Flexi Cap Funds are a type of mutual fund in India. Unlike regular funds, these funds can freely invest in companies of any market capitalization and carry a broad portfolio compared to other fund categories. In short, these funds are not bound by specific restrictions on investing in companies based on their market capitalization.
This category of funds was recognized in India following a re-categorization of mutual funds by the Securities and Exchange Board of India (SEBI). HDFC and ICICI Flexi Cap Funds are two of the best funds in India. Let's understand how these funds operate.
Best Flexi-Cap Fund In India
There are several Flexi Funds in India. Here are some of the best ones.
1. ICICI Prudential Flexi-Cap Fund
The ICICI Prudential Flexi Cap Fund is a prominent fund in India. The fund invests in equity and equity-related instruments across different sectors and market capitalizations. It was launched on June 28, 2021.
ICICI Flexi Cap fund has ₹13,525 Crs worth of assets under management. Since its inception, it has delivered 18.59% average annual returns. The fund's top 5 holdings are in TVS Motor Co. Ltd., Maruti Suzuki India Ltd., ICICI Bank Ltd., HDFC Bank Ltd., and Avenue Supermarts Ltd..
2. UTI Flexi Cap Fund
The UTI is a flexi-cap mutual fund offered by UTI Mutual Fund in India. It also invests in equity and equity-related instruments for long-term capital appreciation.
Since launch, the UTI Flexi Cap fund has delivered over 14.47% average annual returns. It has ₹26,424 Crs worth of assets under management (AUM).
3. HDFC Flexi Cap Fund
HDFC Flexi Cap Fund is a mutual fund offered by HDFC Mutual Fund in India. It seeks to generate income from a portfolio, invested in equity and equity-related instruments.
HDFC Flexi Cap Fund was launched on January 1, 2013. Since its launch, it has delivered around 16.65% average annual returns and has ₹45,993 Crs worth of AUM.
4. Nippon India Flexi-Cap Fund
Nippon India Flexi Fund is a mutual fund offered by Nippon Life India Asset Management Limited (formerly known as Reliance Nippon Life Asset Management Limited). Its purpose is to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity securities & equity-related securities.
Nippon India Flexi Cap Fund has an AUM of ₹5,753 Crs. It has its money invested in the Financial, Services, Technology, Consumer Staples, and Automobile sectors. It has an expense ratio of 0.51% which is less than other flexi-cap funds.
5. SAMCO Flexi Cap Fund
SAMCO Flexi Cap Fund is an open-ended dynamic equity scheme that invests across large-cap, mid-cap, and small-cap stocks. It was launched on 4 February 2022.
SAMCO Flexi Cap Fund has an AUM of ₹798.72 Crs. It has delivered over 18.24% annual average return since inception.
6. Franklin India Flexi-Cap Fund
Franklin India is another Flexi fund offered by Franklin Templeton Mutual Fund in India. It was launched on 1 January 2013. It is a medium-sized fund in its category.
Franklin India Flexi Cap Fund has 36.06% returns from last year. Since its inception, it has delivered 17.19% returns. It has an AUM of ₹13,792 Crs.
7. DSP Flexi Cap Fund
DSP Flexi Fund is a scheme that generates long-term income by investing in a portfolio of equity and equity-related instruments. The top stock holdings of this fund include Bajaj Finance Ltd., HDFC Bank Ltd., ICICI Bank Ltd., Apar Industries Ltd., and Bharat Electronics Ltd..
DSP Flexi Cap Fund has an AUM of ₹10,067 Crs. It has delivered 15.74% annual returns. It has doubled its money every 4 years
How do Flexi-Cap Funds operate?
Unlike regular funds, a flexi fund can invest in a company with any market capitalization. In other words, the fund manager can invest in large, mid, and small-cap stocks in any proportion based on where they see the best opportunities. This flexibility allows the fund managers to spread the risk, boost returns, and adapt to changing market conditions more efficiently.
Key Features of Flexi Cap Funds
Flexi Funds provide a unique mixture of investment possibilities. The following are some of the features of these funds.
- Diverse Portfolio
Since these funds invest across different market capitalizations, it brings more diversification possibilities. The diversification potentially reduces risk as the fund's performance is not heavily reliant on a single market segment.
- Dynamic Management
The fund managers can change the allocations between large, mid, and small-cap stocks. They can switch between different market segments to aim for higher returns.
- Risk-Return Tradeoff
Although a flexicap fund may produce higher returns, investing in mid and small-cap companies comes with inherited risk.
- SEBI Regulations
In India, Flexicap funds are regulated by the Securities and Exchange Board of India (SEBI). SEBI has defined certain guidelines for the asset allocation of these funds and fund managers must adhere to those regulations.
How Flexi-Cap Funds Work With Different Market Caps?
Let's take an example of a Flexi fund involving five Indian stocks with different market capitalizations. Remember, the stocks are purely illustrative and do not constitute investment advice.
| Stock | Ticker | Last Price | Technical Score | Growth Score |
|---|---|---|---|---|
|
Apollo Hospitals Enterprise Limited
|
APOLLOHOSP
|
6695.45
|
58
|
88
|
|
Dixon Technologies (India) Limited
|
DIXON
|
15432.8
|
52
|
63
|
|
Infosys Limited
|
INFY
|
1820.2
|
32
|
83
|
|
Reliance Industries Limited
|
RELIANCE
|
1229.35
|
63
|
58
|
|
Trent Limited
|
TRENT
|
5429.1
|
70
|
78
|
Large-Cap Stock – Reliance Industries Ltd: Reliance is a massive company. It is typically classified as a large-cap stock. It has a substantial market presence in sectors like oil, gas, telecommunications, and retail. A Flexicap fund manager may invest in Reliance Industries for its stability and strong market position.
Mid-Cap Stock – Apollo Hospitals Enterprise Ltd: Apollo Hospitals is one of the leading hospital chains in India. It is often categorized as a mid-cap stock. These stocks are usually in the process of expanding and have the potential to become large-cap in the future. A fund manager might invest in Apollo Hospitals expecting rapid growth.
Small-Cap Stock – Dixon Technologies (India) Ltd: Dixon Technologies is involved in manufacturing consumer electronics. It represents the small-cap category, considered the most aggressive and high-growth potential stocks. The flexicap fund manager might invest here seeking high growth rates.
Large-Cap Stock – Infosys Ltd: Infosys is a giant in the IT sector. It is known for its steady growth and consistent performance. It is also another example of a large-cap stock. A fund manager may include Infosys in the portfolio for its stability and consistent returns.
Mid-Cap Stock – Trent Ltd (Retail Sector of Tata Group): Trent is a part of the Tata Group which operates in the retail sector. It lies in the mid-cap segment. A fund investing in Trent would be looking at tapping into the retail growth story in India, especially in the urban and semi-urban areas.
Given the stocks are from varied market capitalizations, a manager can adjust the portfolio based on market conditions and future outlook. During stable economic times, the manager might lean more towards large caps like Reliance Industries and Infosys for their reliability and steady growth. In a rising market, there could be a higher allocation towards mid-cap and small-cap stocks like Apollo Hospitals, Dixon Technologies, and Trent to capture higher growth rates.
The fund manager might again tilt towards large-cap stocks if the market is experiencing volatility. This strategic shifting is a significant advantage to fund managers who can predict market trends and adjust their portfolios accordingly.
Reseasons To Invest in Flexi Funds
Flexi Funds can be a great option for your portfolio for several reasons.
-
Balanced Exposure
Investors often look for a single equity fund to maintain a balanced exposure across market capitalizations. They might find flexicap funds appealing during this situation.
-
Market Adaptability
India’s financial market is changing rapidly. These funds can shift their focus across different segments which can be a significant advantage for investors.
-
Professional Management
Choosing the right mix of stocks across market caps can be difficult. A Flexicap fund follows professional fund management techniques to select the right stocks.
Things to Consider Before Investing in Flexi Funds
If you are considering investing in Flexi Funds, take a moment to consider the following.
-
Investment Horizon
Flexicap funds are best suited for a longer investment approach. They have exposure to a mix of market caps which may take time to mature.
-
Risk Tolerance
Consider your risk tolerance because these funds can experience volatility due to their exposure to smaller stocks.
-
Track Record of the Fund
It is crucial to look at the consistency of the fund house, the fund manager’s expertise, and historical performances before investing.
-
Expense Ratio
These funds are actively managed. They might have a higher expense ratio compared to passive index funds. So always weigh the cost against the potential for higher returns.
The Bottom Line
Flexi funds are a good choice for Indian investors looking for high returns. However, an investment decision shall be made based on individual financial goals, and risk tolerance.