Reliance Multi Cap Fund: A Diversified Scheme Without Excessive Risk

Posted by Dishika Baheti on October 24th, 2018

So far in this year, the S&P BSE Mid Cap Index is down by approximately 13%, S&P BSE Small Cap Index has lost almost 18% (Jan 1, 2018, to Sept 30, 2018). However, the large-cap index, S&P BSE Sensex has gained around 9% in the period. The investors who were caught in the small and mid-cap rally faced a big loss in the year, but those who have invested proportionally in all the market segments have got consistent wealth creation in their portfolio. One such scheme that has remained focused in the polarised market and managing the portfolio actively is Reliance Multi Cap Fund. Before re-categorisation, it was known as Reliance Equity Opportunities Fund, which picks the best opportunities prevailing in the market to create a differentiated high-quality as well as a benchmark agnostic portfolio.

The fund has standout due to its flexibility to invest across the market cap and also offers the benefit of diversification. It offers superior returns in the long run without any higher risk element in its portfolio. So, let’s dive deeper into the details of the scheme before investing in it.

Multipronged Investment Approach

Reliance Multi Cap Scheme has a small portfolio as it is investing in 52 stocks currently, with a good exposure in the top picks. Besides, it has a high exposure in mid and small-cap companies as compared to its peers, which makes it a bit more riskier fund. This exposure of it shows that it is not a market-cap biased and adapted free-flowing investment approach.
The fund management team has a penchant for emerging companies and shining sectors as they can exhibit strong growth prospects and offer healthy returns on equity. It has also invested the corpus in value stocks to balance the growth portfolio and perform in both the market segments.

Realigning the Market Opportunities

Reliance Multicap Fund picks the stocks that are yet to participate largely in the market but can provide an opportunity to touch new highs in the long-term. As per the fund manager, Mr Sailesh Raj Bhan, most of the negativity in the market is short-term, and the outlook continues to be reasonably positive from a medium term perspective. Therefore, he realigned assets time-to-time in such stocks which have been showing opportunity of growth in the long run by keeping the focus on the quality of products, reasonable valuations, strong earnings potential, etc.
The fund has been placing bets on such stocks which have given a good percentage of dividend in the past but have backfired due to the market rally in the past few years. Besides that, recently the fund has realigned its assets in the companies which have the longevity of the competitive advantage, so that, it can perform well in all the market rallies.

Superior Risk-Adjusted Returns

Currently, the market is highly volatile due to various reasons. Therefore, Reliance Multi Cap has hiked its investments in the large-caps by diluting many mid-cap stocks. This shows that the fund is trying to offer risk-adjusted returns to the investors in all the market and business cycles.
On an annualised basis, the fund has underperformed in the year 2015 and 2016, however, it has backed up with superior returns outperforming the benchmark as well as the index in 2017. However, the fund is a long-term performer and delivered excellent returns to the investors in five, ten, and seven years compounded returns. This can also be seen in the table provided below:

All these returns show that Reliance Multi Cap Fund- Growth Plan has the capability to outperform and deliver long-term returns by diversifying the portfolio across the market cap. This also reduces the risk in its portfolio and generates risk-adjusted returns over the long run.