Published on: Oct. 29, 2020, 2:47 a.m.| Last on Updated : Nov. 8, 2020, 1:59 p.m. UTC TIME ZONE
Securities and Exchange Board of India (SEBI) issued a circular on 11 September 2020 and modified the scheme characteristic of multi-cap funds. From SEBI circular
“Minimum investment in equity & equity related instruments -75% of total assets in the following manner:
All the existing Multi-Cap Funds shall ensure compliance with the above provisions within one month from the date of publishing the next list of stocks by AMFI, i.e. January 2021.”
Based on the above direction by SEBI, the following things will happen to multi-cap mutual funds:
If AMCs doesn’t comply with this rule then they have to re-characterise the funds.
I was curious why would SEBI bring such kind of circular when it already defined mutual funds in great detail in October 2017. So I started collecting portfolio information of multi-cap funds. First some basic data:
To understand the need for the circular, we have to check the portfolio composition of these funds. Analysing portfolio of all the funds is not easy (You have to collect data for 34 funds from 34 websites). So I selected the top five funds based on their AUM size and the top-performing fund that is giving high return compared to category i.e. Parag Parikh Long Term Equity Fund.
|Fund Name||Large-Cap %||Mid-Cap %||Small-Cap %||Other %||AUM (Cr.)|
|Kotak Standard Multicap Fund||77.75%||18.69%||1.19%||2.37%||29550.50|
|HDFC Equity Fund||85.13%||9.25%||4.12%||1.5%||18424.11|
|UTI Equity Fund||52.82%||21.73%||1.59%||23.86%||11386.26|
|Motilal Oswal Multicap 35 Fund||80.19%||9.56%||5.29%||4.95%||11031.85|
|Aditya Birla Sun Life Equity Fund||67.37%||24.06%||6.20%||2.37%||10831.99|
|Parag Parikh Long Term Equity Fund||31.28%||15.23%||19.05%||34.44%||4798.00|
If we look at portfolio composition in table 1, other than Parag Parikh Long Term Equity Fund all funds have more than 50% share in the portfolio is of large-cap companies. Out of the six funds presented in the table, three will easily qualify as large-cap funds. Come February we are going to see a lot of changes in multi-cap space. Portfolio managers of Parag Parikh Long Term Equity Fund have to do a small adjustment in its portfolio. Till the time bull run in FAANG companies continues it will beat rest of the pack.
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