offer investors the potential for higher returns, risk management through diversification, and flexibility in portfolio composition. They offer exposure to companies of different sizes and sectors, thereby reducing the impact of market fluctuations on the portfolio.
However, it’s important to note that they come with higher expense ratios and can be complex to understand. Hence, it is important to do your research and consult with a financial advisor before investing in multi-cap funds.
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FAQs
A multi cap fund, meaning a mutual fund that invests in companies across all market capitalisations—large-cap, mid-cap, and small-cap—may provide a diversified investment strategy. This approach can help balance risk and potential returns by including a wide range of companies in different market segments.
Here is a list of top 5 multicap funds that you can invest in 2024.
1. Quant Active Fund
2. Mahindra Manulife Multi Cap Fund
3. Baroda BNP Paribas Multi Cap Fund
4. Nippon India Multi Cap Fund
5. Invesco India Multicap Fund
Note: This list of best multicap mutual funds is provided for educational purposes and is not intended as a recommendation or endorsement.
Multicap funds excel over mid-cap funds in diversification as they invest in a broader range of stocks. However, a mid-cap fund can effectively cater to various investment objectives.
Multicap funds offer investors a balanced exposure to companies of various caps, such as small, mid, and large caps, offering stability and growth. Flexicap funds particularly enable asset allocation flexibility.
Investors with a long-term investment horizon should contemplate allocating funds to these categories. Over extended periods, mid- and small-cap stocks historically outperformed large caps, and multi-cap funds allocate at least 50% of their assets to these segments. However, one must evaluate their risk appetite and investment goals before investing in multicap mutual funds.
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