Union Mutual Fund is
coming out with a NFO in the form of Union Multi cap Fund.
Union Multi cap Fund
would be a multi cap fund with minimum allocation requirement to large, mid and
small caps.
The fund would be open for subscription from November 28, 2022 to December 12, 2022.
NFO details
for Union Multi Cap Fund
|
Scheme Opens |
28/11/2022 |
|
Scheme Closes |
12/12/2022 |
|
Fund Manager |
Mr.Vinay Paharia Mr. Sanjay Bembalkar |
|
Benchmark |
Nifty 500 Multicap 50:25:25 TRI |
|
Minimum Investment |
5,000 |
|
Fund Category |
Multi Cap |
|
Exit Load |
1% if units are switched/redeemed out on or before 15 days from the
day of allotment. Nil if redeemed/switched after 15 days from day of allotment. |
Union Multi Cap Fund
would be an open – ended dynamic equity fund with minimum allocation
requirement to invest 25% in each large, mid and small cap stocks with the
remaining 25% at the complete discretion of the fund manager.
The scheme would
reopen for investment from 16th December 2022.
Union
Multi Cap Fund Investment Objectives
The investment
objective of the fund is to generate long term growth while identifying and
investing in opportunities across market caps through an in house market cap
model.
There is no guarantee
that the investment objectives of the scheme would be achieved
Union
Multi Cap Fund Allocation
The asset allocation for the fund would be something like this
|
Asset Class |
Minimum % |
Maximum % |
|
Equity and Equity Related instruments |
75 |
100 |
|
Debt and money market instruments |
0 |
25 |
|
Units issues by REITS and InvITs |
0 |
10 |
The above figures are
only indicative and not fixed, the fund managers have the liberty to move
across the asset classes depending upon prevailing market conditions as long as
they remain within the mandate permitted.
The fund can also
invest in REITs and InvITs if so desired.
Multi cap mutual funds were once the most
sought-after mutual fund schemes.
So much so that it would be almost
unimaginable to have a mutual fund portfolio without a multicap fund in it.
Multi cap mutual funds would also be
recommend to first time equity investors.
This is all in the past now, with new rules
for multi cap mutual funds brought about by SEBI effectively 2021 they now
require a fresh approach and perspective since the old rules no longer apply.
What is a multi
cap mutual fund?
A multi cap mutual fund needs to invest in
the following manner now:
Minimum 25% investment into equity and
equity related instruments of large cap companies (as opposed to no such
restriction earlier).
Minimum 25% investment into equity and
equity related instruments of mid cap companies (as opposed to no such
restriction earlier).
Minimum 25% investment into equity and
equity related instruments of small cap companies (as opposed to no such
restriction earlier).
A multi cap mutual fund would now require a
minimum of 75% investment in equity as opposed to 65% earlier.
What is a flexi
cap mutual fund?
A flexi cap mutual fund needs a minimum of
65% investment in equities at all times.
There is no restriction with regards to
caps or sectors.
There is no restriction with regards the
remaining 35% as well.
The fund manager can invest the remaining
35% as per her wish in any of the following:
Domestic Equity
International Equity
Cash
Debt
What is imperative is that 65% at all times
is invested in equities to qualify as a flexi cap fund.
Basically, a flexi cap fund is exactly what
a multi cap fund used to be earlier before the new rules set in, the only
change is in the name.
Difference between
multi cap and flexi cap mutual fund
|
A flexi cap
fund needs a minimum of 65% investment in equity. |
A multi cap
fund needs a minimum of 75% investment in equity. |
|
|
|
|
No
compulsory investment in mid and small cap stocks |
A multi cap
fund needs to compulsorily invest a minimum of 25% each in mid and small cap
stocks. |
|
|
|
|
It can
invest its complete portfolio into large cap stocks if needed. |
It can
invest only up to 50% of its complete portfolio in to large cap stocks at any
given time. |
|
|
|
|
Needs a
lower minimum exposure to equity as compared to a multi cap fund. |
Needs a
higher minimum exposure to equity as compare to a flexi cap fund. |
Why Union mutual fund has launched a multi cap fund?
The Securities
and Exchange Board of India (SEBI) had on 11/09/2020 issued a circular bringing
about changes to fundamental characteristics of Multicap mutual funds.
The regulator believed that
most multicap mutual fund schemes were basically large cap schemes in terms of
their asset allocation disguised as multi cap funds.
These multicap mutual fund
schemes were therefore not true to their label.
"In order
to give more flexibility to the mutual funds and taking into account the
recommendations of Mutual Fund Advisory Committee (MFAC), a new category named
'Flexi Cap Fund' under equity schemes will be available,"
Most mutual fund houses had raised concern of
the necessary investments in mid and small cap stocks.
With mandatory 25% investment into mid and
small cap stocks (50 % overall) the new multicap fund structure would have
become even more aggressive than a large & mid cap mutual fund scheme.
Mid and small cap stocks are more illiquid
than large cap stocks and this would have created the risk of an unnecessary
bubble.
Mutual fund houses had the option of
converting an existing multicap mutual fund scheme into a flexi cap mutual
fund.
SEBI has mentioned in the
circular that "Mutual Funds have the option to convert an existing scheme
into a Flexi Cap Fund subject to compliance with the requirement for change in
fundamental attributes of the scheme in terms of Regulation 18(15A) of SEBI
(Mutual Funds) Regulations, 1996,".
Most mutual fund houses decided to convert
their existing multi cap schemes into flexi cap schemes which included Union
mutual fund.
Therefore now Union mutual fund has decided
to launch a multi cap fund.
Should you invest
in multicap mutual funds?
Multicap mutual funds need a minimum of 25%
investment into each mid cap and small cap stocks.
This means 50% of the total portfolio at
all times will be invested in mid and small cap stocks.
This makes the fund highly aggressive,
volatile but at the same potential for higher growth.
Therefore one needs a longer time horizon,
ideally 7 years or more since both mid and small cap stocks go through various
cycles and need a longer time period for their potential to materialize.
This does come with the caveat of the fund going through volatile phases which is unfortunately when most investors tend to redeem.
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