In the world of mutual funds, there are various types to choose from, including flexi-cap, large-cap, mid-cap, small-cap, value funds, sectoral funds, Equity-Linked Savings Schemes (ELSS), and flexi-cap funds. Among these, flexi-cap mutual funds stand out as the most popular category, based on their size of assets.
There are 38 flexi-cap mutual funds with a total Assets Under Management (AUM) of Rs 3.27 lakh crore, which is higher than any other equity fund category. For instance, there are 42 ELSS equity schemes with a total asset value of about Rs 2 lakh crore, and 149 sectoral/thematic funds with assets worth about Rs 2.58 lakh crore, according to data from the Association of Mutual Funds in India (AMFI) as of December 31, 2023.
So, what exactly are flexi-cap mutual funds?
Flexi-cap mutual funds are schemes that offer flexibility in investing across different market capitalizations (m-cap), including small, mid, and large-cap stocks. According to the Securities and Exchange Board of India (SEBI), flexi-cap funds are required to invest a minimum of 65% of assets in equity and equity-related instruments. In terms of performance, flexi-cap mutual funds have shown promising returns.
Over the past year, they delivered a return of 30.26%, 12.48% over the past two years, and 18.13% over the past three years.
Investors benefit from flexi-cap funds in several ways:
Flexibility: Flexi-cap funds have a flexible asset allocation strategy, unlike other categories such as large, mid, and multi-cap funds. They are not restricted by allocation norms, allowing them to adjust investments across different categories as needed
New Category: Flexi-cap funds emerged as a new category in November 2020, often considered a refined version of multi-cap funds. Unlike multi-cap funds, which have specific allocation requirements, flexi-cap funds have no such limitations, offering investors more flexibility in allocation.
Decent Returns: Flexi-cap funds have historically offered respectable returns. They have outperformed broader indices like the Nifty50, which saw a 20% increase in 2023.
Allocation Tweaking: Fund managers have the flexibility to adjust allocations to small, mid, and large-caps based on market conditions. For example, they can increase exposure to small and mid-caps during bullish markets and shift towards large-caps during market volatility. This freedom to adjust allocations sets flexi-cap funds apart from other hybrid funds.
In summary, flexi-cap mutual funds provide investors with a flexible and potentially rewarding investment option. With their ability to adapt to market conditions and offer decent returns, they are a valuable addition to any investment portfolio.
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