ICICI Pru vs Mahindra Manulife Multi Cap Fund: Which One Reigns Supreme?

As the market navigates these complexities, multi-cap funds are strategically positioned to take advantage of the growth potential across market segments, offering stability and growth simultaneously. Unlike large-cap or small-cap funds that are restricted to a specific market cap, multi-cap funds provide flexibility to fund managers to allocate assets based on market conditions, valuations, and opportunities.

In 2020, SEBI revised the allocation rules for multi-cap funds, mandating a minimum of 25% investment in each of the three segments: large-cap, mid-cap, and small-cap stocks. This change aimed to ensure true diversification by compelling fund managers to allocate more evenly across market caps, with large-cap stocks offering stability and lower risk, mid-cap providing growth potential with moderate risk, and small-cap injecting higher growth but greater volatility. The revision ensures that multi-cap funds reflect the entire market spectrum more accurately.

[Read: Market Volatility: How to Build an All-Weather Winning Mutual Fund Portfolio]

The multi-cap segment has thrived with broad market participation, where large-cap stocks provide stability and mid and small-cap stocks benefit from post-pandemic growth in sectors like manufacturing, infrastructure, and green energy. Multi-cap funds have capitalised on this, offering high returns with increased volatility, balancing large-cap stability with the growth potential of mid and small-caps. Their flexibility to shift allocations based on market conditions makes them a prudent choice for investors seeking capital appreciation while ensuring downside protection.

Should You Consider Multi Cap Funds Amidst Volatile Markets?

Despite the ongoing market volatility, multi-cap funds are particularly suitable for investors with a moderate to high-risk appetite who seek to participate in India's long-term growth story while managing risk through diversification. The diversified asset allocation across large, mid, and small-cap stocks helps to buffer the impact of sector-specific downturns.

While large-cap stocks may offer less growth potential compared to their mid and small-cap counterparts, they provide stability and income-generation potential through dividends, which may cushion against broader market corrections.

[Read: Flexi Cap Funds v/s Multi Cap Funds: Which Is Better at a Market High?]

Given the current market dynamics and the expected economic trajectory, multi-cap funds provide a strategic vehicle for investors who wish to diversify their equity portfolio across various market segments, thus achieving optimal risk-adjusted returns.

While the short-term volatility is expected to persist, investors with a long-term investment horizon (5 years or more) may expect these funds to deliver competitive returns, especially as mid and small-cap stocks gain momentum post-correction.

Note: In my previous comparison report, I have covered a comprehensive analysis of the top performing multi-cap mutual funds in India; you may consider reading - Best Multi Cap Mutual Funds: Nippon India Multi Cap Fund vs Quant Active Fund

This article offers an in-depth comparison of two other schemes from the list of best multi-cap mutual funds in India, ICICI Pru Multi Cap Fund vs Mahindra Manulife Multi Cap Fund, to aid you in making informed investment decisions.

# - ICICI Pru Multi Cap Fund

ICICI Pru Multi Cap Fund is an open-ended equity scheme that belongs to  ICICI Prudential Mutual Fund. Launched in October 1994, the fund has a long track record and currently holds an AUM of Rs 14,152.04 crores.

The ICICI Prudential Multicap Fund is a versatile investment option in the mutual fund space, catering to investors looking for diversified equity exposure across market capitalisations. This fund is structured to invest across large-cap, mid-cap, and small-cap stocks, providing a balance of stability, growth, and potential for high returns.

# - Mahindra Manulife Multi Cap Fund

Mahindra Manulife Multi Cap Fund is an open-ended equity scheme and belongs to Mahindra Manulife Mutual Fund. It is another prominent multi-cap fund focusing across market caps and sectors. Launched in May 2017, the fund has quickly gained popularity and currently holds an AUM of Rs 4,734.88 crores.

Mahindra Manulife Multi Cap Fund is actively managed, with the fund manager making strategic calls to maximise returns while balancing risk. The allocation between large, mid, and small caps is adjusted based on the prevailing market conditions and opportunities.

Investment Style and Philosophy:

- ICICI Pru Multi Cap Fund: adopts a blend of growth and value investing strategies, aiming to capture potential across market segments. Its investment philosophy revolves around generating consistent long-term returns by focusing on cyclical sectors and businesses with turnaround potential.

The fund prioritises companies with robust balance sheets, sustainable cash flows, and attractive valuations. The multi-cap approach allows the fund to exploit market inefficiencies and capitalise on sectoral rotations, ensuring a well-balanced portfolio.

- Mahindra Manulife Multi Cap Fund: adopts a growth-oriented investment philosophy, focusing on identifying high-quality companies with strong earnings growth potential. Its strategy emphasises selecting businesses with robust fundamentals, competitive advantages, and scalable business models, aiming to capture growth opportunities in rapidly expanding sectors.

Unlike the value bias of ICICI Prudential, this fund leans towards companies with high return-on-equity (ROE) metrics and consistent profitability. It actively invests across large-cap, mid-cap, and small-cap stocks, with a notable tilt towards mid-cap growth stories. By diversifying across multiple sectors and capitalisations, the fund seeks to balance high growth potential with risk mitigation, catering to investors with a higher risk appetite and long-term wealth creation goals.

• Performance Comparison: Rolling Returns

  Scheme Name	Absolute (%)	CAGR (%)
  	1 Year	3 Years	5 Years	7 Years	10 Years
  ICICI Pru Multi Cap Fund(G)-Direct Plan	44.58	23.86	21.49	17.42	17.76
  Mahindra Manulife Multi Cap Fund(G)-Direct Plan	46.69	25.77	27.06	20.82	-
  Category Average - Multi Cap	36.91	23.49	23.58	18.69	18.39
  Benchmark - Nifty500 Multicap 50:25:25 - TRI	41.38	18.96	-	-	-

  Data as of December 05, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)

  Mahindra Manulife Multi Cap Fund has delivered impressive returns, outperforming ICICI Pru Multi Cap Fund and the category average. Both funds have outpaced their benchmark, the Nifty500 Multicap 50:25:25 TRI, demonstrating strong stock selection and market positioning.

  Over the long term, Mahindra Manulife again leads with 25.77%, compared to ICICI Pru's 23.86% and the category average of 23.49%, reflecting its growth-focused investment strategy's ability to capitalise on emerging opportunities in mid- and small-cap stocks. ICICI Pru Multi Cap Fund's returns are slightly lower but remain competitive, supported by its value-based strategy that leans towards relatively low-risk cyclical and large-cap stocks.

  ICICI Pru Multi Cap Fund's longer track record allows for comparison over 7- and 10-year periods. It has delivered a 17.42% CAGR over 7 years and a 17.76% CAGR over 10 years, slightly lagging behind the category average but showcasing consistent performance through market cycles.

  [Read: Why Discontinuing/Pausing Your SIPs Isn't the Best Move in a Volatile Market]

  Investor's looking for short- to medium-term growth, Mahindra Manulife Multi Cap Fund provides excellent returns driven by its focus on growth sectors and dynamic allocation. Conversely, those seeking long-term stability with consistent returns may consider ICICI Pru Multi Cap Fund, backed by its time-tested value strategy and defensive allocation. Both funds cater to different investor needs, making them strong contenders in the multi-cap mutual fund space.

  Moreover, past performance should not be the only element, it's important to note that one may consider other factors like portfolio holdings, risk profile, and investment philosophy before making a decision.

  [Read: How to Choose Mutual Funds at a Market High]

• Portfolio Composition: Asset Allocation of Schemes

  The Mahindra Manulife Multi Cap Fund and the ICICI Pru Multi Cap Fund are two prominent mutual funds under the multi-cap category, each with a distinctive asset allocation strategy.

  Scheme Name	Large Cap %	Mid Cap %	Small Cap %
  Mahindra Manulife Multi Cap Fund	39.02	26.04	26.01
  ICICI Pru Multi Cap Fund	40.67	25.30	25.59

  Data as of November 30, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)

  ICICI Prudential Multi Cap Fund has a slightly higher allocation to large-cap stocks, at 40.67%, showcasing its inclination toward stability and wealth preservation. This approach aligns with its value-driven strategy, focusing on blue-chip companies that provide consistent returns with lower risk. Mid-cap stocks account for 25.30%, while small-cap exposure stands at 25.59%, reflecting a cautious yet diversified approach to growth opportunities.

  On the other hand, Mahindra Manulife Multi Cap Fund maintains a similar allocation but leans more towards mid-cap and small-cap stocks. With 39.02% allocated to large caps, 26.04% to mid-caps, and 26.01% to small caps, this fund emphasises a growth-oriented strategy. The marginally higher exposure to mid and small-cap segments indicates its focus on capturing high-growth opportunities in emerging and innovative sectors, catering to investors seeking potentially higher returns over the long term.

  [Read: Investing in High-Risk Mutual Funds: A Bold Approach]

  While both funds closely follow SEBI's allocation requirements, the slight differences in their asset allocation highlight their strategic priorities. ICICI Prudential leans toward a value-based, stable portfolio, whereas Mahindra Manulife prioritises growth and innovation, offering investors options based on their risk appetite and investment goals.

  This balanced diversification makes both funds suitable choices in the current market scenario, where a mix of stability and growth is essential for portfolio resilience.

• Market Volatility: Risk Profile of Schemes

  Investing in multi-cap mutual funds may offer benefits from the growth potential of various market segments; however, understanding the scheme's risk-reward profiles is crucial before investing.

  Risk Ratio	Mahindra Manulife Multi Cap Fund	ICICI Pru Multi Cap Fund
  Standard Deviation (3 Year)	16.41	14.13
  Sharpe	0.24	0.29
  Sortino	0.46	0.57

  Data as of November 30, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)

  An investment with high volatility is considered riskier than an investment with low volatility; the higher the Standard Deviation, the higher the risk. The Standard Deviation over three years for Mahindra Manulife Multi Cap Fund is higher at 16.41%, indicating that it experiences greater volatility compared to ICICI Prudential's 14.13%. This suggests that Mahindra Manulife may carry a higher level of risk, which could be more suitable for investors with a higher risk tolerance seeking potentially higher returns.

  When looking at the Sharpe Ratio, which measures the risk-adjusted return, ICICI Prudential leads with a value of 0.29 compared to Mahindra Manulife's 0.24. This indicates that for every unit of risk taken, ICICI Prudential has historically provided a slightly better return, making it a more attractive option for risk-averse investors who prioritise steady returns over higher risk. The higher Sharpe Ratio of ICICI Prudential suggests it has provided better risk-adjusted returns despite its slightly lower volatility.

  In terms of the Sortino Ratio, ICICI Prudential again has the edge with a Sortino Ratio of 0.57 versus Mahindra Manulife's 0.46. This indicates that ICICI Prudential has done a better job of managing negative deviations and providing a more favourable return per unit of downside risk.

  Therefore, investors concerned about downside risk may find ICICI Prudential Multi Cap Fund more appealing, as it appears to better balance risk and reward in volatile market conditions.

  Remember, this comparison is just to give you an idea of the risk profile of the two best multi-cap mutual funds. Consider your risk tolerance and investment goals to determine which fund aligns better with your investment strategy.

• Top Holdings of the Schemes:

  Both funds offer exposure to key areas of the Indian economy but differ in their top holding preferences and sector concentration strategies.

  ICICI Pru Multi Cap Fund		Mahindra Manulife Multi Cap Fund
  Company	% Assets	Company	% Assets
  ICICI Bank Ltd.	5.48	HDFC Bank Ltd.	5.77
  HDFC Bank Ltd.	5.20	Reliance Industries Ltd.	3.80
  Reliance Industries Ltd.	3.71	Hindustan Unilever Ltd.	2.69
  Axis Bank Ltd.	2.73	PI Industries Ltd.	2.56
  Infosys Ltd.	2.52	Persistent Systems Ltd.	2.55
  Sun Pharmaceutical Industries Ltd.	2.12	Trent Ltd.	2.51
  Maruti Suzuki India Ltd.	1.83	Divi's Laboratories Ltd.	2.46
  Larsen & Toubro Ltd.	1.66	BSE Ltd.	2.16
  State Bank Of India	1.56	Interglobe Aviation Ltd.	2.16
  NTPC Ltd.	1.56	Samvardhana Motherson International Ltd.	1.99

  Data as of November 30, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)

  ICICI Prudential Multi Cap Fund has a well-diversified portfolio with a focus on large-cap, stable companies across various sectors. The fund's largest holding is ICICI Bank Ltd. (5.48%), followed by HDFC Bank Ltd. (5.20%), showcasing its strong preference for the banking and financial services sector, which is crucial for economic growth and stability.

  Sector-wise, the fund leans heavily towards Financials (around 30%), with a substantial portion dedicated to banks like ICICI Bank and HDFC Bank. The Energy sector, driven by Reliance Industries, also plays a significant role in the portfolio, alongside IT and Pharmaceuticals. This strategic allocation ensures stability while tapping into sectors poised for long-term growth.

  On the other hand, Mahindra Manulife Multi Cap Fund exhibits a slightly different sectoral approach, with a strong emphasis on Financials (over 30%) through its top holdings in HDFC Bank Ltd. (5.77%) and Reliance Industries Ltd. (3.80%). The fund also diversifies into Consumer Goods, with major holdings like Hindustan Unilever Ltd. (2.69%) and PI Industries Ltd. (2.56%), emphasising its focus on companies with strong consumer demand.

  In terms of sector allocation, Mahindra Manulife Multi Cap Fund shows a balanced approach with a dominant exposure to Financials and Consumer Goods, complemented by strategic investments in Technology, Healthcare, and Aviation. This diverse allocation strategy reflects the fund's growth-oriented philosophy, focusing on high-potential sectors that are expected to perform well in the future.

  Do note that a subtle difference in sector focus within the multi-cap segment could influence the funds' performance based on how those specific stocks perform.

• Expense Ratio of the Schemes

  When comparing thematic funds, the Expense Ratio, which represents the annual fee charged, plays a crucial role in determining your returns. Here's a quick breakdown of ICICI Pru Multi Cap Fund vs Mahindra Manulife Multi Cap Fund:

  Scheme Name	Direct Plan Expense Ratio	Regular Plan Expense Ratio
  ICICI Pru Multi Cap Fund	0.93%	1.74%
  Mahindra Manulife Multi Cap Fund	0.45%	1.84%

  Data as of November 30, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)

  As you can see, the ICICI Pru Multi Cap Fund has a significantly lower Expense Ratio for a regular plan as compared to the Mahindra Manulife Multi Cap Fund. Do note even a small percentage point difference in expense ratio may accumulate over time and impact your returns.

  On the contrary, Mahindra Manulife Multi Cap Fund's significantly lower expense ratio (with a major difference of 0.48%) under the direct plan could be considered a cost-effective option for many investors. However, remember that a lower expense ratio translates to potentially higher returns over time, but a lower expense ratio should not be the only factor to be considered when investing in sectoral funds.

• Suitability of Investors to the Schemes:

  ICICI Pru Multi Cap Fund is best suited for investors with a moderate risk appetite who seek a balanced approach to investing. Its focus on undervalued stocks across large, mid, and small-cap segments makes it ideal for those looking for steady growth with some degree of downside protection.

  This fund's emphasis on cyclical and defensive sectors helps reduce volatility, making it a good option for conservative investors who want long-term capital appreciation while minimising exposure to high market fluctuations. Its relatively stable returns and lower volatility compared to Mahindra Manulife Multi Cap Fund also make it a good choice for risk-averse investors.

Mahindra Manulife Multi Cap Fund is ideal for investors with a higher risk tolerance and a focus on growth-oriented investment strategy. This fund focuses on identifying high-growth opportunities, especially in the mid and small-cap segments, which are known for their potential to deliver superior returns in a booming economy. Investors with a long-term investment horizon who can tolerate short-term volatility may find this fund appealing. With a higher allocation to mid-cap stocks, Mahindra Manulife is ideal for those looking to tap into emerging sectors and trends, offering the potential for higher returns, though with the understanding that it carries a slightly higher risk profile.

To conclude...

While multi-cap funds offer a dynamic approach to investing in volatile markets the inherent volatility in mid and small-cap stocks requires a long-term perspective for optimal returns. As geopolitical tensions and global economic uncertainties persist, multi-cap funds, with their diversified asset allocation, offer an effective way to manage risk while tapping into India's growth story.

Both schemes offer distinct strategies. Ultimately, the choice between these funds should align with your investment goals and risk tolerance. With active fund management that adjusts to shifting market conditions, multi-cap funds offer a strategic opportunity to investors looking for a well-rounded exposure to India's economic growth.

Disclaimer: PersonalFN does not receive any monetary compensation from the fund house or scheme names stated in the article.

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.