Flexi-cap funds: Overview

These days, investors look for diversified investment options available in the market. So, mutual funds offer various types of investment options, where investors can diversify their corpus across several instruments. There are different types of investors such as aggressive, moderate, and conservative, who invest according to their risk appetite. Likewise, we are going to look at the funds, where investors are willing to diversify their corpus within equity markets. There are various schemes that offer diversification within equity markets, out of which, we are going to focus on Flexi-cap funds in this article. 

Flexi-cap funds are equity-oriented mutual funds, which invest in stocks of the companies across the different market capitalisation such as large-cap, mid-cap, and small-cap. Flexi-cap funds allow investors to diversify their portfolio across sectors as well as market capitalisation, which mitigate risk as compared to small-cap funds and mid-cap funds. Fund managers assess the growth potential of companies, irrespective of their sizes, and invest the corpus of investors in the same, unlike small-cap funds, mid-cap funds, and large-cap funds, which are focussed on the company’s market capitalisation. Fund managers can shift between different sectors and companies, as & when required. If in case, any particular sector or market cap category such as large-cap isn’t doing well while mid-cap is expected to do better going forward, then fund managers will adjust their portfolio accordingly in order to capture the future growth. Likewise, fund managers will assess such opportunities and shift the funds of investors accordingly.  

Flexi-cap funds are quite similar to multi-cap funds in the way they invest across the market capitalisation but differ in the proportion of funds invested in each of the market capitalisation. In the case of multi-cap funds, SEBI has mandated a minimum of 75 per cent of the total assets towards equity & equity-related instruments and a minimum of 25 per cent of allocation towards small-cap and mid-cap stocks each. On the other hand, Flexi-cap funds have to put 65 per cent of the total assets towards equity and equity-related instruments and there is no pre-defined proportion to invest in small-cap, mid-cap, or large-cap stocks. Due to this benefit in Flexi-cap funds, many AMCs recategorised the multi-cap funds to Flexi-cap funds.  

Who should consider investing these funds?  

•  Investors, who are ready to invest their money for at least 5 years, should consider investing in these funds.   

•  Flexi-cap funds come under the high-risk category; so, investors should assess their risk appetite, needs & goals and then decide to invest.   

•  Ideally, investors willing to diversify their portfolio across various sectors and market capitalisation to earn an optimal return should invest in these funds. 
  
    

The following graph depicts one-year return & three-year returns of the top five funds offering Flexi-cap funds on the basis of AUMs: