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MUMBAI: Kotak Mahindra Asset Management Company (AMC) has filed papers with the Securities and Exchange Board of India (Sebi) for a new multi-cap fund. This, when its existing Kotak Standard Multicap Fund is set to become a flexicap fund.

As of 31 December, Kotak Standard Multicap Fund had a size worth 33,462 crore. The scheme has a nearly 71% allocation for large-cap companies, 29% for mid caps, and negligible exposure to small-cap companies. With a 15.35% return, it has lagged the 22.11% delivered by the S&P BSE 500 over the past year, according to data from Value Research.

"Since our erstwhile multi-cap fund is becoming flexi-cap fund from Feb 1, we have filed an offer document in multi-cap category," said Nilesh Shah, managing director, Kotak Mahindra AMC.

In September, Sebi had surprised the mutual fund industry by coming out with a new circular on multi-cap funds, specifying that such schemes must invest 25% of their assets in large, mid- and small-cap companies, respectively. They would no longer have the flexibility to move between categories. This had raised concerns about fund managers of schemes, biased towards large caps, being forced to buy mid- and small caps, without these segments having the liquidity to digest large inflows.

Following an industry outcry, the regulator created a new category called flexicap in November, wherein fund managers could freely allocate assets in different segments as per their judgment. Most erstwhile prominent multi-cap schemes have shifted to this flexi-cap category or are in the process of doing so, including Kotak Standard Multicap Fund and Parag Parikh Long Term Equity Fund.

Separately, Nippon India Asset Managemnt Company has filed for a flexicap scheme with Sebi, suggesting that it may not move its existing mutlicap fund into the flexicap category. Nippon India Multicap Fund has a size of 8,506 crore. It has allocated around 50% of its assets to large caps and around 25% each to mid and small caps leaving it in sync with Sebi's new rules. However, it has lagged the S&P BSE 500 over the past one, three, and five years. Over the past year it has delivered a return of just 3%.

"I prefer flexi cap funds to multicap funds because the fund manager in the former has more flexibility. I would watch the performance of schemes which are not moving to flexicap and then take a call," said Anand K Rathi, founder, Augment Capital Services LLP.

"In case of Nippon , their multicap was never overweight on large caps and allocations were spread out across small, mid, and large. So perhaps they haven’t really felt the need to change the category. And if investors were invested based on earlier style, they need not panic and exit," said Prableen Bajpai, founder, Finfix Research and Analytics Pvt Ltd.

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