These funds are likely to succeed in any given market condition because they can exploit many opportunities
17-Dec-2013 •Research Desk
Multi-cap funds invest in companies of all sizes. Adopting a mix of growth and value strategy, these funds seek opportunity to outperform the market by shifting their allocation across market capitalisation. Often referred as all-cap or go-anywhere funds, such funds come with their share of risks because of the dynamic nature of fund management required with these funds.
Ideally, funds in this category should always do well because the fund manager has the mandate to move across capitalisation to ride the one that drives the market. It is for this reason that such funds are risky and suitable to investors with a high-risk appetite.
Multi-cap mutual funds are part of the financial approach which allows investors to diversify with a single fund than maintaining a portfolio of different funds. To make the most of the changing market direction, funds in this category increase their allocation to mid- and small-cap stocks during bull runs and into large- and mid-cap stocks during market downturns. In other words, funds in this category stand tall during rising markets but fail to curtail their losses when the market crashes.
Following are India's finest multi cap funds:
BNP Paribas Dividend Yield
This fund is a good bet when confronted with choppy markets and does well when the markets rise, rewarding long term investors. The fund sticks to its objective of investing in a diversified portfolio across market capitalisation and in stocks with dividend yield of half per cent more than the Sensex. The fund follows a value-based approach towards investments and stock selection is done on the dividend payout history; a trait that pays in the form of regular income and also rescues it when markets tank.
PineBridge India Equity Standard
This fund manages to check its fall when the markets tank and gains well in a rising market. The fund has the freedom to invest across market capitalisation and sectors, with quality mid-caps working well to aid performance. The fund's small asset base has further helped in deft management to move across stocks and sectors with the change in market conditions. Its rigorous quality focus on stock selection makes it an attractive low risk multi-cap choice for long-term equity investors.
Templeton India Equity Income
This fund does well irrespective of market cycles with its ability to straddle across market cycles with a healthy dose of international diversification. By adopting a value investing style with focus on stocks with attractive dividend yields, both in India and overseas (in emerging markets like Taiwan, Korea and Turkey), the fund maintains a well diversified portfolio. Quality downside protection, international exposure and matching category returns during market turnaround are some of the qualities that are hard to ignore.
This story follows our previous analysis of India's finest funds for a hit portfolio.