“Complying with the Regulation and after all the necessary approvals the required changes will be effective in our flagship scheme. However, there is no change in our portfolio, investment process. We will continue to manage the money the way we have been managing. A flexicap strategy will allow the fund manager to invest wherever value and opportunities are available without restrictions,” said Neil Parag Parikh, Chairman and CEO, PPFAS Mutual Fund.
The new changes were necessitated after Sebi changed the investment mandate of multi cap schemes in September. As per the new mandate, multi cap schemes must invest at least 25% each in large cap, mid cap, and small cap stocks. Earlier, the multi cap schemes had the freedom to invest across market capitalisations and sectors based on the view of the fund manager.
Most mutual fund managers and investment experts believed that the new Sebi mandate would change the risk profile of multi cap schemes and they would not be suitable for moderate equity investors anymore. They pointed out that 50% minimum investment requirement in mid cap and small cap stocks would make them an extremely risky category.
Fund house were contemplating recategorizing their schemes into one of the existing categories like value, ESG, focused, and so on, when Sebi relented and introduced a new category called flexi cap which would be an apt category for the erstwhile multi cap funds.
Many big fund houses have already recategorised their multi cap schemes in the last one month. With Parag Parikh Long Term Equity Fund taking the first step, many other multi cap schemes are likely to announce the recategorization of their multi cap schemes in the coming days.