Multicap Funds: A Closer Look at Performance and Risk

Multicap Funds: A Diversified Approach with Differentiation

Multicap funds, often regarded as "all-weather" equity funds, invest across large-, mid- and small-cap stocks, providing a diversified portfolio. However, even within the same category, fund managers can position their portfolios distinctly.

A comparison of the top five multicap funds by one-year return revealed that some funds leaned more towards large caps, while others took slightly higher exposure to mid- and small-cap stocks. Interestingly, the most aggressive small-cap allocation did not necessarily lead to the best return.

Among multicap funds with over Rs 2,000 crore in assets under management (AUM), Tata Multicap Fund delivered the highest one-year return at 8.97 percent. Mahindra Manulife Multi Cap Fund and ICICI Pru Multicap Fund followed with one-year returns of 8.67 percent and 8.54 percent, respectively.

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Asset Allocation Across Market Caps

Despite delivering the highest return, Tata Multicap Fund was not the most aggressive small-cap player in the group. The fund had over 42 percent allocation to large-cap stocks, which was higher than the category average of 39.58 percent.

On the other hand, Kotak Multicap Fund had the highest small-cap allocation at 30.85 percent, above the category average of 28.42 percent. However, it was not the top-performing fund on a one-year basis.

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ICICI Pru Multicap Fund had a relatively balanced mix across large-, mid- and small-cap stocks, with a slightly higher allocation to mid caps than the category average of 27.98 percent.

Key Takeaways

The data suggests that most top-performing multicap funds stayed reasonably close to category averages, but still made selective allocation calls across market segments. Tata Multicap Fund and HSBC Multi Cap Fund maintained relatively higher large-cap exposure, while Mahindra Manulife Multi Cap Fund leaned slightly more towards mid- and small-cap stocks.

The comparison also showed that a larger fund size did not automatically translate into stronger short-term performance. Kotak Multicap Fund had the largest AUM among the five schemes, but was not the top performer over the past year.

Overall, the data highlights that while multicap funds follow a diversified structure, fund managers still adopt different allocation approaches depending on their market outlook and investment strategy.