Aditya Birla is launching an NFO, which is set to open for subscription from April 19th, 2021 and closes on May 3rd, 2021.

Investment Objective: To seek capital appreciation in the long term by investing in equity securities

Investment Strategy: The fund invests across large cap, mid cap and small cap in a systematic manner. Multi-cap funds need to hold a minimum of 25% each in large, mid and small cap categories.

Fund Manager: Mahesh Patil, Dhaval Shah, Harshil Suvarnkar, Vinod Bhat

Benchmark: Nifty 500 Multicap 50:25:25 TRI

Minimum Lump Sum Investment Amount: Rs 500

Minimum SIP Investment Amount: Rs 500

Fund Management Process:

  1. The fund will consider factors like growth potential, cash flows, debt levels of a company before investing.
  2. The portfolio will be constructed based on the below limits:
  • Large Cap (25%-45%)
  • Mid Cap (25-35%)
  • Small Cap (25%-35%)

3.  The portfolio will hold 15-20 companies from each market cap category and the final portfolio will hold 50-60 stocks.

Based on our analysis, we have observed the following pros and cons

Pros:

  1. Diversification across market caps
  2. Scope for higher returns if small and mid cap outperform broad markets
  3. One stop shop for equal investment across all categories. No need to select funds in each category

Cons:

  1. High volatility due to minimum exposure to small and mid caps across all market cycles
  2. Lack of flexibility to switch between market caps as per market valuations

Small and mid cap investments are high on risk. Unlike flexi-cap funds which have a higher degree of flexibility, multi-cap funds need to maintain minimum 25% exposure to all categories at all times. The fund cannot switch to the safety of large caps when market conditions are volatile. These are more suited for high risk investors

Investors can consider allocating a small amount of their portfolio towards this fund if they have a high risk appetite and are looking to stay invested over 7 years. It is of utmost importance that the fund should be discussed with your financial advisor and then ascertain whether it is suitable to invest. Always read the scheme documents fully before investing.