All-Cap Fund

An all-cap fund is a stock fund that invests in a broad universe of equity securities with no capitalization constraints.

The term "cap" is shorthand for capitalization. The investment community measures a company's size by its market capitalization, which is calculated by multiplying the number of a company's outstanding shares by its current stock price. Companies are generally characterized as small, medium or large.

An all-cap fund does not focus on a specific capitalization style. Instead, it can invest across the full range of market capitalizations. While there is no universal consensus on the exact definitions of the various market caps, the following parameters are a good approximation:

Giant or Mega Cap: Above $200 billion

Large Cap: From $10 billion to $200 billion

Mid Cap: From $2 billion to $10 billion

Small Cap: From $300 million to $2 billion

Micro Cap: Less than $300 million

In targeted capitalization funds, these designations can inform mutual fund investors about the investment focus of the fund in terms of company size. While not investing by capitalization, all-cap funds may have other targeted investment styles or they may be flexible funds which focus just on capital appreciation. Investment objectives and strategies can vary broadly in all-cap funds.

All-cap funds may often require greater monitoring and due diligence from investors because of the broad universe available for investment. Often these funds will only include all-cap in their fund name, requiring investors to dig deeper for comprehensive investing style details. Registered funds must provide full details on their investment objective and strategy in a prospectus included with the fund’s registration statement.

All-cap funds can be passively or actively managed. Passively managed all-cap funds can provide investors with total market exposure using indexes like the Dow Jones U.S. Total Stock Market Index and the Wilshire 5000 Index. (See also: The 4 Best Total Market Index Funds.)

Actively managed all-cap funds often take a more targeted approach to achieve capital gains. Common investment styles for all-cap funds can include growth, value and income. Each uses active analysis to identify top performing stocks and achieve capital gains. The large universe involved in all-cap funds also makes it attractive for alternative management styles such as long/short strategies. Alternative managers can use leverage and derivatives to seek high market returns throughout all market cycles. In the case of long/short funds, investment managers seek to take long positions on stocks they believe will continue to outperform, while expanding the investment options to also include taking short positions on stocks they believe will underperform in the short and long term. Some funds may also broaden their eligible investments to international markets, which can provide for even greater latitude and a more diverse universe.

In the all-cap fund category, the Federated MDT All-Cap Fund has been a top performer in 2018. As of January 29, 2018, the Fund had a return of 8.23%. The Fund is benchmarked to the Russell 3000 Index. It invests using a fundamental quantitative process that seeks to provide for long-term capital appreciation.