NFO analysis: BOI AXA Multi-Cap Fund

Multi-cap is a category under equity scheme that has a diversified equity portfolio. According to Securities and Exchange Board of India (SEBI) circular on rationalisation of mutual fund, multi-cap funds are those, which are free to invest across market capitalisation. This means that the fund managers can invest in large-cap, mid-cap and small-cap stocks at its own discretion. If one feels that a particular market cap is in favour then, he might have assets allocated towards that particular asset. Usually, in the long-term, multi-cap funds prove to be a good investment.

With an intention to create wealth for its investor in such a shaky economic situation, BOI AXA Asset Management Company (AMC) has launched BOI AXA Multi-Cap Fund. The new fund offer (NFO) of the said scheme is open for subscription up to June 23, 2020. It will again re-open for subscription on July 01, 2020.

Objective

The fund is an open-ended scheme with an investment objective to generate long-term capital appreciation by investing predominantly in equity and equity-related securities across various market capitalisation as the fund manager might deem fit.

Besides, there is no assurance that the investment objective of the fund will be achieved. The scheme in no way assures or guarantees any returns.

Asset Allocation

Benchmark

The scheme is benchmarked against S&P BSE 500 Total Returns Index (TRI). In this category, there are a total of 53 funds and most of them are benchmarked against Nifty 500 TRI and S&P BSE 500 TRI. There are a total of 17 funds that are benchmarked against S&P BSE 500 and these funds may become the true peers of this scheme.

Investment Strategy

Under normal market conditions, this scheme would seek to invest 65 per cent to 100 per cent of its assets in a diversified portfolio of equity and equity-related instruments across market capitalisation. This fund would invest in stocks, where the fund manager believes that the company has sustainable business model and a potential for capital appreciation. The scheme is said to actively manage the portfolio without keeping any bias with respect to sectoral allocations. In fact, the allocation and the investment style will be determined based on the investment environment, valuation parameters and other investment criteria.

This scheme would follow a top-down approach to shortlist the stocks for portfolio construction. Under this approach, the fund manager would be looking at the global and Indian economy, the domestic policy environment and stock valuations. This would aid the fund manager in identifying themes with a potential to outperform. Hence, the final stock selection process would be based on the bottom-up approach wherein, stocks from the short-listed themes would be picked up, based on the valuations. The fund manager is said to use qualitative framework of macro, valuation, policy and sentiment (MVPS) for asset allocation.

Fund Manager

This scheme will be managed solely by Alok Singh. He holds B.com, PGDBA and CFA. Speaking about his experience, he said that he has around 19 years of experience, of which, he spent 15 years in mutual fund industry. Following is the performance of other funds managed by him:

Our Recommendation

Investing in multi-cap funds is indeed a good idea if you have no knowledge, skills and time to manage investments across market caps. However, in new fund offer (NFO), there is no performance data available to judge the capabilities of the fund. Thus, we always believe that you should avoid participating in NFO, as there are many funds available in the category with a performance history.

We also believe that you should invest in a fund which has at least been through two market cycles. NFOs can be subscribed if it has something different to offer and you need it to further diversify your portfolio. Thus, before investing in any fund, you should check if it suits you in terms of your risk and returns profile. All in all, we would recommend you to keep a wait and watch stance.