Edelweiss Mutual Fund's Radhika Gupta and Trideep Bhattacharya discuss their Multi-Cap NFO. Is this category right for you?
Alex Mathew finds out from Finfix's Prableen Bajpai and Plan Ahead Wealth Advisors' Vishal Dhawan.
Alex Mathew finds out from Finfix's Prableen Bajpai and Plan Ahead Wealth Advisors' Vishal Dhawan.
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NewsTranscript
00:00 Hi, thanks so much for joining in.
00:02 You're watching the Mutual Fund Show on BQ Prime, and my name is Alex Mathew.
00:06 Multi-cap funds, that is the topic of the conversation today.
00:10 Now, just a short while back, just a couple of years back, this was the largest or one
00:15 of the largest categories in the mutual fund industry, the equity segment.
00:20 And that changed when the markets regulator came in and changed the definition of multi-cap
00:26 funds.
00:27 It was indicated that 25% of the assets under management in these funds has to go into each
00:34 small cap, mid cap and large cap.
00:36 And the last 25% can be allocated as the fund manager sees fit.
00:42 At the time, mutual fund houses were given the option of making those changes in their
00:47 multi-cap schemes or to transition their existing schemes into what was called a flexi-cap category.
00:53 A lot of mutual fund houses chose to do the latter.
00:57 Now we're talking about multi-cap funds today because it so happens that Edelweiss Mutual
01:02 Fund has a new fund offer, multi-cap fund, and we'd like to talk to them about it.
01:08 Joining me is Radhika Gupta, the managing director and chief executive officer of Edelweiss
01:13 MF and Sridip Bhattacharya, the CIO of Edelweiss MF.
01:17 Thank you so much for taking the time.
01:20 Let me ask the first and the most important question at this juncture to set the context
01:24 also is that you chose, as I said, to take the latter approach, which is to transition
01:31 to the flexi-cap.
01:32 You have quite a few assets under that scheme.
01:35 I guess to a certain extent, a lot of people felt at the time, Radhika, that the new norms
01:42 as they were, were a little restrictive, which is why they moved to flexi-cap.
01:45 So why are we launching multi-cap now?
01:47 Sure. So thanks, Alex.
01:50 Good to be here.
01:52 So I think the history was a little bit old and more has happened in that history.
01:57 Now when we had the option, our fund was running as a flexi-cap fund in nature.
02:03 It was benchmarked to NSE 500.
02:05 It had about 70 or 60 percent large-cap exposure, the balance mid and small.
02:11 We always focus on creating minimal disruption to existing investors.
02:15 So we took on what was a worthwhile multi-cap fund and made it a flexi-cap fund because
02:21 we didn't want to do unnecessary buying and selling of securities.
02:24 We had a particular mandate and we migrated our fund.
02:28 As far as launching a new fund is concerned, we are a little thoughtful and we don't launch
02:36 NFOs just because the category has opened.
02:39 We like to evaluate market conditions.
02:41 We like to evaluate liquidity and we like to evaluate our basket more completely.
02:46 Now, I think a few years since this event has happened, one, our own equity capabilities
02:53 and team has substantially expanded.
02:55 And I think Pradeep can talk about that.
02:57 But I think the clear case between the clear differentiation between both funds is available.
03:02 SEBI has also got mandatory benchmarking on both schemes and the current, what is current
03:07 flexi-cap schemes are benchmarked to NSE 500.
03:10 NSE 500 is a benchmark with 75% large-cap exposure, which means that your flexi-cap
03:17 fund is now going to run as a predominantly large-cap funds and really benchmarks govern
03:22 how schemes are run.
03:23 We feel that if you look at the structure of the Indian market today, really within
03:29 small-cap as a segment has expanded.
03:31 You know, in 20 years ago, the average size of a large-cap company was 3000 crores.
03:37 Today, the average size of a small-cap company is 12,000 crores.
03:40 And if you really want to capture the best of India's opportunities, we do believe it
03:45 can't be only large-cap because while banking and financial services leaders are present
03:49 in large-caps, many of the leaders in capital goods, in China plus one teams, in diagnostics
03:55 and capital markets are present in mid and small-cap.
03:59 So the default portfolio has to now move to a blend of large, mid and small.
04:04 The multi-cap fund construct lets us do this.
04:07 Benchmark is a lot more aligned to equal participation across market caps.
04:12 And that's why we felt it's a good time to launch.
04:14 In addition, I think we do have the mid and small-cap capability this fund requires.
04:18 Fantastic.
04:19 Tarip, I'll come to you on this next question because at a time when we're looking at tremendous
04:25 flows into small-cap and mid-cap because of the outperformance in the year-to-date period,
04:31 there are some questions about whether or not the valuation picture is as attractive
04:36 as it has been at the start.
04:38 And I think that's a fair question to ask.
04:41 You're launching the scheme at a time when that question is being asked more often than
04:46 it has in past weeks.
04:48 Is that going to pose a challenge for you?
04:50 In fact, I would turn it around and say that while we have a very successful mid and small-cap
04:57 fund with robust track record, and we have been strong proponents of mid and small-cap
05:03 investing over the last couple of years, given where valuations are, given that we have seen
05:09 already a 40 to 50 percent rally in mid and small-caps, we think that the incremental
05:14 money today should probably go into a balanced portfolio, balanced across large, mid and
05:21 small-cap as a stock.
05:23 So when we at Riddlewise, we sat together to think what could be that alternative, and
05:27 hence what NFO to come with, if we do come up with, rather than going with a thematic
05:33 fund, we thought this is the best way to sort of best solution for investors, given where
05:37 valuations are for mid and small-caps, and as present as an alternative to investors
05:44 overall.
05:45 The other point I would say that after having seen a good amount of rally between in mid
05:50 and small-caps, there are some pockets of irrational exuberance that are present in
05:56 that segment, but that is not to say that mid and small-caps as a space is uninvestable.
06:01 In fact, if you ask me, we believe that this is India's decade, and over the next four
06:06 or five years, once we navigate through this volatility, which includes national elections,
06:11 this, that, the other, we think that the next four or five years, India could see a strong
06:16 runway for growth driven by various different factors, and to capture that, one needs to
06:23 have exposure in mid and small-caps.
06:26 What we are saying though now is we need to be a little more selective, and hence a multi-cap
06:32 portfolio or a multi-cap construct helps us do that in the context of a similar, in the
06:38 context of one portfolio, and hence we are kind of taking the multi-cap approach of investing
06:45 for incremental money, and that's our suggestion for investors as well.
06:49 Okay, Radhika, in terms of the drawbacks of this particular category, and you mentioned
06:55 the flexi-cap tends to mirror the benchmark as well, and 75%, I think by and large, most
07:02 mutual fund schemes in this category, in flexi-cap, are above that 75% mark.
07:08 The drawback as I see it, and correct me if I'm wrong, is that in the event of a downturn,
07:14 because you are restricted in having to have 25% each in mid and small-cap, the possibility
07:21 of a drawdown in that situation would be quite significant.
07:25 Is that something that you are, through your partners, distribution partners, educating
07:31 people about, and is there an investor type that you think should look at this very closely?
07:39 So I think that this is, I'll answer the second question first, I think this will be the default
07:45 portfolio for the future, because to Sridip's point and my point earlier, if you look at
07:50 the structure of the Indian economy, I think you need to capture opportunities across market
07:54 cap, and we also as a house are a big believer in bundled solutions, you know, you can't
08:00 have mid and small-cap exposure today, markets change, then you do market timing, firstly
08:05 it's very hard to do market timing, you switch to large-cap, you pay a lot of tax, then you
08:09 move to mid and small-cap again.
08:11 I think the power of having things in one solution is really underrated, you know, we've
08:16 seen that with the success of hybrid funds, we've seen that with the success of our own
08:19 gold and silver fund, I think having a single solution is very powerful, you know, in a
08:25 world where you pay taxes and there are costs to rebalancing, so I think the product is
08:30 really for everyone in that sense, it is your default equity allocator, you know, if you
08:35 want to call it dumb asset allocation, call it that.
08:37 Now as far as volatility is concerned, I think we intend to run this as a broadly 40% large-cap,
08:44 30 mid, 30 small fund, which means 60% is mid and small-cap exposure, and of course
08:50 we are making that fact amply clear, you know, if we wanted to run one more large-cap biased
08:56 fund, there was frankly no need to launch that fund.
08:59 Will the risk be a notch higher?
09:02 Of course it will be a notch higher than running a pure-play large-cap fund.
09:05 Will the returns be a notch higher?
09:07 I think the, you know, historical data suggests that the returns will also be a couple of
09:12 notches higher.
09:13 Interestingly, when we look at the data on a risk-adjusted return basis, I think multi-cap
09:19 stacks up well.
09:20 So, you know, investors are being rewarded for the incremental risk that they're taking.
09:24 Fair point.
09:25 I want to come to the nitty-gritties of, Tradip, the selection and the thesis behind this particular
09:32 scheme and I think in a sense it will reflect what is across your other portfolios as well.
09:37 But as Radhika pointed out, certain allocations are possible because of the nature of this
09:42 particular scheme.
09:43 So, would you be able to give me a sense of how the portfolio will reflect that?
09:49 What will the contours be?
09:51 So, I think overall, I would say that, you know, if you look at a bit of an equity market
09:57 outlook, it probably kind of will set the context and hence the portfolio will be run
10:02 the way it will be.
10:04 And I would set the context as, if you look at the macro today, whether you look at a
10:08 global macro or local macro, punctuated by the fact that the 10-year bond yield in the
10:13 United States have reached levels that it reached in 2007, the weaker global recovery,
10:19 et cetera.
10:20 I think it makes sense to say that global and local micro is reasonably negative.
10:25 And hence, the way we want to sort of run the multi-cap fund on an ongoing basis is
10:30 basically focusing the portfolio on what I call as pockets of earnings resilience.
10:35 These pockets of earnings resilience are selected on a bottom-up basis and basically presents
10:41 itself, you know, earnings tailwinds, which are more than just the normal ones.
10:46 And what that means is, even in a tough macro environment, these are the areas where we
10:51 will have limited earnings downgrades, if any, or in a positive macro environment, we
10:56 could see, you know, a better earnings upgrades to come through.
10:59 This is what I would call as a, you know, heads I win more, tails I lose less kind of
11:04 a way of thinking.
11:05 And based on this sort of construct, we've come about five areas of pockets of earnings
11:11 resilience, which is what I would say about 70 to 75% of our fund will be oriented towards.
11:17 These five areas are briefly, and we can go into details if needed.
11:21 First, we are positive about CapEx as a theme.
11:24 We think that we are in the middle of a manufacturing upcycle driven by private sector CapEx over
11:29 the next two to three years.
11:31 Second, we think that lending financials are in a good spot right now.
11:36 I would call it going through a Goldilocks moment with both growth and asset quality
11:41 in the right place where they should be.
11:43 Third, we think that direct and indirect plays of real estate are a good place to be because
11:48 real estate is in the middle of a five to seven year upcycle, and we are somewhere in
11:52 the middle and there is some more room to go.
11:54 The fourth and the fifth areas are more emerging and hence a multi-cap construct helps us better.
12:00 The fourth area is defense, where indigenization of defense is a big opportunity in front of
12:05 Indian puppets.
12:07 And we think particularly stocks in middle and small cap can capitalize on the same.
12:11 And finally, EMS, electronic manufacturing systems, as a theme, in my opinion, is probably
12:18 even a longer-dated theme overall.
12:20 The sector itself is growing at about 30-odd percent.
12:23 The point really here is that in these areas, there is something more going on than the
12:28 normal business conditions.
12:30 And we think a bottom-up portfolio constructed in and around these areas would actually present
12:36 to investors a portfolio which is relatively insulated, but at the same time, from macro,
12:44 but at the same time, is very oriented towards growth and valuations are still not excessive.
12:49 So enough of a long-winded answer to your question.
12:52 No, it wasn't.
12:53 I think it perfectly answered my question.
12:54 No, Sridhi, don't worry about that.
12:56 In fact, I have a follow-up to that, which is that in a lot of schemes that you see across
13:01 the board, you see a very significant allocation to the financials because you try and play
13:07 that CapEx story or even the consumption story through these entities, which are central
13:13 to that.
13:14 Is that going to be something that you could see in your portfolio as well?
13:17 I'm talking about a third in some situations of the portfolio.
13:20 And that, I guess, is reflective of the bank Nifty or the Nifty composition as well.
13:25 But is that going to be your focus or is it going to be manufacturing?
13:30 Because I looked at the presentation which spoke about manufacturing being the big team
13:34 and PLI being opportunities that you see in that manufacturing space.
13:40 Exactly.
13:41 So I think overarching team, if you were to look at where we are taking the alphabets,
13:45 it will be higher in manufacturing than it is in financials.
13:52 Financials today is a fairly broad construct, by the way.
13:54 We have lending financials, we have non-lending financials in the form of capital market players,
13:59 depositories and a whole bunch of other players.
14:02 So in that context, we are talking about a specific subsegment within financials, which
14:06 is the lending financials, which we are positive on.
14:09 Whereas in manufacturing, we are more broad based, I would say, whether it's capital goods,
14:14 whether it's construction and also defense, it could be a subsector, if you can call it
14:20 that way.
14:21 So we are more broadly overweight manufacturing, underweight or selective in consumption.
14:26 We are, our consumption-related bets are more oriented towards urban consumption bets.
14:32 And in that context, financials would come second or third in areas that we are betting
14:37 on because we are betting on a subsegment, which is lending financials.
14:40 And it is in a way linked to the manufacturing as a theme, because manufacturing, as you
14:45 know, needs capital creation.
14:49 And as part of capital creation, you need credit growth, and credit growth is what banks
14:53 provide.
14:54 So it is linked in a way, but we want to capture that part of the lending financials rather
14:59 than anything and everything that falls under that category.
15:02 Fantastic.
15:03 So, Radhika, did you have a point to add?
15:06 Yeah, I want to make a tiny point.
15:09 I think one of the things that distinguishes multi-cap is that if you look at the large-cap
15:13 universe, the flexi-cap universe, because of this NSE 500 benchmark, financials ends
15:18 up being 35-40% of that benchmark, which is why, Alex, you see what you said, you know,
15:23 portfolio is heavily dominated by financials.
15:26 In a multi-cap construct, because the benchmark is a lot more spread across sectors, your
15:31 sectoral split is a lot less concentrated.
15:33 So we talked about what we will intend to do, but the portfolio structurally lets us
15:38 be a lot less concentrated towards financials.
15:41 Right.
15:42 No, that's a fair point.
15:43 Radhika, thank you so much for joining in and for giving us that perspective.
15:46 I'm sure our viewers have a much clearer concept of what to expect going forward.
15:51 Thanks so much.
15:53 Thanks for inviting us to your show.
15:55 Thank you.
15:56 All right.
15:57 So that was the management of Edelweiss MF speaking about the multi-cap fund that they
15:59 are currently offering through an NFO.
16:03 But let's talk about the category and let's talk about what your approach should be as
16:07 a retail investor.
16:09 Joining me now is Praveen Bajpai, founder of FinFix, as well as Vishal Dhawan, founder
16:13 and chief executive officer of Plan Ahead Wealth Advisors.
16:17 Thank you so much to the both of you for taking the time.
16:19 Now, I must point out that when I spoke to Edelweiss MF about their multi-cap fund, I
16:25 provided the context and the fact that this was required because of the SEBI regulation
16:32 change, which required 25%, 25%, 25% into mid, small and large cap stocks.
16:38 And a lot of fund houses at that point chose the flexi-cap route.
16:43 And I said, why are you launching a multi-cap now?
16:46 So they said that the flexi-cap benchmarking is with the NSE 500 and that has a large cap
16:53 bias.
16:54 The multi-cap route allows for allocation to stocks that are not necessarily getting
17:00 a representation in the flexi-cap category.
17:03 I'm curious to find out what you guys think about this and what you think about the multi-cap
17:08 category as a whole.
17:09 Praveen, I'll start with you.
17:10 Right.
17:11 Thanks, Alex.
17:12 Great to be here.
17:13 Absolutely, I think multi-cap space is the newest category in the diversified space.
17:22 SEBI in 2020 came up with the observation that the multi-caps then had almost 80% in
17:31 large cap stocks.
17:32 And that is why they mandated this 25% each to large, mid and small caps.
17:38 And as you said, majority of the fund houses actually chose to continue with the large
17:45 cap tilt and change the structure to a flexi-cap, which was essentially the earlier multi-cap
17:52 and then it continued as a flexi-cap.
17:55 And if you look at the 22 funds as of now, there are only about four funds which are
18:00 actually 10 years old and about two others which are six and four years old.
18:03 So there are not too many funds which have a very old track record, like you said, very
18:08 few ones continue.
18:10 Now the rationale that they have given, I think it's right because a lot of broader
18:17 categories, diversified space funds that we see, Alex, are usually large cap tilted and
18:23 definitely the flexi-cap category is one of them.
18:26 So a multi-cap space, I think, is a good combination of different market caps.
18:32 It definitely brings in the true diversification in terms of market cap, but also it brings
18:38 in the added risk because 50% of your allocations are towards the small and the mid caps.
18:45 Having said that, I think it is not a category which is for everybody.
18:49 It is for those who understand the kind of risk that they're going to undertake.
18:53 And I think a little trouble here is only with, you know, we haven't really seen because
18:58 the restructuring happened in 2020.
19:01 And if you look at how the different market, you know, the large, mid and small caps have
19:05 performed since then, 2020 was phenomenal for all the three spaces.
19:09 If you look at 50-50, 150 and the mid caps, you know, the small cap 250 index, all of
19:14 them were really good in terms of performance.
19:17 2021 again was a phenomenal year.
19:20 2022, we saw some dullness, but 2023 again has been great.
19:25 So you know, till now, whatever we've seen in the category is good performance and we
19:29 haven't seen a time like 2018, where the large caps were up by 3% and mid cap index was down
19:35 by 13% and small cap was down by about 27%.
19:39 So I think the true potential will only be revealed with time.
19:42 But yes, I think it's a good combination.
19:45 It's a good category to be in young and yet to be tested.
19:48 Okay.
19:49 Vishal, any thoughts before we get into the nitty gritties of it?
19:53 Yeah, so actually, I think it's a good idea to step back a little bit and ask yourself
19:58 saying, you know, what is an investor really seeking when he chooses to go to a category
20:03 which is flexible in its approach, whether it is a flexi cap category or a multi cap
20:08 category.
20:09 Our experience has been that what most investors are saying is that, let's leave this decision
20:15 to the fund manager to decide on whether he wants to be in a larger company or in a small
20:21 size company or a mid size company, because I don't have the skill to make that decision
20:25 in any form whatsoever.
20:27 And I think my fund manager will do that well.
20:30 Now the moment that becomes the approach of the investor, clearly the flexi cap category
20:38 becomes a default choice because it doesn't have any of the restrictions that the multi
20:43 cap category comes with, in terms of saying you need to have a minimum 25% in mid cap,
20:49 minimum 25% in small cap, and the large cap 25%.
20:53 And then the rest, you can do whatever you want.
20:56 So very clearly, I think there's a very natural fit of the flexi cap category with the investors
21:03 need.
21:05 And therefore, our sense is that, you know, if this question is posed to the investor
21:11 and sort of explained to him in the way that these are structured, it's most likely that
21:17 in most environments, the investor would prefer a flexi cap fund over a multi cap fund.
21:22 Okay, fair point.
21:24 So since we're talking about this in terms of versus between a flexi cap and multi cap,
21:31 I'm guessing that both of you have also studied to a certain extent.
21:34 And I take your point, Praveen, when you pointed out that the history of quite a few of these
21:39 schemes is not as deep.
21:41 And so therefore, will not provide you with a relevant comparison or a complete comparison
21:46 between the two.
21:48 Would you say it's fair to compare though, first of all, and second, if you were to compare
21:53 in terms of actual performance, is there any benchmark that you can draw or not benchmark,
21:57 but any comparisons that you can draw?
22:01 It's a different category, Alex, because flexi cap is, you know, it's like the multi caps
22:05 became the flexi cap.
22:06 I think that is why we have this comparison, naturally, it is quite natural.
22:11 And I personally feel that, you know, looking at because we don't have the track records,
22:16 if you look at Nifty 500 returns, and if you look at Nifty 50, 25, 25, there's another
22:21 index, which is there, if you look at the returns of those two, just for comparison's
22:27 sake, definitely, the one which has the mid cap and the small cap exposure has outperformed
22:33 over different time periods.
22:34 And I'm looking at SIP returns here.
22:38 Because I think multi cap as a category, because we are having exposure to small caps, and
22:42 that is a decent exposure 25%, and to mid caps, another 25% at all times, I think a
22:48 staggered approach or SIP approach is going to be better here, definitely.
22:53 So if you look at the returns in terms of SIPs, it has outperformed and it should because
22:57 we are also undertaking higher risks.
23:00 So though we and flexi caps, I think majority moved into the flexi cap category, which were
23:07 earlier multi cap, because they wanted to properly maintain the large cap tilt.
23:10 So I think Sebi, when initially it came up with the, you know, restructuring that you
23:15 have to be defined, what is large cap, mid cap, you know, it gave a three year period
23:20 to all AMCs.
23:22 But it came with the observation that none of them were actually using the flexibility
23:27 to the level that they should have been probably using.
23:31 And that is why we have this structured product.
23:33 But I think it's a good product, Alex, for those who understand that, you know, the kind
23:38 of risk that they are going to undertake.
23:40 And I do feel that it does have the return potentials, you know, it does offer the return
23:45 potential.
23:46 So I would go in for a multi cap for those who understand the matrix of how the fund
23:52 is structured, and also who are looking to have, you know, a higher mid and a small cap
23:57 exposure to a diversified fund.
23:59 Interesting, very interesting point.
24:02 And so we're getting two slightly differing views here.
24:06 One is saying that flexi cap might just be preferred.
24:08 And the other is saying that the nuanced investor, or perhaps someone that understands the risk
24:12 involved and by the way, Edelweiss management also spoke about what the likely categorization
24:18 of their fund will look like in terms of market capitalization tilt.
24:23 And it was said that it would likely be 40-30-30 in terms of large cap being 40 and then mid
24:28 and small cap being 30-30.
24:30 So they will be in that sense true to label.
24:34 But having said that, Praveen, just to follow up before I toss it back to Vishal on this
24:38 one, when you're saying that an investor can potentially look at it as an option, where
24:45 does it fit in their portfolio?
24:46 Because a lot of the time when we're saying that we're building an equity portfolio as
24:51 well, it's not just one product, you're diversifying there as well.
24:55 So how should they look at the allocation towards a scheme like this?
25:00 So I feel Alex that I think it's a good fit in a combination for somebody who has a passive
25:06 funds as well.
25:08 So let's say somebody having a long-term portfolio has a large cap passive fund in
25:12 combination, let's say, with a mid-cap 150 index fund.
25:16 So that's your core.
25:18 And here, the multi-cap space can actually give them some exposure to large and mid-caps
25:23 and in pockets where probably there is scope for value investing.
25:27 Meanwhile, let me go to you, Vishal.
25:29 So would you say that that is the right thinking to have, that it can be used in combination?
25:35 Or will you still stick with your view that flexi-cap is the way to go?
25:41 So I think there's two, three different elements here that need to be looked at very closely.
25:46 I think first of all, as an investor, or even as an advisor, there's a set of people who
25:55 like discipline to be very high.
26:02 And the ranges that are available to be limited for a fund manager in order to be able to
26:08 make choices in terms of which market cap he or she can buy into.
26:13 Now those sets of investors will find multi-cap very interesting because that 25% flexibility
26:20 is all that the fund manager has to be able to make those decisions in contrast to something
26:25 like a flexi-cap fund where literally you are leaving it up to the fund manager to decide
26:31 whatever he or she wants to do.
26:33 And therefore, those sets of people who have great trust in fund managers and their abilities
26:37 will find it comfortable to go to a flexi-cap fund.
26:41 Those who want to give that flexibility but with limits defined around it will prefer
26:46 to look at multi-cap as an alternative.
26:49 The second thing that is an important part of this decision is essentially to say how
26:56 much of this is being made on the basis of the last few years of track records of multi-cap
27:03 funds versus flexi-cap.
27:06 And clearly, because the mid-cap and small-cap space have done relatively better than large
27:11 caps, you could end up finding that on a trailing basis, multi-cap funds could actually be delivering
27:18 or have delivered a higher rate of return thus far, which could change if the mid-cap
27:25 and small-cap space start to underperform going forward.
27:30 And therefore, if your decision is being made on the basis of past returns, there is a real
27:35 risk that you could end up buying the wrong category because you made it on that basis.
27:40 I was going to come to that with that significant caveat because I think we've been screaming
27:45 from the rooftops as well based on what we've been seeing in terms of inflows into small-cap
27:50 and mid-cap actively managed funds.
27:53 It's been absolutely staggering, the kind of investment, over 50,000 crore in the year
27:58 so far, 2023.
28:00 So with that in mind, and I think we're at the close of this conversation, and with the
28:05 caveat that this has a larger amount of risk than your flexi-cap funds, do you have any
28:13 schemes that you have looked at that you think have the potential or have enough of a track
28:20 record for you to say that perhaps you can look at these and choose from among these?
28:24 Praveen, first to you.
28:27 I totally agree with what Vishal has mentioned about that recency bias can be very high at
28:33 this point, Alex.
28:34 So I think that is something that investors have to be very careful about.
28:37 And that is why I think a standard approach into the category generally is better.
28:41 Out of, if I have to name certain funds, because we don't have too many with a track record
28:48 and that too, when the track record is available, it is not for the structure that wasn't in
28:53 place.
28:54 So it's hard to say how they will perform in terms of this rigid structure going forward.
29:00 But I think Nippon is one.
29:03 And I'll name three others from HDFC, SBI, and Kotak.
29:06 And this is on the rationale that I feel all these fund houses have delivered great performance
29:13 in their respective mid-caps and small-cap categories.
29:16 So I think these are fund houses which have the expertise to manage these market cap companies.
29:22 The stock picking has been great because their individual schemes from these categories have
29:26 done quite well and have been consistent performers.
29:30 So I think these are the four AMCs I would go with.
29:35 And other than these, ICICI, Invesco, I think they look fine too.
29:40 And investors have to, of course, it comes with a disclaimer that they have to do their
29:45 own due diligence of the co-investing.
29:47 Absolutely, no doubt.
29:49 Vishal, any thoughts here?
29:51 Yeah, so I think in addition to the staggered approach that Praveen mentioned, it's also
29:56 important to, I think, have a long enough investment horizon for these funds.
30:01 Clearly, we think at least seven to 10 years for you to be able to ride through what can
30:06 happen with mid and small caps.
30:09 I think two of the funds that Praveen mentioned, which is essentially Nippon and HDFC, are
30:14 both funds that we would suggest investors look at as well.
30:18 HDFC is about to finish three years in December.
30:21 So in the normal course, we would have been a little hesitant.
30:24 But like Praveen said, not a lot of track records in this category, especially as multi-cap
30:31 funds with the mandate that SEBI put out.
30:34 So therefore, those would be our top two choices if investors are looking, as long as they
30:38 take at least a seven to 10 year view of the investment.
30:41 Fantastic.
30:42 So, to the both of you for joining in, for giving us the perspective that you did, pleasure
30:45 speaking with you as always.
30:46 Thank you so much.
30:47 All right, viewers, there you have it.
30:51 Multi-cap as a category has been discussed quite deeply today.
30:55 Let us know what you think, and hopefully this conversation has been beneficial to you.
30:59 Do stay tuned, lots more coming up over the course of the day.
31:01 This is BQ Prime.
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