What are Multicap Funds? Learn About the Best Multicap Mutual Funds, their Allocation & Returns
Multicap funds are mutual funds that allocate investments across large-cap, mid-cap, and small-cap stocks, providing a diversified portfolio. With SEBI-mandated allocation rules, these funds aim to balance risk and returns by investing at least 25% in each market capitalisation category. This article provides a detailed overview of multicap funds, their benefits, limitations, and how they differ from other mutual fund categories.
List of Popular Multicap Funds to Invest in 2025
Here is the list of top multicap funds for 2025.
| Name | AUM (Rs. in cr.) | CAGR 3Y (%) | CAGR 5Y (%) | Expense Ratio (%) | Volatility (%) | Minimum Lumpsum (Rs.) |
|---|---|---|---|---|---|---|
| Quant Active Fund | 10,613.88 | 17.24 | 29.98 | 0.58 | 18.79 | 5,000.00 |
| Mahindra Manulife Multi Cap Fund | 4,857.81 | 21.19 | 26.49 | 0.45 | 18.73 | 1,000.00 |
| Baroda BNP Paribas Multi Cap Fund | 2,790.73 | 20.01 | 25.40 | 0.93 | 16.40 | 5,000.00 |
| Nippon India Multi Cap Fund | 39,000.80 | 26.80 | 25.21 | 0.73 | 15.20 | 100.00 |
| Invesco India Multicap Fund | 3,897.12 | 20.51 | 24.59 | 0.66 | 15.74 | 1,000.00 |
| Sundaram Multi Cap Fund | 2,760.83 | 16.98 | 22.25 | 0.9 | 14.28 | 100.00 |
| ICICI Pru Multicap Fund | 14,193.16 | 20.78 | 21.67 | 0.93 | 12.73 | 5,000.00 |
| ITI Multi-Cap Fund | 1,381.80 | 22.17 | 18.25 | 0.32 | 17.38 | 1,000.00 |
| Aditya Birla SL Multi-Cap Fund | 6,234.02 | 17.87 | 0.00 | 0.79 | 14.08 | 500.00 |
| Kotak Multicap Fund | 15,816.46 | 27.01 | 0.00 | 0.39 | 16.93 | 100.00 |
Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.
Note: The data on the top 10 multi cap mutual funds in India list is from 2nd January 2025, and the data is derived from Tickertape Mutual Fund Screener, using the following parameters:
- Plan: Growth
- Category: Multi Cap Fund
- 5Y CAGR: Sorted from Highest to Lowest
🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.
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. SEBI mandates multi cap funds to allocate at least 25% of their portfolio in large-cap, mid-cap, and small-cap stocks each.
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
Multicap funds are equity mutual funds regulated by SEBI and must follow specific allocation guidelines. Under this category, there is often a distinction between two fund types:
- Pure Multicap Funds: These funds are mandated to invest at least 25% of their total assets in large-cap stocks, 25% in mid-cap stocks, and 25% in small-cap stocks. The remaining 25% can be allocated based on the fund manager’s discretion, which provides some flexibility while adhering to the prescribed limits.
- Flexi-Cap Funds: While similar in diversification, flexi-cap funds do not have the same allocation mandates. These funds must invest at least 65% of their total assets in equity and equity-related instruments but can allocate freely across large-cap, mid-cap, and small-cap stocks without restrictions.
How to Invest in Multicap Funds?
You can easily invest in multicap mutual funds by following these steps:
- To invest in mutual funds, you can visit an equity investment platform such as smallcase or Tickertape.
- The next step would be to research and identify the best multicap funds to invest in which aligns with your investment thesis. You can easily select and learn more about the best multicap funds with the help of a financial tool like the Tickertape Mutual Fund Screener. With 50+ pre-loaded filters, it helps you to create a comprehensive list by giving insights about the fund’s performance. Try it now!
- Once you have selected the funds based on different metrics and parameters, go to smallcase.com or the smallcase app, and login via your phone number. Click on ‘Discover‘ and enter the name of the specific mutual fund name in the search bar and hit enter. You can click on ‘invest now’ and select whether you want to invest a lump sum amount or start a SIP and start investing!
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:
- 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 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.
Moreover, if you want to take a deep dive into the world of the share market, you can check out smallcase. It offers ready-made diversified portfolios where you can invest with just a few clicks. These smallcases are managed by professionals and consist multi-cap stocks, including large-cap, mid-cap and small-cap stocks.
Frequently Asked Questions About Multi Cap Funds
A multi cap fund is a mutual fund that invests in companies across all market capitalisations—large-cap, mid-cap, and small-cap. 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 for 2025.
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. Ultimately, the choice between a mid-cap mutual fund and a multi-cap mutual fund depends on your financial goals, risk tolerance, investment horizon, and market conditions.
Multicap funds offer investors a balanced exposure to companies of various caps, such as small, mid, and large caps, offering stability and growth. 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. It is upto the individual investor to choose whether a multi cap is better for them or a flexi cap fund.
Investors with a long-term investment horizon can consider multi cap funds. 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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