Equity markets across the globe are enduring a very difficult time thanks to the ongoing geopolitical complications, such as the US-Israel war with Iran, along with the Russia-Ukraine war. The benchmark Nifty 50 index has remained flat over the last year. In this environment, flexi cap mutual funds have quietly emerged as a go-to choice for investors navigating uncertain markets.
This fact has been backed by the recent ₹10,054.12 crore inflows into Flexi Cap mutual funds, according to AMFI data. This amount is the highest inflow of all the categories.
These distinct mutual fund schemes offer flexibility across market capitalisations, with some resemblance to other mutual funds, making them look predictable and similar. Still, their risk strategies, return profiles and consistency can differ immensely. Understanding the concept of flexi cap mutual funds is critical before you decide to invest in them.
What are flexi cap mutual funds?
Flexi cap mutual funds are diversified equity schemes that can invest freely across different large-, mid- and small-cap stocks. This feature of flexi cap mutual funds allows mutual fund managers to dynamically adjust and align portfolios in response to market developments and upcoming opportunities.
What are the pros and cons of flexi cap mutual funds?
| Category | Details |
|---|---|
| Pros | Flexi cap mutual funds offer diversification, adaptability to changing market conditions, and the potential for better risk-adjusted returns. They are designed to suit different investors compared with Large-cap, Mid-cap, and Small-cap funds. |
| Cons | Returns depend heavily on fund manager decisions, market conditions, and geopolitical developments. Performance can vary significantly across funds, and all returns are subject to market risks. |
Returns, AUM & Fund Manager comparison
|
Fund |
Fund Manager |
AUM ( ₹ crore) |
1-Year Return |
3-Year Return |
5-Year Return |
|---|---|---|---|---|---|
| HDFC Flexi Cap Fund | Amit Ganatra | 91,334.91 | 5.66% | 20.77% | 20.87% |
| ICICI Prudential Flexi Cap Fund | Rajat Chandak | 18,458.16 | 10.45% | 19.13% | — |
| Parag Parikh Flexi Cap Fund | Rajeev Thakkar | 1,28,966.48 | 6.29% | 18.14% | 16.39% |
| Mirae Asset Flexi Cap Fund | Varun Goel | 3,448 | 9.47% | 16.16% | — |
Note: The AUM, returns and fund manager details are recent and taken from official sources. For complete details, refer to the official website of the respective fund.
What should investors compare?
In case you wish to invest in this category of mutual funds, you should compare the following and not just focus on past returns:
- Review and understand key risk metrics, such as standard deviation and beta. Check the expense ratio, exit loan, taxation metrics, etc.
- Technical aspects such as the Sharpe ratio, current Asset Under Management (AUM), past performance, future growth and the fund’s investment objectives should be analysed.
- Focus on the fund manager, his experience, strategy, vision and level of consistency. Reading about the fund manager itself will give you a fair idea about how the fund might perform in the future.
- If possible, track AUM growth and the fund’s performance during earlier market peaks and declines. These checks will help you get a fair understanding of the fund.
HDFC, ICICI, Parag Parikh and Mirae Asset: All mutual funds have their unique features
All the above-discussed flexi cap mutual funds have their unique features. HDFC focuses on long-term stability, ICICI Prudential takes a more aggressive approach, Parag Parikh prioritises downside protection, and Mirae Asset focuses on building its performance-based brand.
The choice of investment, hence, should be based not just on returns but on whether the fund’s risk style matches your investment goals and comfort with volatility.
Are flexi cap mutual funds the correct investments for you?
This decision depends on a host of factors, including your current financial health, risk tolerance, debt levels, future economic objectives, and your comfort with equity exposure.
Before you lock into any investments, whether it is equities, debt instruments or other asset classes, sit with a certified financial advisor to have a clear discussion before investing.
This way, all your investments will remain professionally guided. Professionals can also guide you in managing your exposure to risk-based equities and mutual funds to ensure that your portfolio doesn’t suffer a lot of volatility.
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