What is the difference between Flexi-cap funds and Multi-cap funds?

What is the difference between Flexi-cap funds and Multi-cap funds?

by 5paisa Research Team Last Updated: Nov 18, 2021, 05:55 PM IST

Various schemes offer diversification within equity markets, out of which, we are going to focus on Flexi-cap funds in this article.

Presently, people are getting aware of the fact that investing is an essential aspect of every individual life. As for investing aid, you create a fund to fulfil various life goals. While formulating one’s portfolio he/she should make sure that diversification is the key aspect to receive optimal benefits.

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 mitigates 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 to capture the future growth.

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 capitalisations. In the case of multi-cap funds, SEBI has mandated a minimum of 75% of the total assets towards equity and equity-related instruments and a minimum of 25% of allocation towards small-cap and mid-cap stocks each. On the other hand, Flexi-cap funds have to put 65% 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 and goals and then decide to invest.

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

The following table depicts one-year return returns of the top five funds offering Flexi-cap funds based on AUMs: 

Fund Name  

1-Year Return (%)  

AUM (in crores)  

PGIM India Flexi Cap Fund  

66.70  

2,957.48  

BOI AXA Flexi Cap Fund  

62.09  

162.23  

Franklin India Flexi Cap Fund  

59.08  

10,612.25  

Parag Parikh Flexi Cap Fund  

57.54  

18,495.88  

HDFC Flexi Cap Fund  

57.50  

27,563.63  

 

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