Thursday, Sep 28, 2023

A Glance At The One-Year Performance Of Flexi-Cap Funds, Is It Worth Your Investment?

Outlook Money

A Glance At The One-Year Performance Of Flexi-Cap Funds, Is It Worth Your Investment?

With 30 funds and a combined asset under management (AUM) of over Rs. 2.56 crore, the flexi-cap funds provided an average return of 14.34 per cent in a year, AMFI data shows

Flexi-cap funds offer investors the flexibility to invest in large, mid, and small-cap stocks, and with their average annual return of 14.34 per cent, they emerge as a promising option.

Data from the industry body, the Association of Mutual Funds in India (AMFI), shows that flexi caps’ average annual returns were higher than large caps in the short term while mitigating volatility in the mid-caps with relative ease.

What Are Flexi Cap Funds?

Designed as dynamic equity schemes, flexi-cap funds allow fund managers to invest across large, mid, and small-cap stocks, offering complete freedom in allocation decisions.

According to Sebi, flexi-cap funds require a minimum investment of 65 per cent of the total assets in equity and equity-related instruments. The large-cap, mid-cap, small-cap, and multi-cap schemes also have predefined mandates for investing across market caps.  

However, the flexi cap funds can invest across large, mid, and small-cap categories with no restrictions on allocations across these categories. This dynamic allocation allows them to adapt swiftly to market trends and capitalise on emerging opportunities.

Flexi Cap Funds’ Returns

AMFI data shows the market boasts 30 flexi cap funds as of June 2, 2023, with a combined asset under management (AUM) of Rs 2,56,459 crore.

A cursory glance at the performance of these funds over the past year reveals some interesting facts. The top performers were JM Flexicap Fund (G), delivering a 22.77 per cent return, closely followed by the HDFC Flexi Cap Fund (G)-Direct Plan, with a 20.44 per cent return.  

Additionally, the Invesco India Flexi Cap Fund (G), Navi Flexi Cap Fund, and Mahindra Manulife Flexi Cap Fund saw over 17 per cent returns. On the other hand, UTI Flexi Cap Fund (IDCW) recorded the lowest return at 7.92 per cent.

The average return of all the flexi cap funds was 14.34 per cent. Of the 30 funds, 17 outperformed this average, while 13 underperformed.

The data set further shows that the large cap-direct funds gave an average annual return of 13.73 per cent as of June 2, 2023. Also, of the 30 funds, 19 surpassed the average return of 13.73 per cent from large-cap funds, while 11 fell short.

Since mid-cap funds are usually more volatile than large caps, and the small caps exhibit even higher volatility, some investors pick flexi-cap funds. While the average return of flexi-caps (14.34 per cent) and mid-caps (17.47 per cent) is not an appropriate comparison, it does demonstrate that flexi-caps can provide higher returns than large caps while mitigating volatility associated with mid-caps.

Who Can Invest?

The flexi-cap funds could be suitable for first-time investors as they may have doubts or struggle to diversify their portfolios with large-cap, mid-cap, small-cap, multi-cap, sectoral funds, etc.  

Investors looking for a well-diversified portfolio with reduced risk can consider them. Moreover, the flexi-caps’ returns indicate that they have the potential to give higher returns while balancing various market risks, including volatility.

However, remember that the past performance of these funds is not a guarantee for future performance. Therefore, investors should consider their investment goals and seek help from a financial advisor before investing in these assets. 


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