Tata Multicap Fund is the latest offering from Tata Mutual Fund. Launched under the muticap funds category, it aims to generate medium to long term capital growth by investing in a diversified portfolio of equity and equity related instruments spread across market capitalization.
After the rationalisation and categorisation of mutual funds, mutual fund houses have begun filling in the gaps through New Fund Offers (NFO's). Through this NFO, Tata Mutual Fund aims to fill the multicap strategy that is currently missing in its bucket of open ended schemes. Tata Multicap Fund is an open-ended equity scheme with a mandate to invest across large cap, midcap, small cap stocks. The new fund offer will close for subscription on 31st August 2018.
Notably, this is not the first multicap strategy of the fund house.
Way back in July 2006, Tata Mutual Fund had launched a 3 year close ended scheme called Tata Capital Builder Fund that aimed to invest predominantly in equity & equity related instruments of companies across large, mid and small market capitalisations. In short a multicap strategy.
The fund was later converted into an open ended equity scheme, on completion of its 3 years close ended period. However in February 2012, the fund house decided to merge Tata Capital Builder Fund with Tata Midcap Growth Fund, a move that may have surprised its investors.
It is also to be noted that, post SEBI recategorization and rationalization norms, the fund house had proposed to classify the popular Tata Equity Opportunities Fund under Multi Cap Funds category. However, effective June 01, 2018, the fund house changed the fundamentals of Tata Equity Opportunities Fund and recategorized it from a Multi Cap Fund to a Large and Midcap Fund, thus renaming it as Tata Large & Mid Cap Fund (Read Addendum).
What does a Multicap strategy mean?
Multicap funds ideally offer the benefit of diversification across market caps by investing across large cap, mid cap and small cap stocks. However, the new classification offers multicap funds the flexibility to switch allocation across market caps, without any limit or restriction.
At present the large Cap, Mid Cap & Small Cap companies are classified as below:
-
Large Cap:1st to 100th company in terms of full market capitalization.
-
Mid Cap: 101st to 250th company in terms of full market capitalization.
-
Small Cap: 251st company onwards in terms of full market capitalization.
In the absence of any restriction or limit on investment in any particular market cap, multicap funds enjoy the freedom to move from one market cap segment to another, based on the market movement and sentiments, with an aim to generate higher alpha for its investors. While multicap funds are understood to have nearly equal weightage across market cap segments, most of the funds in this category are currently inclined towards large caps with slight diversification towards mid and small caps.
Although multicap funds come with some safety element of large caps, they also carry the risk associated with mid and small caps. Hence investors should consider investing in multicap funds only if their risk appetite permits.
Historical Performance Track Record of Multicap Funds:
Returns are on a rolling basis and those depicted over 1-Yr are compounded annualised.
Data as on August 27, 2018
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns.
While multicap funds have been superior long term performers, not all multicap funds have been able to consistently beat the broader market index. Some funds come with higher element of risk as measured by their standard deviation, whereas some have failed to deliver in terms of risk-adjusted returns (Sharpe Ratio). Thus it is necessary to select your funds carefully, and look for funds that come with a stable and consistent track record.
NFO Details of Tata Multicap Fund
| Type |
An Open Ended equity scheme investing across large cap, mid cap, small cap stocks. |
Category |
Multi Cap |
| Investment Objective |
The investment objective of the scheme is to generate capital appreciation over medium to long term. However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The scheme does not assure or guarantee any returns. |
| Min. Investment |
Rs 5,000 and in multiples of Re 1 thereafter |
Face Value |
Rs 10 per unit |
| Plans |
• Regular
• Direct |
Options |
• Growth
• Dividend |
| Entry Load |
NA |
Exit Load |
1% of the applicable NAV, if redeemed on or before expiry of 18 months from the date of allotment. |
| Fund Manager |
Sonam Udasi |
Benchmark Index |
S&P BSE 500 Index TRI |
| Issue Opens |
17th August, 2018 |
Issue Closes: |
31st August, 2018 |
Source: Scheme Information Document
Indicative Asset Allocation and Investment strategy of Tata Multicap Fund
Under normal circumstances the asset allocation of Tata Multicap Fund shall be as follows:
| Instruments |
Normal Allocation
(% of net assets) |
Risk Profile
High/Medium/Low |
| Minimum |
Maximum |
| Equity & Equity related Instruments. |
65% |
100% |
High |
| Debt (including Money Market Instruments & units of debt & liquid category schemes). |
0% |
35% |
Low to Medium |
Source: Scheme Information Document
In line with the investment allocation pattern of the scheme, Tata Multicap Fund will predominantly invest in:
i) Equity and equity related instruments of domestic companies and/ or equity derivatives such as options and futures.
ii) Debt and money market instruments.
Categorized as a multicap fund, Tata Multicap Fund intends to invest across market capitalization i.e. large cap, mid cap and small cap stocks. As per the schemes information document, the fund will invest predominantly in equity and equity related instruments of well researched and growth oriented companies and would follow Top Down (to track sectors) and Bottom Up approach (to select companies) towards construction of the diversified equity portfolio.
As per the fund house, Tata Multicap Fund will follow a blend of both ‘value’ and ‘growth’ style of investing, depending on the market environment and opportunities. It will capture multi-baggers by staying through their market cycle and will place high importance on fundamental strengths of the company and the underlying business. Tata Multicap Fund would invest in companies based on various criteria including sound professional management, track record, industry scenario, growth prospects, liquidity of the securities, etc. The scheme will emphasize on well managed, good quality companies with above average growth prospects.
The fund may also invest in derivatives instruments such as Futures, Options or such other instruments as may be permitted under the regulations.
Who will manage Tata Multicap Fund?
Tata Multicap Fund will be managed by Mr. Sonam Udasi.
Sonam Udasi is a Fund Manager – Equity at Tata Asset Management Ltd. Sonam has pursued PGDM-Finance and is a B. Com Graduate. He has a total experience of around 21 years, of which over 12 years is in equities. Sonam joined Tata AMC in April 2014, prior to which he was associated with IDBI Capital Market Services Ltd as Head Research (June 2010 – March 2014), BRICS Securities as Head – Consumer Vertical (November 2008 – April 2010), Prime Securities as Head Research (August 2007 – October 2008) and JM Financial AMC as Senior Analyst (February 2006 – June 2007).
Among others, Sonam Udasi also manages Tata Equity P/E Fund, Tata Index Fund-Sensex & Nifty, Tata Banking & Financial Services Fund, Tata India Consumer Fund, Tata Retirement Savings Fund - Equity Portfolio of Progressive, Moderate & Conservative Plan, Tata Young Citizens Fund and Tata Value Fund Series 1 & 2.
Other schemes managed by Mr Sonam Udasi
(Source: ACE MF)
The performance of other equity schemes managed by Mr Sonam Udasi at Tata Mutual Fund has been commendable and has fared well under his supervision. The fund manager has been able to generate substantial alpha for the investors.
Fund Outlook of Tata Multicap Fund
The investment objective and strategy of the fund indicates that Tata Multicap Fund will hold a diversified portfolio, with no market cap bias. The fund has the privilege to invest across large cap, mid cap and small cap stocks, although there is no restriction or limit to specific market cap segment. While multicap funds carry a notch higher risk compared to typical large cap funds; they are usually less volatile than mid-caps.
Tata Multicap Fund will follow a blend of both 'value' and 'growth' style of investing depending upon market environment & opportunities. It would emphasize on well managed, good quality companies with above average growth prospects. With no restriction towards any market cap, the investment strategy of the fund would be to invest in opportunities across sectors and market cap in line with the Fund Manager's conviction. Moreover, the fund holds flexibility to have higher allocation to any market cap category to suitably position the portfolio in line with the investment outlook
Looking at the performance of other funds managed by the fund manager – Mr Sonam Udasi, it seems to be in safe hands. However, the fund lacks any track record to prove its worth against its prominent peers that already have years of superior track record to their credit.
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