Multi-cap plans trump flexi-cap funds under new allocation norms

After more than a year of implementation of new asset allocation rules by the Sebi, multi-cap schemes have delivered returns higher than flexi-cap funds.According to the data shared on the website of Value Research, a mutual funds research firm, the multi-cap funds category has given an average of 10.4% returns in the past year. On the other hand, the flexi-cap funds category has given 8.2% returns in the same period.

There are a few reasons for this. The very structure of asset allocation has worked in favour of multi-cap schemes. According to Sebi’s circular dated September 11, 2020, multi-cap schemes must have a minimum 25% allocation of their portfolio in large-cap, mid-cap and small-cap companies. In the past year, mid-caps and small-caps have outperformed large-caps.

The Nifty 100 index has given 8.6% returns while the Nifty Midcap 150 and Nifty Smallcap 250 indices have given 10.3% and 11.3% returns, respectively.Flexi-cap schemes have higher exposure to large-cap stocks than multi-cap funds. Large-cap stocks have corrected in the past year. This has impacted returns in flexi-cap schemes.

At present, according to Value Research, the multi-cap scheme category has almost 47% exposure to large-caps, 37.2% to mid-caps and 15.3% to small-caps. On the other hand, the flexi-cap category has 71% exposure to large-caps, 22% exposure to mid-caps and 6.4% exposure to small-caps.

Rupesh Bhansali, head-mutual funds, GEPL Capital said: “Multiple factors such as interest rates, inflation, Russia-Ukraine war, and interest rate hikes by Fed have increased uncertainty and volatility in Indian markets. Hence, from the point of view of three to five years, a combination of large-cap and multi-cap schemes will work for retail investors.”

A distributor who wished to remain anonymous said that “from a three-year investment view, now, investors who have a relatively high-risk appetite may increase allocation to multi-caps when compared to their allocation to flexi-caps”.

Multi-cap Plans Trump Flexi-cap Funds Under New Allocation Norms


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