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How do multicap and dynamic funds differ?

Dhirendra Kumar explains the difference between multicap and dynamic funds

How do multicap and dynamic funds differ?
- Ashok

Multicap and dynamic funds differ from an equity perspective. Multicap funds claim that they will remain diversified and almost completely invested in equity at all times. Whereas, some of the dynamic funds are claiming that they will be investing largely in equity and will be reasonably diversified but it will be dynamic in the sense that it will change its equity composition and fixed income allocation depending on market conditions. So if the fund manager is very apprehensive about valuation, he can very well have 25 per cent or 30 per cent in fixed income and retain the attribute of an equity fund. Whereas, multicap funds are fully invested in a reasonably diversified equity portfolio with the flexibility of investing across the market.

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