Kotak Clarification on SEBI decision on Multi-Cap Funds

1. Mutual fund industry has asked time from Sebi to give their representation on the circular. MF industry will either argue that circular is not in favour of unit holders or they may ask for extension of deadline.

2. MF industry will not buy small and mid cap stocks immediately and also not sell large caps because of circular announcement. They will wait for their representation to sebi.

3. MF industry has all alternatives available if they believe the size of scheme is detriment. Alternatives are merge schemes (Multicap with LargeMid category), change scheme category from multicap to flexicap, create new category of funds so that there is no compromise to investors.

4. Fund managers will not buy small and mid cap just because there is a circular. If the AMC believes there is less value in mid and small caps then the AMC would consider alternatives mentioned above.

5. Kotak Standard multicap will continue to be managed with same size with minimal disruption (he has this confidence to say this if he believes that AMC will exercise any of the above said alternatives)

Best alternative according to Nilesh shah is “convert kotak Standard multicap to flexicap category”. Hence they will not have any impact from circular

Kotak Standard multicap cannot be converted into a focused fund because a focused fund cannot have more than 30 companies in underlying portfolio.