Top 10 best-performing flexi-cap funds: Should you invest?
Mutual funds focused on equities, such as Flexi-cap funds, are crucial for anyone aiming to build wealth over the long haul.
Responding to investor needs, the Securities and Exchange Board of India (SEBI) introduced a new category known as Flexi Cap Funds on November 6, 2020. According to SEBI's directive, these funds must allocate at least 65 per cent of their total assets to equity and equity-related securities.
Understanding Flexi Cap Funds
Flexi Cap funds, a category of equity mutual funds, are characterized by their ability to invest across various market caps, offering the flexibility to adjust allocations based on market conditions and opportunities. This attribute sets them apart in the mutual fund landscape.
According to the Association of Mutual Funds in India (AMFI), there are 25 Flexi cap funds, adhering to SEBI's guideline of maintaining a minimum of 65 per cent investment in equities. These schemes are versatile, investing in a mix of large, mid, and Small-Cap stocks, allowing fund managers the liberty to invest in companies of any size, from high-growth giants to smaller entities with robust financials, focusing on potential earnings, attractive returns, and cash flow efficiencies.
Top 10 best-performing flexi-cap funds based on 3-year returns
|
Scheme Name
|
AuM
(In Cr)
|
1-year return
|
3-year returns
|
5-year returns
|
|
Quant Flexi Cap Fund
|
3,539.90
|
54%
|
35%
|
32%
|
|
Bank of India Flexi Cap Fund
|
630.37
|
51%
|
27%
|
-
|
|
JM Flexi Cap Fund - Direct
|
1,437.98
|
51%
|
25%
|
24%
|
|
HDFC Flexi Cap Fund
|
47,642.42
|
36%
|
25%
|
21%
|
|
Parag Parikh Flexi Cap Fund
|
55,034.05
|
39%
|
22%
|
24%
|
|
Franklin India Flexi Cap Fund
|
14,165.22
|
37%
|
21%
|
20%
|
|
Edelweiss Flexi Cap Fund
|
1,598.23
|
33%
|
19%
|
20%
|
|
Union Flexi Cap Fund
|
1,917.58
|
33%
|
19%
|
20%
|
|
HSBC Flexi Cap Fund
|
4,115.56
|
37%
|
18%
|
19%
|
|
Shriram Flexi Cap Fund
|
76.64
|
36%
|
17%
|
17%
|
*Data as of February 13, 2024.
Ideal Investors for Flexi Cap Funds
The economic slowdown in 2020, particularly impacting the growth of mid and small-cap companies, highlighted the resilience of Flexi Cap Funds. These funds can shift their focus to large caps in uncertain times, adjusting allocations when market conditions favour smaller caps.
Flexi Cap Funds are suited for investors with a moderate to high-risk tolerance, recommending a minimum investment horizon of five years to maximize returns. While small-cap investments add volatility, the inclusion of Large-Cap stocks helps mitigate risk, ensuring a balanced portfolio.
Key Features of Flexi-Cap Mutual Funds
Diversified Investment: By investing across market caps, Flexi-cap funds ensure a broad diversification, exposing investors to a range of large, mid, and small-cap stocks across sectors.
Dynamic Management: These funds are actively managed, allowing for adjustments in asset allocation to capitalize on market opportunities.
Freedom from Market Cap Constraints: Unlike other fund categories, Flexi-cap funds are not bound by market capitalization constraints, affording fund managers the flexibility to tailor the portfolio as they see fit.
Open-Ended Nature: Flexi-cap funds are open-ended, meaning they have no fixed maturity or lock-in period. Investors can choose to invest in a lump sum or through a Systematic Investment Plan (SIP) and redeem their investments according to their financial needs.
Flexi-cap funds stand out for their adaptable investment approach, making them a compelling choice for those seeking diversified exposure to the equity market.