LIC Multi-Cap fund Now Open for Continuous Purchase – Should You Consider?

A look at the recently launched LIC Multi-cap mutual fund

The Life Insurance Corporation’s multi-cap mutual fund scheme was opened to the public on 6 October 2022. Following the New Fund Offering (NFO) application period ending on 20 October 2022, the scheme has become available for continuous purchase. Mutual fund investors looking to increase or enter the multi-cap segment can consider this new mutual fund scheme. Whether you buy this, or any other scheme, should be decided after understanding the scheme and comparing it with peer schemes.

Also Read – What is a multi-cap fund? How it is different from flexi cap funds and where should you invest

Basic Information – LIC Multi-cap Fund

It is an open-ended scheme

The fund Manager is Mr Yogesh Patil

The minimum investment is Rs 5000, minimum additional investment is Rs 1000

Exit load is 0% to 1%

Regular and Direct Plans are available

Monthly and Quarterly contribution in SIP/SWP/STP starts at Rs 1000 and Rs 3000 respectively

Liquidity – Highly liquid, can be bought or sold without any lock-in period.

The asset allocation break-up along with risk is as follows –

1. Large-cap companies – very high risk – minimum allocation 25%, maximum allocation – 50%
2. Mid-cap companies – very high risk – minimum allocation 25%, maximum allocation – 50%
3. Small cap companies – very high risk – minimum allocation 25%, maximum allocation – 50%
4. Debt and money market – low to medium risk – minimum allocation 0%, maximum allocation – 25%
5. REIT and InvIT units – very high risk – minimum allocation 0%, maximum allocation – 10%

Also Read – Should you invest in mutual fund NFO

Investment Strategy

The AMC has stated that the scheme will identify and invest in companies that emerge as key players in their respective sectors. These companies should demonstrate a competitive advantage in their business and should have scalability with a view to delivering long-term value appreciation. However, such companies are market leaders and may command a premium estimation.

The proportion of investment is a key influence in the risk associated with multi-cap funds. While the minimum allocation across all three market caps is 25%, fund managers have the liberty to maximise investment in the riskier small and mid-cap companies with the residual fund. They can do so by suppressing fund allocation in the remaining 25%. Notably, LIC multi-cap fund can choose not to invest/under-invest in debt and money market instruments as the minimum allocation is 0%. Such decisions can expose the fund to market volatility.

For your reference, here is the declared asset allocation in three of the highly rated multi-cap funds from competing AMCs. You can check and compare other schemes too.

1. Quant Active Plan – Large cap – 48.94%, Mid-cap – 10.53%, Small-cap – 24.93%
2. Nippon India Multi-cap Plan – Large cap – 36.3%, Mid-cap – 21.65%, Small-cap – 28.55%
3. Mahindra Manulife Badhat Yojana Plan – Large cap – 33.8%, Mid-cap – 22.63%, Small-cap – 22.73%

Also Read – Best Flexi-cap mutual funds to buy in 2022

Apart from asset allocation, you should also consider other factors like exit load, annual charges, investment etc. Moreover, a new fund should bring something unique to the market for it to be considered an investment option. Otherwise, it is always wise to go for schemes with a record that speaks for itself.