Mirae India Equity fund, a multi-cap fund to become a pure large-cap fund. Here's what it means for you

#1

Here’s some news out of the blue. Mirae India Equity fund, the flagship fund of Mirae, a multi-cap fund will now be recategorized as a pure large-cap fund.

This is bit disappointing because this fund was one of the better multi-cap funds. The CEO of gave the following reasons:

  1. The fund, for the past few years was predominantly investing in large caps.
  2. The fund size which stood at rs. 10,500 crores was also a reason
  3. To protect investor interests. God know what he means

So, what happens now?

According to the recent scheme reclassification exercise by SEBI, large-cap funds will have to mandatorily invest 80% of the corpus in the top 100 stock. The remaining 18% can be in mid-cap funds. 2% in cash (TREPS) to meet redemption needs of the fund

Exit window
Anytime a fund changes it’s mandate, a window of 1 month period will be opened where investors can redeem the units of a fund without any exit load. Tax implications will still be applicable.

Should you exit?
This depends on a host of factors. By my personal view - if you already have a large-cap fund in your portfolio, then I see very little point in have 2 of them. With the tightly defined investible universe, large-cap funds have been having a very tough time beating passive funds which are WAY cheaper. The only way the fund manager can try to beat the index is changing weightages or running focussed portfolios, which opens up a whole new debate.

Possible solutions
This is my personal view and you definitely should consult your financial advisor before activin upon it. But today, it is a no brainer to invest in low cost passive funds instead of large-cap funds. An average large-cap fund charges between 1%-1.5%. Comparatively, you can get a Nifty 50 index fund + Nifty Next 50 index fund for as little as 0.37%. ETFs are even cheaper. This will give you exposure to the top 100 Indian stocks, same as large-cap funds.

Here’s a note from the AMC explaining the rationale behind the change in categorization

3 Likes
#2

Thank you for the post and notifying us of this change!