After market regulator SEBI introduced flexi-cap in mutual funds in January this year, the new category gained a lot of traction among the investors of late. Currently, flexi-cap category is second in size only to largecap funds. Fund managers mopped up Rs 11,508 crore in flexi-cap funds in July.
This type of fund has the freedom to allocate portfolio without restriction in any segment of the cash market.
Flexi-cap funds have to invest at least 65 percent of their assets in equity and equity-related investments. However, there is no cap on how much these funds invest in large, mid, or small caps. In case of multicap funds, they were allowed to invest a minimum of 25 percent across large and mid-small caps.
In this episode of ‘Mutual Fund Corner’, CNBC-TV18’s Sumaira Abidi spoke to Jinesh Gopani, head-equity at Axis MF, and Shreyash Devalkar, sr. fund manager-equity at Axis MF.
Gopani said, “I think, there are a set of investors who would like to participate in all cap stories, and flexi-cap is one of the best product I would say, in a way it is a multicap strategy, which allows fund managers to have flexibility in terms of positioning his portfolio depending on the market conditions, depending on the valuations. What we have seen frankly is by not taking a higher beta on the portfolio, and by not taking a higher risk on the portfolio, the ability is there this product to outperform the indices over a longer period of time.”
“So, I think it gives a lot of flexibility to the fund manager to manoeuvre depending on the market conditions, and valuations among different categories of market caps.”
Devalkar said, “In flexi-cap, there is no restriction. So, you can have theoretically 100 percent smallcap theoretically, 100 percent largecap, and then based on individual fund managers, we can have whatever percentage. But again these allocations to the market cap, especially in flexi-cap funds, are more driven by which companies are good, irrespective of their market cap. So, someone may end up having 100 percent small and someone may end up having 100 percent large and that is where in this category you will notice the funds have diverse nature of holdings.”
Watch the accompanying video for more.