Last Updated on Nov 10, 2022 by Aradhana Gotur

If you are concerned about market volatility and are unsure about which market capitalisation to bet on, flexi cap funds can be your ally. Flexi cap funds are relatively new to the equity funds pack. These funds can invest in companies across market cap without any restriction. In this article, let’s discuss what is a flexi cap fund and its features. Also, get a list of top flexi cap funds for 2022.

What are flexi cap funds?

Flexi cap funds were introduced by the Securities and Exchange Board of India (SEBI) on 8th November 2020. These funds are open-ended, dynamic investments that invest at least 65% in equity and equity-related instruments across different market capitalisations. This gives fund managers the liberty to invest across industry sectors. Flexi cap mutual funds are ideal for long-term investment wealth creation. The ideal time horizon for these types of funds is 5-7 yrs.

A flexi cap fund shares similarities with multi-cap funds.

Top flexi cap funds list

NameAUM (Rs. in cr.)CAGR 3Y (%)CAGR 5Y (%)Expense Ratio (%)
Quant Flexi Cap Fund639.6138.3520.000.58
Parag Parikh Flexi Cap Fund26,033.2422.9617.020.76
PGIM India Flexi Cap Fund5,084.7325.7316.380.32
Canara Rob Flexi Cap Fund8,243.0319.4114.940.49
UTI Flexi Cap Fund25,786.6218.7414.820.92
Union Flexi Cap Fund1,285.8019.7913.961.08
IDBI Flexi Cap Fund374.2719.0913.861.17
Edelweiss Flexi Cap Fund1,018.7819.2413.610.5
HDFC Flexi Cap Fund29,749.0120.3613.431.06
Franklin India Flexi Cap Fund10,001.8521.4912.901.12

Note: The above information is dated 8th November 2022. The parameters used to filter the list of top flexi cap funds on Tickertape’s Mutual Fund Screener are:

  • Category – Flexi cap funds
  • Plan – Growth
  • CAGR – 3Y
  • CAGR – 5Y (set high to low)
  • Expense Ratio

What are the features of a flexi cap fund?

  1. Flexi cap funds are required to invest 65% of their funds in equity and equity-related instruments.
  2. Fund managers of flexi cap mutual funds are allowed to invest in companies of all sizes without any limits on particular market segments. For instance, large-cap funds can only invest up to 20% in mid-cap and small-cap companies. But flexi cap funds don’t have such restrictions.
  3. Since there are no limits on the market segment front, fund managers can invest based on a segment’s attractiveness instead of being restricted to a particular market segment, thereby giving better returns.

Benefits of investing in flexi cap funds

  1. Flexi cap mutual funds invest in different industries and aim for long-term wealth creation. This makes it an excellent option to beat market volatility and enjoy optimal returns.
  2. Flexi cap funds are diversified. Fund managers can limit the exposure to risky segments to a minimum during a market correction. This can protect your portfolio from an unexpected decline in a particular asset or industry caused by short or mid-term volatility.
  3. Large-cap funds are not allowed to invest more than 20% in mid-cap and small-cap companies. In contrast, flexi cap funds have the flexibility to invest in companies across market capitalisations, depending on the performance of a specific market segment.
  4. Due to the 65% requirement, flexi cap mutual funds can also invest in foreign markets. This offers global diversification.

Risks of a flexi cap fund

Funds managers of these schemes have the liberty to invest in any market segment based on their outlook. For instance, some flexi cap funds may be more conservative than others. Hence, you should invest in a scheme that aligns with their risk tolerance.

How are flexi cap mutual funds different from multi cap funds?

Multi cap funds managers must invest a minimum of 25% in all three market capitalisations – large-cap, mid-cap, and small-cap. In contrast, flexi cap funds have no such limit across the segments. This gives the fund managers flexibility to invest across the market segments without any bias towards a particular market cap segment.

Who should invest in flexi cap funds?

  • Investors looking to create wealth in the long run can consider these
  • Investors who have an investment horizon of 5-7 yrs as it can offer higher returns and can beat inflation
  • Investors having a moderate to high-risk appetite

How are flexi cap funds taxed?

Flexi cap funds are taxed like other equity funds:

  • Short-term profits (made within a year are taxed at 15% flat, irrespective of your applicable slab rate.
  • Long-term returns in excess of Rs. 1 lakh (made after holding for more than 12 months) are taxed at 10% flat.

FAQs

What is a flexi cap mutual fund?

Flexi cap funds are open-ended, dynamic investments that have the freedom to invest across market capitalisations without category limits. These invest at least 65% in equity and equity-related instruments.

Which index do flexi cap funds track?

Flexi cap funds generally track Nifty 500 TRI and Nifty 50 TRI.

Which are the best flexi cap mutual funds?

Quant Flexi Cap Fund, Parag Parikh Flexi Cap Fund, PGIM India Flexi Cap Fund, Canara Rob Flexi Cap Fund, and UTI Flexi Cap Fund are some of the best flexi cap funds for 2022 based on the 5-yr CAGR. You can use Tickertape’s Mutual Fund Screener to discover the best flexi cap funds based on your desired metrics such as rolling returns, expense ratio, Sharpe ratio, 3-yr and 5-yr CAGR, AUM, and so on.

Is a flexi cap fund good?

Flexi cap funds can be considered for long-term wealth creation. Since these funds have no restrictions on the market segment, investors with moderate to high-risk tolerance and an investment horizon of 5-7 yrs can invest in these.

Is flexi cap fund safe?

Just like any other equity mutual fund, flexi cap funds are not risk-free. Therefore, having a long investment horizon with a well-diversified portfolio can help beat market volatility and give better returns.

Aradhana Gotur
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