Investors seeking long-term wealth creation with moderate risk often turn to large-cap mutual funds, the largest and one of the most popular categories among equity funds. As of April 2023, the category boasted assets worth over Rs 6.57 lakh crore, representing more than 31 per cent of the total assets managed by open-ended equity funds. According to SEBI's classification, large-caps consist of the top 100 companies based on market capitalisation. Large-cap funds primarily invest in well-established businesses that may not offer exceptional growth potential but are relatively shielded from business, economic, and market risks. Considering this and the added advantage of them being liquid, large-cap companies make up close to 60 per cent of all equity assets of the mutual fund industry. So, let's delve into the ongoing trends of these funds. EPFO's influence EPFO's investment in equities has significantly influenced inflows in the large-cap category, especially in passive funds. As of March 2022, they accounted for about 41 per cent of the total AUM in the large-cap category. In fact, EPFO's sway, especially over ETFs, may grow further. There were reports last July wherein the Finance Audit and Investment Committee (FAIC), the advisory body to the EPFO, had approved increasing its equity allocation limit from 15 to 20 per cent. However, the Central Board of Trustees (CBT) did not discuss it during their meeting, leaving the proposal in limbo. But, if and when it happens, the ETFs they invest in may see more significant inflows. Regardless, even now, EPFO has a vice-like grip over ETFs (passive funds) they invest in. The government body's investment comprises 70-90 per cent of these ETFs' total assets. Having said that, EPFO's dominance has a few side effects, as seen when it withdrew some of its equity investments in the first five months of 2023, leaving ETFs with a bloody nose. Other inflow trends Let's now look at the non-EPFO passive funds. Even they have kept up with their past trends, which is a positive. However, things don't look great for active large-cap mutual funds. They received little inflows in 2023. One of the main reasons for this is the exodus of about Rs 2,000 crore from Axis Bluechip Fund, which has been going through a lean patch since late 2020. Performance over the last year The markets have lately rebounded from the lows they witnessed in June last year, and have been scaling new highs in recent weeks. As a result, large-cap funds have delivere
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