The fund aims to capture stability from large caps while leveraging the growth potential of mid and small cap companies. The scheme will intend to build a well-diversified portfolio of companies present across sectors with a long-term growth perspective and will remain diversified across key sectors and economic variables.
The scheme may also invest in the hybrid securities viz. units InvITs for diversification and subject to necessary stipulations by SEBI from time to time. Also, the scheme may invest up to 25% of its net assets in money market instruments and other liquid assets and upto 5% in Gold ETF and silver ETF.
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Stock selection approach
The multi cap fund will follow a three step process for stock selection. First is proprietary framework, where the fund will use CHANGE and EDGE framework for investment. The CHANGE framework is a disciplined framework to identify scalable, resilient, and high-quality businesses whereas in the EDGE framework, a multi-dimensional lens is there to assess market direction and positioning.
The second step is the investment funnel, a structured, multi-layered framework for disciplined selection. Finally, the approach is backed by strong corporate governance and an experienced executive team.
Edge over other multi caps
According to the fund house, unlike single-category or market-cap funds, this multi-cap fund mandatorily invests at least 25% each in large-, mid- and small-cap stocks, providing exposure across market segments while reducing dependence on any one segment.
What fund house say on fund launch
Madhu Lunawat, Founder, MD & CEO: Market capitalisation is a number, not an investment thesis. A company may be large today and have limited room to grow. A smaller company may have the opportunity to become tomorrow’s leader. The real work is in identifying which businesses have the management, competitive strength and scalability to create value over time. That is how we look at Multi Cap — not as three boxes to fill, but as a much larger opportunity set to research, challenge and build conviction around
What experts say about the fund
Experts typically ask investors to avoid investing in NFOs unless they offer something unique. The uniqueness could be that the scheme is offering an investment option that is not available in the market or offering something extra to an existing option. Otherwise, the experts believe investors are better off with an existing scheme with a long performance record. This is because you have some historical data to base your investment decision. You don’t have any data when it comes to new offerings.
Shivam Pathak, CFP and Founder of Asset Elixir shared with ETMutualFunds that the fund follows a bottom-up stock-picking approach, with a focus on business quality, valuations and earnings potential, while maintaining the mandatory 25% allocation each to large-, mid- and small-caps. Its differentiation will ultimately come from stock selection and portfolio construction, rather than the multi-cap structure itself, Pathak further said.
Multi cap funds having a defined structure, with at least 25% of the portfolio required to be invested in each of large cap, mid cap, small cap stocks and the remaining 25% gives the fund manager flexibility to allocate across these segments, hold cash or invest in other securities Manish Srivastava, Executive Director, Anand Rathi Wealth Limited told ETMutualFunds that this structure is common across all multi cap funds hence The Wealth Company Multi Cap Fund will also follow a similar structure.
Srivastava further said that there are currently 33 multi cap funds in the multi cap space and The Wealth Company Multi Cap Fund is currently an NFO and does not have any track record so the fund’s performance will eventually depend on the fund manager’s strategy and stock selection.
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Multi cap structure
Multi cap funds need to have a minimum allocation of 25% of total assets of the scheme in equity and equity related instruments of each market cap category viz large cap, mid cap and small cap companies.
The fund house further said that maintaining exposure across large, mid and small caps may reduce the risk of being overly dependent on the performance of any one market-cap segment and by maintaining diversified exposure throughout market cycles, investors are less dependent on correctly timing market-cap rotations.
The Wealth Company Mutual Fund highlighted the performance of different market caps across different market cycles. Since 2006 to YTD 2026, different market caps have performed differently. For example, in CY2020, mid caps stood first with 21.9% return, followed by small caps with 21.5% return and large caps with 14.9% return.
In CY2023, small caps offered 55.6%, followed by mid caps and large caps which gave 46.6% and 20% respectively. In CY2025, small caps lost 5.6%, large caps and mid caps gained 10.5% and 5.7% respectively.
Large, mid or small caps: Where does the fund see the best opportunities?
Srivastava said that every market cap segment performance has its own cycle, there will be periods when one or two of these segments will underperform and hence investors should not focus on predicting which market cap will perform better.
“In the last two years, Large caps have delivered relatively muted returns, while mid and small caps have started showing a reversal in the current financial year. However, at current levels, all three segments are having negative froth suggesting that there is still reasonable headroom across market caps. The better approach should be to diversify across large, mid and small caps so that the portfolio can withstand different market cycles.”
He further said that for a multi cap fund, the mandatory 25% allocation each to large, mid and small caps means at least 50% of the portfolio will always be in mid and small caps which makes a minimum investment horizon of 3 years more appropriate, as it gives the portfolio enough time to participate through different market cycles so investors should also look at market cap allocation across their overall equity portfolio rather than relying on one multi cap fund for diversification.
On this, Pathak said that at current valuations, he would remain positive on large caps and selective in mid- and small-caps, focusing on companies with strong earnings visibility and reasonable valuations rather than chasing the broader segment. Pathak further said that given the mandatory mid- and small-cap exposure, investors should have a 5-7 year horizon and be comfortable with volatility.
Multi cap vs flexi cap: Which one to choose?
The Sebi recategorised mutual fund schemes in October 2017. It prescribed a strict investment mandate for every category to make it true to the label. It also introduced several new categories, including the multi cap category.
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Multi cap schemes already existed, but they functioned more like today’s flexi-cap funds. When SEBI mandated a minimum 25% allocation each to large-, mid- and small-cap stocks, fund houses sought greater flexibility in investing across market capitalisations. This led to the introduction of flexi-cap funds, which can invest freely across market capitalisations and sectors or themes.
Since September 2020, multi cap funds have a mandate to invest 25% each in large cap, mid cap, and small cap companies. On the other hand, the flexi cap funds have the mandate to make minimum investment in equity and equity related instruments of around 65% of total assets. The flexi cap category was launched in November 2020.
Pathak said that he would prefer flexi-cap as the core equity allocation because of its flexibility across market caps, while multi-cap can complement the portfolio for investors seeking mandatory mid- and small-cap exposure and around 25–35% of the equity portfolio in multi-cap can be considered for an investor with a higher risk appetite and a 7+ year horizon.
Srivastava further said that it should not really be a choice between the two as Multi cap and flexi cap funds serve different purposes which makes the two strategies quite distinct, and both can have a role in a portfolio. However, we have seen that flexi cap funds generally maintain higher exposure in the large cap segment.
He further said that in addition to multi cap and flexi cap, investors can also add a dedicated large cap, mid cap and small cap funds, along with other diversified strategies such as value or dividend yield; the right way to manage market cap exposure is at the overall portfolio level rather than through a single fund and investors can maintain around 50 to 55% in large caps, 20 to 25% in mid caps and the balance in small caps which will allow portfolio to ride across different market cycles.
Multi cap basket and way ahead
There were 10 funds in the category that have completed five years of existence and Nippon India Multi Cap Fund delivered the highest return of 17.83% whereas Quant Multi Cap Fund delivered the lowest return of around 11.92%.
Srivastava said that multi cap funds can be an important part of a long term equity portfolio because they provide exposure across large, mid and small caps through a single strategy; the return potential will ultimately depend on how each market cap segment performs through the cycle and how effectively the fund manager allocates within the framework. In our study, multi cap funds have, as a category, delivered 15.63% returns and outperformed benchmarks over a 10 year SIP period.
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“Rather than by targeting a fixed return, investors should judge the fund’s ability to outperform its benchmark over a complete market cycle. And the investment horizon should also be linked to the investor’s financial goal and the tenure of the overall equity allocation, rather than being decided at an individual fund level,” Srivastava further said.
Pathak said that multi-cap funds remain attractive for long-term wealth creation, but investors should moderate return expectations given current valuations and low-to-mid teen returns over 5–7 years can be reasonable, with consistent benchmark performance and downside management being key measures of success.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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