New Delhi, Oct. 18 -- Multi-cap funds and multi-asset allocation funds may sound similar, but they belong to different mutual fund categories and follow distinct investment strategies.

While multi-cap funds invest primarily in equities across companies of different market capitalisations, multi-asset allocation funds spread investments across multiple asset classes, including equities and debt.

Here is what investors need to know about the two mutual fund categories and how their returns compare.

Multi-cap funds: They are open-ended equity schemes that invest across large-cap, mid-cap, and small-cap stocks.

Under Securities and Exchange Board of India (SEBI) rules, these funds must invest at least 75% of their total assets in equity a...