SBI Mutual Fund has launched a new multi-cap scheme. This NFO has opened for investors on Monday. Multi-cap schemes invest in small-cap, mid-cap and large-cap stocks. This NFO will close on February 28. The category of multi-cap funds is new. Hence not much track record is available for this category. Let us know the main features of this scheme. We will also know whether you should invest in this scheme or not.
As per SEBI norms, a multi-cap fund is required to invest at least 25-25 per cent in small-cap, mid-cap and large-cap stocks. However, SBI Multi-cap Fund will be allowed to invest 27-27 per cent in all three types of stocks. The fund manager will be able to take the decision of investing the rest of the money on his own.
Ruchit Mehta, head of research at SBI MF, said the additional 2 per cent (27 per cent instead of 25 per cent) is aimed at creating a buffer against volatility in the market. R Srinivasan is the fund manager of this fund. He is also the Head of Equity at SBI MF.
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The benchmark of this fund is Nifty 500 Multicap 50:25:25. However, SBI Multicap Fund will not build its portfolio on the basis of the weights of the benchmark. High-convolution ideas will be ranked on the advice of analysts. For each stock idea, the analyst will give a confidence score, which will range from 1 to 5.
The fund will keep the number of stocks in its portfolio between 30 and 35. In this way, this fund will be run like a focused fund. The performance of multi-cap funds is more volatile than flexi-cap schemes. This is because of its high allocation in mid and small cap stocks.
Multi-cap funds perform well in the stock markets when all types of stocks, small or big, are rallying. However, the fund’s performance suffers when the market sees only large cap stocks. Flexi-cap funds tend to perform better in such situations, as they have room to increase exposure to large-cap stocks.
Vishal Dhawan, Founder and Chief Financial Planner, Plan Ahead Wealth Advisors says that right now flexicap funds are more suitable for investors. The reason for this is that the picture about the market is not clear. Hence, it would be better for investors to invest in Flexicap funds with a good track record.
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