• Maheswaran Hariharan

AssetPlus NFO Review: SBI Multicap Fund

Updated: Oct 28

SBI AMC is launching a NFO, which is set to open for subscription from Feb 14th, 2022 and closes on Feb 28th, 2022.


Investment Objective:

To generate wealth over the long term, suitable for investors having a moderate to high risk appetite, who are comfortable with volatility in the short to medium term.


Investment Strategy:

As the name suggests, the fund will invest in a Multi- Capitalization approach across all areas of the market with a minimum of 25% in each category, namely Large, Mid and Small cap. The fund follows an approach which emphasizes on investing in stocks which have garnered high levels of Conviction. The fund will invest at least 75% of its portfolio in Equity and Equity oriented investments and the remaining 25% can be in any other Equity market cap/Debt Instruments or Cash. The focus is to create returns which can provide stability and growth in the long term.


Fund Manager: R Srinivasan

Benchmark: Nifty 500 Multicap 50:25:25 TRI

Minimum Lumpsum Investment Amount: Rs 5,000

Minimum SIP Investment Amount: Rs 500


Fund Management Process:

  1. The Fund follows an active management with the expectation to generate alpha over the long term.

  2. Investment universe is majorly from Nifty 500.

  3. Fund is constructed based on the Multi-Cap mandate, which provides a minimum of 25% to Large, Mid and Small cap.

  4. Any single Market Cap can have a maximum allocation of 50%.

  5. No specific sectoral bias and no fixed style of investing like Growth/Value.

  6. Portfolio will involve periodic rebalancing with changes in the composition of the fund based on market opportunities.

  7. Fund can also extend exposure to International Markets to a maximum level of 25%.

Opportunity:

Diversification has always been the forefront of prudent investing strategy. Spreading the total money into various market caps not only help in mitigating risk but also gives the much needed exposure to different sizes with a set pattern to ensure mandated uniformity at all points of time.



Snapshot of the major market caps. Source: SBI AMC

Multi-Cap is a sound strategy for those investors who aim to maximize the best of all Market Caps through a single fund without concentrating or over-investing in a single market cap.


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


Pros:

  1. Experienced fund manager having a solid proven track record in the equity space

  2. Diversified exposure to all sizes of the market

  3. Completely Sector Agnostic

  4. Not limited to any particular style of investing

Cons:

  1. Mandated to have exposure in all market caps, making it susceptible to relative underperformance

  2. Lack of flexibility to eliminate market caps based on valuation

  3. Portfolio at any given time cannot go below 25% in each market cap, making it unfavorable during market corrections in specific areas

  4. Lack of specialization in a single market cap

This fund is backed by an able fund management with consistent process driven approach which has been successful in delivering index beating returns. History has repeatedly shown us that no single category has the ability to be at the top at all points of time, hence using a Multi-Cap approach would be ideal for a moderate to high risk investor to get the best of all flavors of the market. At the same time, one should be able to withstand the risk of relative downside when compared to a flexi-cap category as the fund is required to adhere to the given mandates.


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.

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