Multi-Cap Fund
An equity fund required to hold a minimum allocation to each of the large, mid and small-cap segments.
Formula
Test: at least 25% each in large-cap, mid-cap and small-cap, totalling a minimum of 75% in equity
Unit
%
In depth
SEBI mandated the 25-25-25 structure in 2020 so that funds calling themselves multi-cap actually held all three segments, rather than concentrating in large-caps while retaining the flexible label. The rule guarantees genuine exposure across the market and simultaneously forces the fund to hold small-caps regardless of valuation or liquidity, which is a real constraint in a stretched small-cap market. The mandated small and mid-cap exposure makes the category structurally more volatile than flexi-cap. The forced minimums are the whole difference between this category and flexi-cap.
Worked example
A ₹8,000 crore multi-cap fund must hold at least ₹2,000 crore in small-caps. Building and exiting that position in a segment with thin liquidity is a constraint the manager cannot opt out of.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Multi-Cap Fund” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.