Home / Mutual Funds / News /  LIC Mutual Fund’s new multi cap fund will use macro-based valuation check

The new fund offer (NFO) will be open from October 6 to 20.  

LIC Mutual Fund has announced the launch of its Multicap Fund. The new fund offer (NFO) opens on October 6. The NFO will close on October 20. As a multi cap fund, the scheme will invest a minimum of 25% each in large caps, mid-caps and small caps. The balance can be invested across market capitalisation.  

According to the fund house, the multi cap fund will adjust the allocation of chosen stocks within the portfolio in line with the evolving macro variables by taking into account - equity risk premium, interest rates and earnings growth, as reflected in its in-house Macro Based Valuation Check. Under this investment framework, adjusted market valuations will be calculated by taking macro cues into consideration. This will involve calculating the lower-end and higher-end price-to-earnings ratio and arriving at an optimum portfolio-level PEG (price/ earnings to growth) band. 

“The key differentiation and value add would emanate from how, the framework would adjust the allocation in line with changing macro variables, to maintain a strict valuation discipline using our in-house framework of Macro Based Valuation Check. This framework is an essential guardrail to avoid traps of overvaluation or bubbles without sacrificing the ability to participate in growth opportunities," said, Yogesh Patil, CIO-Equity.  

The fund will focus on investing in companies that can potentially emerge as winners, and will endeavour to identify industry leaders across market caps having a strong moat and scalable business. The first-tier benchmark for the multioncap fund will be Nifty 500 Multicap 50:25:25 TRI (total return index).  

In their earlier avatar, multi-cap funds were required to invest at least 65% of their corpus in equity. Following a Securities and Exchange Board of India (SEBI) rule change in September 2020, multi-cap funds were mandated to invest at least 75% of their corpus in equity. Two, unlike before, where multi-cap funds could freely invest this 65% either in large, mid or small cap stocks, after the change, they were required to invest at least 25% of their corpus each in large, mid and small cap stocks.  

ABOUT THE AUTHOR

Maulik Madhu

Maulik Madhu is a special correspondent at Mint. She started her career at the Competition Commission of India (CCI) and forayed into business journalism in 2012. Choosing to specialize in personal finance, she worked at FundsIndia and The Hindu Business Line, before joining Mint in March 2022.
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