Mutual Fund Investor: Multi-Cap Rule Change Explained

Till now as there was no said protocol for investment allocation in multi-cap schemes, most of the investors' funds were mobilized into large cap funds and remaining into small and mid-cap. But now the overall equity allocation in the multi-cap scheme has been pegged at 75% as against the earlier 65%, with 25% each in large, medium and small cap funds.

Mutual Fund Investor: Multi-Cap Rule Change Explained

"In order to diversify the underlying investments of Multi Cap Funds across the large, mid and small cap companies and be true to label, it has been decided to partially modify the scheme characteristics of Multi Cap Fund" said the SEBI's circular aiming at providing diversification which is aimed at from the target.

Rule change explained in few pointers:

1. In the current regime, fund managers managing multi-cap schemes invest across market capitalization basis their discretion.
2. For the same, mutual fund houses have been given time until January 31, 2021 to comply with the new ruling, within 1 month of AMFI coming out with the list of large, medium and small cap stocks.
3. Hence with the new ruling in force, fund managers will not be able to divert funds more than 50% into large cap funds.

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