Understanding Flexi-Cap Fund

Flexi-cap funds are a new category of mutual funds that invest at least 65% of their capital in stocks. In this fund category, the fund manager has the flexibility to gain exposure to the large-cap, mid-cap and small-cap segments. without restriction. Therefore, Flexi Cap Funds invests its funds by market capitalization. This means fund managers have full control to limit or maximize exposure to a particular market capitalization segment based on how  that segment will perform in the future. And that decision is based on  growth potential,  performance history, and the risks  these companies and sectors face. Typically, a flexi cap fund has a portfolio of companies with professional management and growth capabilities. 

Factors to consider 

Flexicap funds offer a diversified portfolio as the fund balances  risk and return quite well. These funds are also known for providing consistent returns even during  a bear market. In addition, the fund manager may decide to assess the  allocation of funds and switch between different companies and sectors  from time to time based on performance.For example, if the fund manager learns that a particular segment of the market in which it has invested  has become unattractive over time, the fund manager may change the allocation to an alternative segment that has been performing well recently. This gives investors the dual benefit of not only investing in the best-performing stocks, but also the ability to unsubscribe from the unattractive ones. Market capitalization plays a crucial role in selecting companies to invest in mutual funds. Market capitalization shows not only  the size of a particular company, but also various other  characteristics that investors look for, such as: B. the track record, the growth potential and the risk inherent in these companies.

How is it different from the Multicap fund?

Multi-cap funds are subject to rule 252525 for maintaining $25 billion for large-cap, mid-cap, and small-cap stocks, which sets forth minimum investment requirements across all market capitalization segments.To provide flexibility to AMCs, SEBI has introduced a new category, the "Flexi Cap Fund", which will position itself as an active investment fund and will  have no limits or biases towards with a market capitalization segment.In the new portfolio, these funds will continue to follow their investment strategy for the flexicap fund as it provides full flexibility for the fund while investing in market capitalization segments.

Suitable for whom?

Flexicap funds are generally suitable for investors who are willing to invest their money for a period of five or more years to meet their long term financial goal.One can expect returns that beat the inflation rates and higher than that of the fixed income options.Owing to its flexible nature, it attracted the attention of investors and emerged as the second largest equity mutual fund category after large cap funds.