What Is Multi Cap Fund - Meaning, Features and Types | ICICI Bank

Multi Cap Mutual Funds invest in a portfolio of companies of various sizes and across different sectors. This means the investments are made in Small Cap, Mid Cap and Large Cap companies. This diversification provides a balanced approach—stability from Large Cap investments and growth opportunities from Mid and Small Cap holdings. Simply put, portfolio diversification gives it the name - Multi Cap. Multi Cap Mutual Funds give fund managers the freedom to diversify as per their choices. For instance, fund managers for Small Cap Funds cannot invest in the shares of Mid Cap or Large Cap companies no matter how exciting the opportunity is. That is not the case with Multi Cap Mutual Funds. Hence, these funds are considered profitable by retail investors. 

What are Multi Cap Funds?

Multi Cap Funds are a type of mutual fund that invest across companies of all sizes such as large, mid, and small caps. Unlike funds that focus only on big companies or only small ones, Multi Cap Funds give you exposure to a wide range of stocks. This variety helps spread the risk and take advantage of growth opportunities in different market segments. They are managed by professionals who decide the right mix depending on the market. These are suitable for investors who want a diversified portfolio in one fund.

How Does a Multi Cap Mutual Fund Work?

The working of these funds is quite simple. These funds collect money from many investors and invest it in shares of companies of different sizes. The fund manager researches and picks stocks from large, mid, and small companies based on market conditions and growth potential.

This mix helps spread risk and improve chances of good returns. The fund’s value changes daily with the stock market. Investors can invest through lump sums or regular monthly SIPs. By pooling money together, Multi Cap Funds make it easier for individual investors to access a diversified and professionally managed equity portfolio.

Features of a Multi Cap Fund

• Multi Cap Funds invest in a mix of large-cap, mid-cap, and small-cap stocks. It means they spread your money across companies of different sizes, balancing growth and stability.

• You can expect greater flexibility, as fund managers can shift investments based on market trends. These funds aim to deliver good returns while managing risks through diversification.

• They suit investors looking for growth but with some risk control.

• The expense ratios and fund sizes vary, but overall, Multi Cap Funds give a balanced approach to equity investing by not focusing on just one type of company.

Types of Multi Cap Mutual Funds

Multi Cap Funds generally come in different styles depending on how they split investments among large, mid, and small companies. Some focus more on large-cap stocks for stability, while others may take higher risks by investing more in mid or small caps for better growth potential. There are also aggressive and balanced Multi Cap Funds, depending on how much risk they take. This variety allows investors to choose a fund that matches their risk appetite and financial goals, all while benefiting from a diversified equity portfolio.

List of the best Multi Cap Mutual Funds in India

Below is an overview of top-performing Multi Cap Mutual Funds sorted by their 5-year annualised returns.

• ICICI Prudential Multicap Fund, with ₹14,505 crores under management, offers an annualised return of 22.93%. Known for its balanced portfolio, it invests in companies across market caps while focusing on risk management.

• Nippon India Multi Cap Fund is a market favourite with a large fund size of ₹40,261 crores and an impressive annualised return of 27.20%. This fund focuses on diversified equity investments across sectors and market caps, aiming for consistent long-term growth.

• Mahindra Manulife Multi Cap Fund manages ₹5,094 crores and delivers strong returns of 23.26% per annum. It follows a robust investment strategy focusing on quality companies with potential for sustainable growth.

• Invesco India Multicap Fund has a fund size of ₹3,782 crores and yields a return of 21.43% annually. The fund is appreciated for its active management style and sectoral diversification.

• Baroda BNP Paribas Multi Cap Fund, with ₹2,705 crores in assets, provides a 21.39% return per annum. It targets high-growth companies and has a disciplined investment approach.

• Sundaram Multi Cap Fund manages ₹2,662 crores and offers a return of 19.88% annually. It is known for combining fundamental analysis with market trends to optimise performance.

• Quant Active Fund, managing ₹9,549 crores, delivers 19.76% returns per annum. It employs a data-driven approach to select undervalued stocks across market caps.

Investors looking for diversified equity exposure can consider these funds based on their risk appetite and investment horizon. Multi-Cap Funds provide the advantage of flexibility, diversification, and the potential for higher returns.

Disclaimer: The fund sizes and returns mentioned are as of June 2025 and may vary over time. Please do your research before investing. 

What are Multi Cap Funds?

Multi Cap Funds are a type of mutual fund that invest across companies of all sizes such as large, mid, and small caps. Unlike funds that focus only on big companies or only small ones, Multi Cap Funds give you exposure to a wide range of stocks. This variety helps spread the risk and take advantage of growth opportunities in different market segments. They are managed by professionals who decide the right mix depending on the market. These are suitable for investors who want a diversified portfolio in one fund.

How Does a Multi Cap Mutual Fund Work?

The working of these funds is quite simple. These funds collect money from many investors and invest it in shares of companies of different sizes. The fund manager researches and picks stocks from large, mid, and small companies based on market conditions and growth potential.

This mix helps spread risk and improve chances of good returns. The fund’s value changes daily with the stock market. Investors can invest through lump sums or regular monthly SIPs. By pooling money together, Multi Cap Funds make it easier for individual investors to access a diversified and professionally managed equity portfolio.

Features of a Multi Cap Fund

• Multi Cap Funds invest in a mix of large-cap, mid-cap, and small-cap stocks. It means they spread your money across companies of different sizes, balancing growth and stability.

• You can expect greater flexibility, as fund managers can shift investments based on market trends. These funds aim to deliver good returns while managing risks through diversification.

• They suit investors looking for growth but with some risk control.

• The expense ratios and fund sizes vary, but overall, Multi Cap Funds give a balanced approach to equity investing by not focusing on just one type of company.

Types of Multi Cap Mutual Funds

Multi Cap Funds generally come in different styles depending on how they split investments among large, mid, and small companies. Some focus more on large-cap stocks for stability, while others may take higher risks by investing more in mid or small caps for better growth potential. There are also aggressive and balanced Multi Cap Funds, depending on how much risk they take. This variety allows investors to choose a fund that matches their risk appetite and financial goals, all while benefiting from a diversified equity portfolio.

Why invest in Multi Cap Mutual Funds?

Ability to diversify across sectors and market caps

Multi Cap Mutual Funds have a diversified portfolio across companies of different sizes and in various sectors, reducing the risk factor. Market sectors can shift in any direction at any given time, spreading the risk. A diversified portfolio minimises the overall portfolio risk.

Exposure to potential opportunities

These funds are not confined to specific market caps or sectors. Investors gain exposure to all sectors and companies driving the Indian economy. This broad exposure ensures that investors do not miss out on potential opportunities available in the market.

Flexible portfolio allocation

The flexibility of choosing between Large, Mid and Small Cap stocks allows Multi Cap Mutual Funds to adapt their portfolio composition to suit the prevailing market conditions. For instance, if Mid and Small Cap stocks seem overvalued, the fund managers can move towards Large Cap stocks.

Through this allocation strategy, fund managers can adjust their investment weightage across market caps. This makes the investments adaptable to market fluctuations and positions them advantageously for varying market cycles.

What to consider while choosing Multi Cap Mutual Funds

Here is what you need to consider while choosing Multi Cap Mutual Funds: 

• Take the Expense Ratio into account: A lower Expense Ratio can impact long-term returns. Investors should consider this before investing

• Check the fund manager's history: Evaluate the fund manager's track record of managing Multi Cap Mutual Funds and their performance over the years

• Get an overview of the associated risk: Understand the risk-return tradeoff to ensure that the fund's risk aligns with your risk appetite and investment horizon

• Check the consistency in returns: Analysing a fund's historical performance and consistency provides insights into its reliability and sustainability.

Risks Involved While Investing in Multi Cap Mutual Funds

You must know about the various risks that are involved in investment in multi cap funds:

• The value of your investment can go up or down based on stock market performance. This is because these funds invest in small and mid-cap stocks too, which are more volatile and the risk is higher compared to pure large-cap funds.

• In times of any economic changes, company performance, or even market trends, the multi cap funds can be affected. 

Taxation Rules of Multi Cap Mutual Funds

• Short-Term Capital Gains (STCG): If you sell your Multi Cap Mutual Fund units within 12 months of purchase, the gains are classified as short-term capital gains and taxed at 20% (increased from 15% before July 23, 2024).

• Long-Term Capital Gains (LTCG): If you hold the units for more than 12 months, the gains are treated as long-term capital gains. LTCG exceeding ₹1,25,000 in a financial year is taxed at 12.5% (up from 10% on gains exceeding ₹1 lakh before July 23, 2024). Gains up to ₹1,25,000 per year are exempt from LTCG tax.

• Dividend Income: Dividends received from Multi Cap Mutual Funds are added to your total income and taxed according to your applicable income tax slab.

Conclusion

Consistent performance over the years, the potential to surpass market returns and adaptability to the changing market dynamics are some of the key factors that distinguish the best Multi Cap Mutual Funds. When it comes to investing in these funds, the view of the fund manager matters the most. These managers take the decision of spreading the investment corpus across different cap sizes and sectors. It is important to assess the past performance and expertise of the fund manager. Investors seeking growth potential, portfolio diversification and resilience across market cycles find these funds to be an important investment avenue.

Frequently Asked Questions (FAQs):

What should I consider while selecting a Multi Cap Mutual Fund?

While selecting a Multi Cap Mutual Fund, you need to consider the following: 

1.  Fund philosophy: Learn about the fund’s philosophy and investment strategy

2.  Historical performance: Check the fund's performance over various periods - one year, three years and five years

3.  Asset allocation: See how the fund allocation is done for Large Cap, Mid Cap and Small Cap stocks

For Multi Cap funds, what investment strategies should I consider?

Different investment strategies that you can consider for Multi Cap funds include:

• SIPs (Systematic Investment Plans) vs Lumpsum: See how SIPs perform in comparison to lumpsum investments
• Holding period: Check the historical performance of the fund and what the predictions suggest for the next one, three and five years. You can decide the holding period based on that.

How can I look into risk analysis and mitigation of a portfolio?

Multi Cap Mutual Funds are diverse so you need to assess the risk accordingly. Look into:

1. Market risk: How are the funds affected by the market fluctuations?

2. Sectoral risk: Check how the exposure to specific sectors affects the fund performance

3. Risk mitigation strategies: Understand what strategies the fund managers have used to reduce these risks.