Multi Cap Funds have emerged as a distinct category within equity mutual funds by offering investors exposure across large-, mid- and small-cap stocks through a single scheme. Unlike investors who build diversified portfolios by combining multiple equity funds, Multi Cap Funds follow a mandated allocation strategy that ensures exposure to all three market segments.
The category has matured significantly over the past three years, with performance data highlighting meaningful differences between the best-performing and weaker schemes. It argues that the mandatory allocation framework provides investors with genuine diversification rather than allowing portfolios to drift towards a particular market-cap segment during periods of uncertainty, noted Anupam Tiwari, Head of Equity at Groww Mutual Fund.
What are Multi Cap Funds?
Under Securities and Exchange Board of India (SEBI) regulations, Multi Cap Funds are required to maintain a minimum allocation of 25% each in large-cap, mid-cap and small-cap stocks. This is a mandatory requirement rather than a guideline, ensuring investors receive exposure to the full breadth of the equity market.
It contrasts this approach with flexi-cap funds, which may increase allocations to large-cap stocks when uncertainty rises. The compulsory allocation ensures that Multi Cap Funds remain aligned with their stated diversification objective regardless of market conditions, added Tiwari.
What makes the category different?
As per Tiwari, fund managers in this category are required to navigate three distinct pools of investment opportunities simultaneously, with each segment having its own earnings cycle, liquidity profile and valuation dynamics.
He added that mandatory exposure to mid- and small-cap stocks has worked in investors’ favour during market phases when these segments have generated disproportionate alpha over rolling three-year periods, provided fund managers were able to identify the right businesses within each segment.
How have Multi Cap Funds performed?
Performance across the category varies considerably, making fund selection an important consideration.
Data sourced from mutualfundindia.com as of June 2026 shows that among schemes with a sufficient track record, annualised three-year returns range from 13.8% to 17.8%, while five-year returns range from 12.6% to 18.5%. The performance table includes Nippon India Multi Cap Fund, Mahindra Manulife Multi Cap Fund, Baroda BNP Paribas Multi Cap Fund and Aditya Birla Sun Life Multi-Cap Fund, according to the mutual fund.
Moreover, the leading funds have delivered annualised returns of 17-19% over three years, outperforming both the category average of 15.67% and the NIFTY 500 Multicap 50:25:25 TRI benchmark return of 15.19%. At the lower end, some funds in the same category have struggled to cross 12%, reflecting the challenge of generating consistent returns across three market-cap segments.
Which fund stands out?
Tiwari noted that among schemes with a meaningful five-year track record, Mahindra Manulife Multi Cap Fund delivered first-quartile performance across both the three-year and five-year periods.
The fund ranks fifth over three years with an annualised return of 17.75% and third over five years with 15.01%. It has also outperformed the benchmark by approximately 2.56% annually over three years and 1.71% over five years.
This outperformance is due to disciplined stock selection across each market-cap segment rather than aggressive portfolio concentration or outsized sector bets. Multi Cap Funds offer a structural solution for investors seeking equity diversification across large-, mid- and small-cap stocks through a professionally managed portfolio.
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