NEW DELHI:
Flexi cap funds
are a type of mutual fund that gives fund managers the flexibility to invest in stocks across market capitalizations, i.e., large-cap, mid-cap, and small-cap. This type of fund is considered a hybrid fund as it invests in a mix of large-cap, mid-cap, and small-cap stocks, rather than being restricted to only one market capitalization.
Vrijesh Kasera, Fund Manager, Mirae Asset Flexi Cap Fund, spoke with ET Now about flexicap investing strategies.
A FlexiCap is a dynamic
equity
allocation fund that is open-ended. It makes investments in businesses, across large-cap, mid-cap, small-cap. There is no floor or ceiling on the market value of investments. So you can be 100% mid-cap, 100% small-cap, all large-cap. A FlexiCap fund must have at least 65% of its total assets invested in equity investments with an equity component. It offers exposure to a wide variety of equity securities and has no limitation on sector and market caps. These funds aim to generate wealth over a longer period of time.
Difference between a multi-cap and flexiCap?
The
SEBI
issued a circular in September 2020 requiring multi-cap funds to invest a minimum of 25% in large, mid, and small-cap stocks. This means that these funds must now allocate 25% of their AUM(assets under management) or corpus to each of these mid-cap, small-cap, and large-cap stocks at all times as per the amphiclassification of stocks.
FlexiCap, on the other hand, has the flexibility to invest dynamically in small, mid, and large-cap stocks with no restrictions on the level of exposure to these segments. They can change the exposure dynamically as the fund manager sees fit. It is a go-anywhere strategy in which a fund manager invests based on where he sees the best value.
When comparing the two funds, multi-cap is slightly riskier due to its higher allocation to small and mid-cap stocks. So it would be for an investor who would be more risk-taking.
FlexiCap is for an investor who is undecided and does not want to make that decision or does not have the ability to make that decision. He won't be able to evaluate whether mid-cap or small-cap stocks are better for the market today.And he leaves that decision to be made by the export, which is the fund investments. Acting out of fear and pressing the redemption button may cause you to miss out on opportunities to create wealth.
Equity
mutual funds
should be considered for the long term. FlexiCap funds seek to capture stories across market capitalizations and hold them for an extended period of time. Thus, the ideal period for investment is at least 3-5 years.
Source: ET Now
