Flexi cap funds are open-ended equity mutual funds that allow fund managers to invest in companies of any market capitalization (large-cap, mid-cap, and small-cap stocks) based on market opportunities and conditions, rather than being restricted by fixed allocation requirements like multi-cap funds. These funds must invest at least 65% of their assets in equities and equity-related instruments, with the remaining assets in debt or cash. This dynamic allocation provides flexibility to adapt to market trends, potentially balancing risk and seeking higher returns by shifting capital between market caps.
Key Characteristics
Dynamic Asset
Allocation:
The primary
feature is the fund manager's freedom to allocate investments across all market
capitalizations (large, mid, and small-cap) based on their discretion and
market outlook.
Minimum Equity Exposure:
To maintain
their equity-oriented nature, flexi cap funds are required by regulations to
invest a minimum of 65% of their total assets in equity and equity-related
instruments.
Flexibility in Allocation:
Unlike multi-cap
funds with mandatory allocations for each market cap segment, flexi cap funds
can shift capital between large, mid, and small-cap companies to capitalize on
growth opportunities or navigate market downturns.
Risk and Return Potential:
By strategically
allocating investments, flexi cap funds can potentially balance the stability
of large-caps with the higher growth potential of mid and small-caps, offering
a diversified portfolio.
Open-Ended Scheme:
As open-ended
schemes, they offer investors the ability to buy and sell units at any time,
providing liquidity.
How Do Flexi Cap Funds Work?
SEBI regulations mandate that a flexi
cap mutual fund must invest at least 65% of its assets in equities. Beyond this
threshold, the fund manager is free to allocate the portfolio across different
capitalisation tiers. Here’s how the asset mix may typically look depending on
market scenarios:
|
Market Phase |
Large-Cap Allocation |
Mid-Cap Allocation |
Small-Cap Allocation |
|
Bull Market |
30–40% |
30–40% |
20–30% |
|
Bear Market |
60–70% |
20–30% |
20–0% |
|
Recovery Phase |
50% |
30% |
20% |
This dynamic allocation is what gives
flexi cap funds a performance edge during shifting market cycles.
Benefits
Diversification:
They provide diversification across
different market segments, reducing concentration risk in a single market cap.
Adaptability:
The fund manager's ability to change
allocations makes the fund adaptive to changing market cycles, sector
performance, and economic shifts.
Potential for Optimal Returns:
By investing opportunistically in the
best-performing stocks across all market caps, these funds aim to generate
optimal returns.
The other benefit of Professional Management , Managing the Size and Time in the market are taken care by the structure of the mutual fund management.
Performance of Flexi Cap Funds
|
Historic Returns - Flexi Cap Fund( Regular)
Growth Option, Performance
Tracker: Funds with AUM> 20,000
Cr Moneycontrol.com as accessed on 13
Sep 2025 |
|||||||
|
Scheme
Name |
Crisil
Rating |
AuM
(Cr) |
1Y |
2Y |
3Y |
5Y |
10Y |
|
5 |
115,040.08 |
7% |
21% |
20% |
23% |
18% |
|
|
4 |
81,935.61 |
5% |
22% |
22% |
28% |
16% |
|
|
4 |
53,625.83 |
1% |
17% |
15% |
19% |
14% |
|
|
2 |
25,508.98 |
-1% |
13% |
10% |
16% |
13% |
|
|
Aditya Birla Sun Life Flexi Cap Fund - Regular Plan - Growth |
3 |
22,962.43 |
0% |
17% |
16% |
20% |
14% |
|
2 |
22,010.84 |
-3% |
12% |
12% |
18% |
13% |
|
Performance varies at different point in time. And past performance do not guarantee that of future . However by comparing longer period returns, one can generally conclude that these fund class may give 4-5 points more than that of post office savings.
Comfort in servicing the investment is another factor to be considered before investing in any class of asset.
Happy Investing
Those who read this also read:
1. Asset Allocation Decision: India
2. Thumb Rules (TR) of Personal Financial Decisions
