NFO Pick – (UTI Multi Cap Fund)

28 Apr 2025 , 10:08 AM

WHY INVESTORS MUST LOOK AT UTI MULTI-CAP FUND?

There are several reasons for investors to opt for the multiple benefits of UTI Multi Cap Fund.

• The UTI Multi Cap fund combines large caps, mid-caps, and small caps in a minimum ratio of 25% each, with discretion for the last 25%. This enables investors to enhance their returns, since smaller stocks have traditionally outperformed large caps.
• The multi cap fund allows seamless reallocation between large caps, mid-caps, and small caps; without incurring any taxation costs for the investor.
• While there is discretion in stock allocation, there are basic limits for each capitalization class set out. This limits fund manager discretion risk, unlike flexi-cap funds.
• Exposure to mid-caps and small caps also offers an additional diversification strategy to investors, beyond the traditional sector and theme based diversification.
• Multi-cap funds mix stocks across market cap classes. This catalyses value creation in the long run as stocks transition from small caps to mid-caps and later from mid-caps to large caps. That is where most value gets created.

Let us look at how multi-cap fund have performed in India.

QUICK NOTE ON PERFORMANCE OF MULTI-CAP FUND IN INDIA

Here is the ranking of multi-cap funds on 5-year CAGR returns. We have considered direct plan to avoid TER discrepancies amongst funds.

Scheme Name	Return (%) 1Y-Direct	Return (%) 3Y-Direct	Return (%) 5Y-Direct	Daily AUM (₹ in Crore)
Nippon India Multicap Fund	10.27	23.88	33.34	40,789
Quant Active Fund	-5.96	13.11	32.97	9,692
Mahindra Manulife Multi Cap	10.26	18.70	30.48	5,200
ICICI Prudential Multicap Fund	11.57	21.23	28.81	14,631
Baroda BNP Paribas Multi Cap	10.57	18.35	28.36	2,743
Invesco India Multicap Fund	13.39	19.35	27.41	3,837
Sundaram Multi Cap Fund	10.89	16.32	27.03	2,696
Edelweiss Recently Listed IPO	5.83	10.93	23.92	876
ITI Multi Cap Fund	4.08	21.09	22.71	1,179
Data Source: AMFI

It may be noted here that the 5 year returns may look on the higher side; but that is due to the low base of the COVID year (2020). The general experience is that multi-cap funds have not only outperformed diversified large cap funds; but in terms of flows, investors have gravitated towards multi-cap funds more than flexi-cap funds.

GLANCE AT THE UTI MULTI CAP FUND NFO

Here are key details of the UTI Multi Cap Fund NFO.

• The NFO opens on April 29, 2025 and closes on May 13, 2025. The allotment date for units will be within 15 days from the close of subscription of the NFO.
• On the risk-o-meter, UTI Multi Cap Fund is classified as “Very High Risk Fund,” due to its predominant exposure to equities and mandatory exposure to small caps and mid-caps.
• Investment objective is to generate long term wealth through a diversified portfolio of equities across large caps, mid-caps, and small caps. Fund must have minimum 25% to large caps, mid-caps, and small caps; with discretion on the last 25%.
• There is no entry load. An exit load of 1% of the redemption value will be levied if the fund is redeemed within 90 days from the date of allotment of units.
• UTI Multi Cap Fund offers Regular and Direct plans. Additionally, the fund also offers the Growth option and the IDCW option to investors.
• Minimum application amount in NFO will be ₹1,000 and additional investments also have to be of ₹1,000. However, monthly SIPs have minimum limit of ₹500. Karthikraj Lakshmanan will be the designated fund manager for the fund.
• Being a multi-cap equity fund, it is exposed to equity volatility and to additional risks of mid-caps and small caps. While a long term holding of over 5-7 years is recommended, based on past experience, there are no guarantees of returns on the fund.
• UTI Multi Cap Fund, is a pure equity fund. STCG tax (less than 1 year), will be taxed at 20.8% (including surcharge). LTCG tax (1 year or more), will be taxed at 12.5%, after maximum exemption of ₹1.25 Lakhs per financial year.

The UTI Multi Cap Fund is an active equity fund, with a formula based approach to spreading the portfolio across large caps, mid-caps, and small caps. This limits managerial discretion in allocation; and makes the capitalization allocation more rule-based.