Flexi-cap funds are in the news for all the right reasons. They generated the highest inflows of Rs 2,511.74 crore among equity mutual funds in June 2022, according to the Association of Mutual Funds in India (AMFI) data. As of June 2022, their average net asset under management (AUM) stood at Rs 2,11,296.44 crore. This was significantly higher than ELSS, mid-cap, small-cap, multi-cap, sectoral and thematic funds.
So are flexi-cap funds a lucrative investing option?
What are flexi-cap funds?
Flexi-cap funds are equity funds that invest a minimum of 65 percent of their assets in equity and equity-related instruments. They are free to take exposure to large-cap, mid-cap, and small-cap stocks without any restrictions as they invest across market capitalisation.
What is the recent buzz around these funds?
Flexi-cap funds are in the news because of the way they handled stock market volatility after the Russia-Ukraine crisis, said Archit Gupta, Founder and CEO at Clear, in an interaction with CNBC-TV18 Digital.
"For instance, flexi-cap funds increase exposure towards large-cap stocks under volatile market conditions. According to ETIntelligence Group data, flexi-cap mutual fund schemes had an average allocation of 65 percent of their assets towards large-caps, 17 percent towards mid-caps and 9.9 percent towards small-caps," Gupta said.
So, is it a good investment option?
According to Gupta, flexi-cap funds are a good approach as large-caps have better liquidity and stability than mid-caps and small-caps in volatile stock markets.
"These funds have a higher exposure to large-cap companies as they are well-established and offer a higher risk-adjusted return. It gives stability to the portfolio than mid-caps and small-caps, which tend to crash in a declining stock market," he said.
Here are some of the reasons to invest in flexi-cap funds:
Dynamically-managed
Flexi-cap funds invest in stocks across market capitalisation in different industries and sectors without restrictions. It helps in building a diversified portfolio for all market conditions.
Less risky than mid-cap and small-cap funds
Flexi-cap funds have sufficient exposure toward large-cap stocks, which protects the portfolio from volatility and enhances risk-adjusted returns than mid-cap and small-cap funds.
Flexibility across investment styles
Flexi-cap funds blend various investment styles to maximise investment returns. For example, the value style focuses on undervalued stocks, and the growth style focuses on growth opportunities.
