Franklin Templeton launches Franklin India Multi Cap Fund; Let’s know about this Fund
The new high in the market is not making mutual funds scaring away from introducing new schemes. Franklin Templeton India Mutual Fund, which is an asset management company, recently ventured into starting a new equity scheme on a day when the S&P BSE Sensex passed the 80,000 mark for the first time. Known as the Franklin India Multi-Cap Fund (FMCF), this is one of the most diversified equity funds able to invest in different types of capitalization: large-cap, mid-cap, and small-cap stocks. On the other hand, while the multi-cap segment is young and indeed competitive, it is also rather saturated. Of the 24 schemes, the corpus together with the schemes is Rs.1.39 lakh crore as per ACE MF data.
Let me present you with four facts about this fund you ought to be aware of.
Diversified But Multi-Cap
Since it is a multi-cap fund, it should have around 25% of its investment in large-cap, mid-cap, and small-cap stocks. The remaining 25% can be invested in any segment that the company wants without having to pay a dime. Specifically, in November 2020, an innovative type of investment fund in India was approved by the capital market regulator, namely the flexi-cap type of fund. Schemes in this category could invest in large-cap, mid-cap, and small-cap stocks in any ratio preferred by the fund houses, unlike multi-caps, which have a particular floor for these categories. Franklin Templeton India did not have a multi-cap fund if one counts the Franklin India Flexi Cap Fund, which got re-categorized as a flexi-cap fund. The fund house has now come to the realization and offering of FMCF to cater for that difference.
The majority was equally exposed to flexi-cap funds that have a leaning toward large-cap stocks. If we study the recent portfolios of flexi-cap funds, it would be apparent that, on average, flexi-cap funds invest approximately 58% in large-cap stocks, 19% in mid-cap stocks, and approximately 17% in small-cap stocks.
Being versatile and liberal, a small cap can sort of let you taste new sectors
Franklin Templeton, India Asset Management Officer, said the small-cap segment has good investment value that cannot be overlooked. From 2018 to 2013, there was an increase in the number of listed digital companies in seven sectors, which include retail, food technology, software, insurance, fintech, social media, and logistics, which were nearly nonexistent in 2018. He said that between 2020 and 2023, there were more than 100 IPOs, and only 3% of the issuances were in the large-cap space. The remains have been concentrated in the small and mid-cap categories.
Nifty 500 vs. Nifty 500 Multicap
The benchmark index of FMCF is the Nifty 500 Multicap: Large-cap 50%; Mid-cap 25%; Small-cap 25%, or a 50:25:25 ratio of large-cap, mid-cap, and small-cap stocks, respectively. This is as follows, mainly because of how multi-cap funds invest.
On the other hand, the Nifty 500 index has approximately 70% exposure to large-cap stocks. In any case, most flexi-cap schemes oscillate around that kind of large-cap allocation level. A flexi-cap scheme has a higher degree of freedom as far as investing in or shifting its focus to any segment of the market is concerned. Which one, you may ask, is the better idea?
It has already been mentioned that multi-cap and flexi-cap funds provide you with diversification across large-cap, mid-cap, and small-cap stocks. However, if the investor already has a high allocation towards large-cap funds, then it will be advantageous to go in for multi-cap funds because all multi-cap funds will invest at least 25% in small-mid-cap stocks and another 25% at least in large-cap shares. For the balance of 25% of the money, it is up to the fund manager to make the investment decision.
Large, mid, and small: This fight did not reveal any stand-out dominant player benefiting from the rivalry
Share market analysis of Franklin Templeton shows that there is no year-to-year consistency; mid-cap and small-cap stocks are more volatile than large-cap stocks. Analyzing the returns for the calendar year 2006 and up to the calendar year 2023 that the fund house has considered, seven calendar years favour large-cap stocks (Nifty Large Cap 100 index). The mid-cap category fared well in the Nifty Midcap 150 index three years ago. Small-cap stocks, or the Nifty Small Cap 250 index, outperformed during the seven years until September. This, say the experts, shows that there is a reason that a multi-cap fund makes sense if you wish to have fewer funds in your kitty.
