Multi cap funds have the highest AUM among equity funds, shows data collated from Value Research Online. We have excluded the AUM of the arbitrage funds category from the AUM of equity funds due to its short-term nature.
Multi cap funds invest in stocks based on the market conditions irrespective of their market capitalisation. This gives multi cap funds a flexibility edge over other categories of equity funds such as large, mid and small cap funds as these funds have a more restricted pool of stocks based on market capitalisation.
Value Research shows that multi cap funds have AUM of Rs.1.52 lakh crore as on August 2017. These funds account for 30% of the equity AUM.
On the other hand, large cap funds have AUM of 1.36 lakh crore while mid cap funds manage assets of worth Rs.1.26 lakh crore.
Experts point out that multi cap funds have witnessed robust growth over the last three years. “In fact, the AUM of multi cap funds AUM rose 109% in the last three years,” says a research report by ICICI Direct. The report also finds that multi cap funds have increased their exposure to mid-cap stocks, which has helped these funds outperform large cap funds over the last three years.
Gautam Sinha Roy, Fund Manager, Motilal Oswal Mutual Fund says that multi cap funds give flexibility to fund managers. “These funds provide better flexibility to fund managers to pick stocks irrespective of market capitalisation. Many fund managers take bottom up approach to pick stocks under such a portfolio. For investors, multi cap funds give them stability like large cap funds and returns like mid cap funds. These factors have helped them gain popularity among investors.”
Many individual distributors have been increasingly recommending their clients to invest in multi cap funds. Mumbai-based Vinod Jain of Jain Investments says that investing in diversified funds like multi cap funds limits the downside risk. “In a multi-cap fund, the investors do not have to worry about market conditions and valuations. Fund managers have a flexibility to play around the stocks in these funds. In addition, the market has gone up a bit and investors are slightly cautious of taking exposure to mid-cap and small cap funds.”
