Kotak AMC to launch multi-cap fund

Kotak Mahindra AMC had classified its existing fund – Kotak Standard Multicap Fund – as a flexi-cap fund in September 2020 following a circular from market regulator Securities and Exchange Board of India.

SEBI had stipulated that multi-cap funds should invest at least 25% of their assets in large-cap, mid-cap and small-cap companies instead of allowing the fund manager to determine this allocation. The remaining 25% can be allocated as per the choice of the fund manager. This raised fears of existing multi-cap funds being forced to buy mid- and small-cap stocks to meet the new norms. The regulator sought to allay such apprehensions in November 2020 by introducing a new category called flexi-caps, where the fund manager would have the freedom to allocate and move between asset classes. Kotak Mahindra AMC shifted its standard multi-cap scheme to the flexi-cap category, creating a gap for multi-cap funds in Kotak Mahindra AMC’s offerings.

According to a Kotak Mahindra AMC presentation, its proprietary model suggests allocation among large, medium and small companies, using factors such as mean reversion and momentum indicators. In 11 out of the last 15 calendar years, this model has outperformed the Nifty Multicap 500.

The model currently stipulates an allocation of 26-31% for large-caps, 37-42% for mid-caps and 32-377% for small-caps by August 2021. However, looking back, the model suggests a large-cap. Most of the time allocation of 48% (61% of the time). The model suggested mid-cap overweight in the period July 2013 and September 2019 and small-cap overweight in the period December 2008 and March 2020, when the first wave of the COVID-19 pandemic hit India.

The new scheme will be benchmarked against the S&P BSE 500 50:25:25 Total Return Index. It will be managed by Harsh Upadhyay and Devendra Singhal for equity, Abhishek Bisen for debt and Arjun Khanna for foreign investment.