Flexi Cap Funds: Market’s New Darling

According to data released by Association of Mutual Funds in India (AMFI) the flow into equity funds for the month of August stood at Rs 38,239.16 crore. And the segment of equity funds which received the second highest inflows were flexi cap funds at Rs 3,513.16 crore. This is not surprising as flexi cap funds offer a balanced approach to investing in volatile markets. 

What Are Flexi cap Funds? 

What are flexi cap funds? “Flexi cap funds come under the umbrella of equity funds and are a typical diversified equity scheme. They have a regulatory mandate of investing a minimum 65 per cent into equity and related instruments. Flexi cap funds can invest across large, mid and small cap stocks dynamically. Going by the industry data, flexi cap funds generally tend to have a higher exposure to large caps, followed by mid and small caps,” says Sriram BKR, Senior Investment Strategist, Geojit Financial Services.

Here it is important to understand the difference between flexi cap funds and multi asset allocation funds. Multi asset allocation funds on the other hand, come under the parent category of hybrid funds and carry the regulatory prescription of investing in a minimum of at least three asset classes, with a minimum allocation of 10 per cent in each. But the investment mandate of the fund may choose to invest in more asset variants, based on how they see the opportunities.

Should You Invest? 

Does it make sense to invest in flexi cap funds now? 

“Yes, flexi cap funds are a good investment choice, particularly in the current market scenario. The key advantage of flexi cap funds lies in their flexibility to invest across large-cap, mid-cap, and small-cap stocks, allowing fund managers to adjust the portfolio allocation based on market conditions. This adaptability enables fund managers to shift investments between different market segments, optimising returns according to prevailing opportunities or risks in the market,” says Soumya Sarkar, Co-Founder, Wealth Redefine, (AMFI registered MFD).

Because of this flexibility, investors benefit from the fund manager's expertise in making dynamic decisions. By investing in flexi cap funds, you gain exposure to all three market caps—large, mid, and small—giving a balanced risk-return potential. 

“In terms of portfolio allocation, if you have a solid equity exposure, it is advisable to allocate around 30 per cent to 40 per cent of your portfolio to flexi cap funds. This allocation allows you to take advantage of the diversified exposure and the professional decision-making of the fund manager, helping you manage risk while maximising growth potential,” says Sarkar.