Multi-cap funds run the risk of missing out on a broader market recovery

Such funds are holding 70% average allocation to large-caps

Multi-cap funds — which are expected to shuffle between companies across market caps to optimise investor returns — run the risk of missing out on a broader market recovery, with such funds showing heavy bias towards large-cap stocks in their portfolios. 

According to the data from Value Research, average allocation of multi-cap funds to large-cap stocks was 71.8 per cent as of December 31, 2019. Mid-cap stocks accounted for 20.2 per cent of the funds’ investment, while the average allocation to small-cap stocks was a measly 8 per cent.

“If the broader market rally starts to play out at a