UTI Launched new balanced fund approach UTI Multi Cap Fund

UTI Mutual Fund is launching a new open-ended equity scheme — UTI Multi Cap Fund – Direct (G) — with the objective of generating long-term capital appreciation. The fund will invest predominantly across large-cap, mid-cap, and small-cap companies, offering investors exposure across the full market capitalization spectrum. However, there is no assurance that the scheme's objectives will be achieved.

The New Fund Offer (NFO) opens on April 29, 2025, and closes on May 13, 2025. The minimum subscription amount is ₹1,000, with additional investments allowed in multiples of ₹1 thereafter. There is no entry load, while an exit load of 1% will be applicable if units are redeemed or switched out within 90 days of allotment; beyond that, no exit load will be charged.

Investors looking for diversified equity exposure with a long-term horizon may consider this multi cap fund option.

Key features of UTI Multi Cap Fund – Direct (G)

Investment Objective and Strategy

Objective:

The scheme shall seek to generate long-term capital appreciation by investing predominantly in equity and equity related securities of companies across the market capitalization spectrum. However, there can be no assurance or guarantee that the investment objective of the UTI Multi Cap Fund – Direct (G) will be achieved.

Investment Strategy of the NFO

• Blend Strategy: UTI Multi Cap Fund will use a blend of growth and value investing styles, investing in sustainable businesses, turnaround stories, and companies with strong fundamentals at reasonable valuations.
• Disciplined Allocation: The fund mandates minimum allocation of 25% each to large-cap, mid-cap, and small-cap stocks, ensuring diversification across market capitalizations.
• Bottom-up Approach: Stock selection will primarily be bottom-up, focusing on individual company analysis rather than sector trends.
• Score Alpha Framework: UTI’s proprietary Score Alpha framework will guide investments, emphasizing companies with strong operating cash flows and healthy return ratios.
• Dynamic Portfolio Management: The portfolio will see relatively higher turnover, actively adjusting allocations to capitalize on changing market opportunities.
• Benchmark: Performance will be benchmarked against the Nifty 500 Multicap 50:25:25 TRI index, aligning the fund with a broad equity market representation.
• Sector and Style Diversification: Apart from market cap diversification, the fund offers exposure across sectors and investment styles, reducing over-concentration risk.

Check out other upcoming NFOs

Risks Associated with the NFO

• Market Risk: As an equity fund, it is exposed to the volatility of the stock markets, which can impact returns significantly, especially in the short term.
• Mid-cap and Small-cap Risk: Mandatory exposure to mid and small-cap stocks increases volatility, as these segments tend to react more sharply to market fluctuations compared to large-caps.
• Liquidity Risk: Small-cap stocks may face liquidity issues during market stress, affecting the fund's ability to execute trades at desired prices.
• Fund Manager Risk: Despite a rule-based allocation model, active stock selection decisions could impact returns if market views turn incorrect.
• Concentration Risk: Although diversification across caps is maintained, overexposure to certain sectors or styles within market caps could still lead to concentration risks.
• High Turnover Risk: A relatively higher portfolio turnover rate may result in increased transaction costs, affecting overall fund performance.
• Economic and Regulatory Risk: Changes in domestic or global economic policies, regulations, taxation, or political instability can adversely impact equity investments.

Risk Mitigation Strategy by the NFO

The UTI Multi Cap Fund employs several strategies to mitigate investment risks. Firstly, a disciplined allocation model (25% minimum in each of large-cap, mid-cap, and small-cap stocks) ensures that exposure to any single market cap segment is contained, reducing the risk of extreme volatility. The bottom-up stock selection driven by the Score Alpha framework focuses on identifying fundamentally strong companies with robust cash flows and sound return ratios, thereby lowering the risk of investing in weak or speculative stocks.

Moreover, the fund’s active management style allows it to dynamically adjust the portfolio in response to changing market and economic conditions, mitigating sectoral or thematic concentration risks. Diversification across sectors, industries, and market cap segments also plays a critical role in cushioning the impact of downturns in specific areas. While the fund does carry inherent equity-related risks, the structured and formula-based allocation model introduces consistency and reduces fund manager bias, offering investors a balanced exposure to India's growing equity markets.

What Type of Investor Should Invest in This NFO?

• Long-Term Investors: Those with an investment horizon of 5–7 years or more, who can ride out short-term market volatility, may consider investing.
• Growth-Oriented Investors: Individuals seeking long-term capital appreciation by investing across the full market capitalization spectrum—large, mid, and small caps.
• Diversification Seekers: Investors looking for a diversified equity portfolio that balances risk across different company sizes, sectors, and styles.
• Risk-Tolerant Investors: Since the fund is classified as a "Very High Risk" offering, it suits investors with a high risk appetite who can tolerate interim market fluctuations.
• SIP Investors: Those willing to invest via Systematic Investment Plans (SIPs), starting with a minimum of ₹500 per month, to benefit from rupee cost averaging and long-term compounding.
• Tax-Efficient Investors: Investors wanting to rebalance between large-caps, mid-caps, and small-caps without triggering short-term taxation at an individual portfolio level.
• Active Portfolio Followers: Those preferring an actively managed fund that adjusts portfolio allocations based on market opportunities while still following disciplined investment rules.