What is the Flexi Cap Fund? – SensexPanel

Flexi Cap Fund

Flexi Cap Fund is a type of equity mutual fund that invests across companies of various market capitalizations, including large-cap, mid-cap, and small-cap companies. The flexibility to invest across market caps allows the fund manager to take advantage of opportunities in different segments of the market, depending on their potential for growth and valuation attractiveness. This diversification helps manage risk better than funds focusing on a single market cap segment.

How does the Flexi Cap Fund work?

#FlexiCapFunds operate by dynamically allocating assets across companies of various sizes — large, mid, and small caps — based on the fund manager’s assessment of their potential for returns and the prevailing market conditions.

Here’s a breakdown of how these funds work.

  1. Investment Strategy
  • Dynamic Allocation

The fund manager has the discretion to invest any proportion of the fund’s assets in large, mid, or small-cap stocks. This allocation is based on thorough market research, analysis of economic indicators, and company fundamentals.

  • Opportunistic Investing

Flexi Cap Funds capitalize on market opportunities. For instance, if small-cap stocks are undervalued but poised for growth, the fund may increase its holdings in that segment.

  1. Research and Analysis
  • Market Analysis

Fund managers continuously analyze market trends, economic data, and other indicators to identify growth opportunities and potential risks.

  • Company Evaluation

In-depth analysis of individual companies, including financial health, business model, industry position, and growth potential, guides investment decisions.

  1. Portfolio Construction
  • Diversification

By investing across market caps, the fund aims to balance the growth potential of small and mid-caps with the stability of large-caps, thereby managing risk.

  • Active Management

The fund manager actively buys and sells holdings to optimize the fund’s performance, adjusting the portfolio in response to market changes or shifts in the economic landscape.

  1. Risk Management
  • Mitigating Volatility

The ability to shift between market caps allows the fund to navigate market volatility better, as different segments may react differently to market changes.

  • Long-term Focus

Despite short-term market fluctuations, the diversified and dynamic approach aims to achieve long-term capital growth, aligning with investors’ long-term financial goals.

  1. Performance Monitoring
  • Regular Reviews

The fund’s performance is regularly reviewed against benchmarks and peer funds to ensure it meets its investment objectives.

  • Adjustments

Based on performance reviews and changing market conditions, the fund manager may make adjustments to the portfolio to maintain its growth trajectory and manage risk.

#FlexiCap Funds require an active management approach, leveraging the fund manager’s expertise to make informed investment decisions. The goal is to maximize returns for #investors by taking advantage of the growth potential across different market segments while managing the inherent risks of equity investing.

Top Performing Flexi Cap Funds

The top-performing Flexi Cap Funds have shown promising returns, and investing in them could be a strategic move for those looking for diversified equity investment opportunities. Here are some notable Flexi Cap Funds based on recent performance as of 20 Feb 2024.

Quant Flexi Cap Fund

The #Quant Flexi Cap Fund is a dynamic investment option that aims to generate consistent returns by diversifying its portfolio across #large-cap, #mid-cap, and #small-cap companies. With an AUM of ₹3,540 Crores as of January 31, 2024, it has demonstrated a capacity to manage significant assets effectively. The fund is known for its aggressive investment strategy, with a notable focus on sectors like Energy, Financial, Healthcare, Metals & Mining, and Construction, which dominate its investments.

The fund has delivered impressive returns since its inception, boasting a subsequent annualized return rate of 21.33% to 21.45%, depending on the source, highlighting its potential for strong growth over the long term. Over the past year, it has seen a remarkable return of around 58.70% to 62.68%, showcasing its ability to capitalize on market opportunities and navigate through volatility effectively.

Parag Parikh Flexi Cap Fund

The Parag Parikh Flexi Cap Fund is a diversified equity scheme aiming for long-term capital appreciation by investing across large-cap, mid-cap, and small-cap stocks, as well as in foreign equities. As of January 31, 2024, the fund has assets under management (AUM) of ₹55,034 Crores, with a Direct Plan NAV of 75.1418 and a Regular Plan NAV of 69.6257 as of February 22, 2024​.

This Fund has delivered impressive returns, including a 1-year return of 44.28%, a 3-year annualized return of 24.03%, and a 5-year annualized return of 24.81%. Since its inception, the fund has generated average annual returns of 20.64%​​. The fund has a minimum investment requirement of ₹1,000 for new purchases, additional purchases, and both monthly and quarterly SIPs​​.

Franklin India Flexi Cap Fund

The Franklin India Flexi Cap Fund is a versatile investment option aiming to provide growth of capital and regular dividends through a diverse portfolio of equity, debt, and money market instruments, targeting wealth-creating companies across all sectors and market cap ranges.

With assets under management (AUM) of ₹14,165 Crores as of January 31, 2024, the fund has established itself as a significant player in its category. It requires a minimum investment of ₹5,000 for lump sums and ₹500 for SIPs, making it accessible to a broad spectrum of investors. The fund has been active for over 29 years, delivering an average annual return of approximately 18.26% since inception, which reflects its long-term performance potential and management expertise.

The fund’s portfolio prominently includes investments in sectors like Financial, Technology, Energy, Consumer Staples, and Services, with top holdings in leading companies such as ICICI Bank, HDFC Bank, Larsen & Toubro, Infosys, and Bharti Airtel. This diversified investment approach aims to capitalize on growth opportunities across different sectors and market caps, underscoring the fund’s strategy to achieve capital growth and dividends for its investors.

HDFC Flexi Cap Fund

The #HDFC Flexi Cap Fund is designed to generate capital appreciation and income by predominantly investing in equity and equity-related instruments. This flexi-cap fund offers the flexibility to invest across companies of various sizes, aiming for maximum gains which makes it suitable for equity fund investors looking for diversified exposure.

With an AUM of ₹47,642 Crores as of January 31, 2024, and a minimum SIP investment of ₹100, the fund is accessible to a wide range of investors. The fund has an exit load of 1% if units are redeemed within a year from the date of allotment, but no exit load is charged for redemptions after this period. The fund has demonstrated a strong performance, delivering 19.01% returns since its inception 29 years and 1 month ago, with recent 1-year returns at 40.33%.

The top holdings of the fund include major players like #ICICI Bank, #HDFC Bank, #Cipla, Hindustan Aeronautics, and HCL Technologies, reflecting a diversified portfolio across various sectors​​.

Disadvantages of Flexi Cap Fund

Flexi Cap Funds, while offering several advantages like diversification and the potential for high returns, also come with their set of disadvantages.

  1. Market Risk

Given their investment across large, mid, and small-cap stocks, Flexi Cap Funds are exposed to the volatility of the equity market. This can lead to significant fluctuations in fund value, especially in the short term.

  1. Manager Dependence

The performance of Flexi Cap Funds heavily relies on the fund manager’s skill in selecting stocks and timely reallocating assets across different market caps. A misstep in strategy or timing can negatively impact returns.

  1. Higher Volatility

The freedom to invest across market caps means these funds might take higher risks, especially by investing in small-cap stocks, which can lead to increased volatility compared to more focused funds.

  1. Complexity

The dynamic nature of asset allocation in Flexi Cap Funds can make it harder for investors to understand where their money is being invested at any given time, leading to a potential mismatch with their risk appetite or investment goals.

  1. Cost

Actively managed Flexi Cap Funds may come with higher expense ratios due to the intensive research and active trading required to shift investments across market caps. This can eat into the net returns for investors.

  1. Performance under Pressure

In rapidly changing market conditions, the fund manager’s ability to quickly and effectively reallocate assets can be put to the test, sometimes leading to underperformance compared to more focused equity funds.

Investors need to consider these potential downsides and evaluate their own investment goals, risk tolerance, and time horizon before investing in Flexi Cap Funds.

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