Published On: Fri, Sep 11th, 2020

SEBI announces changes to constitution of multi-cap funds

Mumbai: The Securities and Exchange Board of India (SEBI) on Friday announced changes to the constitution of multi-cap funds, wherein the regulator has directed such funds to have a minimum corpus of 75 per cent invested in equities.

SEBI said that multi-cap funds will now invest minimum 75 per cent of total assets in equities

So far, the minimum mandated investment in equity and equity-related instruments stood at 65 per cent of total assets, with no guidelines on how they were allocated across segments.

“In order to diversify the underlying investments of multi-cap funds across the large, mid and smallcap companies and be true to label, it has been decided to partially modify the scheme characteristics of multi-cap fund,” a SEBI circular on Friday said.

SEBI said that multi-cap funds will now invest minimum 75 per cent of total assets in equities with 25 per cent each in largecap, midcap and smallcap companies.

It said that all the existing multi-cap funds shall ensure compliance with the above provisions within one month from the date of the publishing of the next list of stocks by the Association of Mutual Funds in India (AMFI), in January 2021.

Commenting on the move, Sonam Chandwani, Managing Partner at KS Legal & Associates, said: “Multi-cap funds, typically, have the flexibility to shift the allocation in line with the changing market conditions, which has been further facilitated and simplified by the recent notification. In the current scenario, replacing large cap funds with a multi-cap fund that’s maintaining 50 per cent collectively in mid to large cap allocation can suit less aggressive investors.”

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