Flexicap Mutual Funds: Why Are They Most Loved by Investors? 4 Main Reasons

There are 11 equity-oriented mutual fund categories including multi-cap, large-cap, mid-cap, small-cap, value funds, sectoral, ELSS, and flexi-cap funds.

Among all these variations, the most popular category based on asset size is Flexi Cap Mutual Funds.

There are 38 Flexicap mutual funds with total assets under management (AUM) as follows: INR3.27 billion. This is higher than any of the remaining 10 equity fund categories.

For example, there are 42 ELSS share schemes and the total asset value of these schemes is INR2000000000.Similarly, there are 149 sectoral/thematic funds whose total assets are INR2.58 billion yen, apparently AMFI Data as of December 31, 2023.

For those who are not familiar with it, let me first explain what a flexicap mutual fund is.

flexicap investment trust

Flexicap mutual funds refer to schemes that allow you to flexibly invest in securities across the entire market capitalization i.e. small cap, mid cap and large cap.

As per Sebi’s classification of mutual fund schemes, flexi cap funds must invest at least 65 per cent of their assets in equity and equity-related instruments.

Flexi Cap Mutual Funds as a category has returned 30.26 per cent in the past year, 12.48 per cent in the past two years and 18.13 per cent in the past three years. Lucifer data.

(Source: Morningstar. Return on January 19, 2024)

Why do investors choose Flexicap mutual funds?

1. the flexibility it offers: It is most popular among investors because its asset allocation is very flexible and is therefore not restricted by criteria that limit categories such as large-cap, mid-cap, or even multi-cap funds.

“In a flexi-cap fund, the fund manager caters to the desire to have exposure in all sections of equity, debt allocation, or prefers to remain in cash. Therefore, in a single fund large-cap stocks, You can allocate to mid-cap, small-cap and even debt funds if you wish. Some flexi-cap funds even have international exposure. With recent tax changes, full-fledged international funds have Investing in such flexi-cap funds helps in reducing tax liability and also gives exposure to US equities,” said Sebi. says Preeti Zende, Registered Investment Advisor and Founder of Apna Dhan Financial Services.

2. new categoryy: This is a relatively new category launched in November 2020 and is considered a sophisticated version of multi-cap funds. In fact, this is the only limitation that multi-cap funds suffer from. For example, a multicap requires him to allocate 25% of his assets to each of the three categories: small cap, mid cap, and large cap.

Also read: Multi-cap fund or flexi-cap? What is the better option?

Flexicap, on the other hand, has no such restrictions. As the name suggests, it is completely flexible regarding the percentage of allocation to each of the three categories.

3. good profit: They had great returns as a category. As the graph above shows, over the past year, these funds have delivered better returns than the broader index, the Nifty50 fund, which rose 20% in 2023.

Four. Allows fine-tuning of allocations: Fund managers can increase the fund’s allocation to small- and mid-cap stocks when the market is bullish, and reverse the ratio in favor of large-cap stocks when the market is volatile. This freedom to cancel allocations is not available in any hybrid fund.