Edelweiss Large and midcap fund (ELMI) is the latest new scheme to be rolled out. The large & mid-cap category is crowded, with around 30 schemes. Does ELMI offer something different?
ELMI is a passive fund that tracks the Nifty Large Midcap 250 Index (NLM250). The fund will hold 250 stocks.
NLM250 index gives equal weight to both large and mid-cap stocks. By SEBI norms the top 100 stocks by market capitalisation are large-cap and the subsequent 150 stocks are midcaps.
What works
This fund will have an equal allocation to large and mid-cap stocks. This is because of the way the underlying index is constructed. This makes ELMI different from other large & mid-cap funds. As per SEBI’s definition, schemes in this category must invest at least 35 percent of their assets in large-cap stocks and 35 percent in mid-caps. The NLM250 is rebalanced quarterly.
The passive nature of the scheme is an added advantage. ELMI is more true-to-label than its peers in this category, given the equal marker cap split.
Niranjan Avasthi, Head-Product Marketing and Digital business, Edelweiss Asset Management Company, says, “Investors looking beyond large-cap stocks have many options such as flexi-cap, midcap and multi-cap funds. And within these categories, they have to choose the right schemes, decide on the allocation and rebalance regularly. The scheme aims to resolve these issues.”
What doesn’t
ELMI brings in passive midcap exposure. Midcap schemes found it difficult to beat the index in the last one year, when the broader markets did well; there is alpha to be earned in mid-cap stocks over the medium term. Actively managed mid-cap funds may beat ELMI in the medium term.
Nirav Karkera, Head-Research, Fisdom calls it more of bundling innovation as the index has given equal exposure to large and mid-cap stocks. “Though it can be a good solution for ‘do-it-yourself’ investors or first-time investors with no access to good advice, you can always do that by allocating to well-managed large-cap and midcap funds, after taking into account your needs and risk appetite,” he adds.
Should you invest?
The asset allocation of the 28 large and midcap schemes reveals that exposure to large-cap stocks is 17.7-59.3 percent. For instance, Axis Growth Opportunities Fund has 17.7 percent in large-caps as per its October-end portfolio taken from the ACE MF database. Nippon India Vision Fund had around 52.4 percent assets in large-caps.
ELMI makes it easier to understand because the allocation is evenly maintained and rebalanced. It also takes away the cost of rebalancing if you were to maintain two separate portfolios. Jitendra Solanki, a SEBI-registered investment advisor says, “Investors wanting exposure to large and mid-cap stock indices, without worrying about issues such as how much to allocate and how to rebalance should consider investment in this scheme.”
New fund offer closes on November 26, 2021.
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