Making the right investment choices can be challenging for investors and flexi cap funds can be the much-needed silver lining in their portfolios

Capital markets have been witnessing varying degrees of volatility over the past few years owing to multiple factors including the Covid-19 pandemic and the Russia-Ukraine war. With recessionary clouds looming on the US horizon and speculations running rife about further corrections in markets, the ripple effects are expected to have an impact on Indian markets as well. Considering this scenario, making the right investment choices can be challenging for investors and flexi cap funds can be the much-needed silver lining in their portfolios. This is because these funds invest in equities of a range of companies across market capitalizations and sectors – small-cap, mid-cap, and large-cap –which spreads out the risk and can lower the impact of volatility on investor portfolios.

Mirae Asset Mutual Fund recently conducted a special presentation on Flexi Cap funds with Mayukh Datta, Head Product – Strategy and Communication, Mirae Asset Investment Managers (India) Private Limited to throw light on how flexi-asset funds can be a useful addition to the portfolios of investors when volatility looms on the horizon. Here are a few excerpts from the event that was hosted by senior journalist Gautam Srinivasan:

Datta kicked off the session by elucidating the benefits of flexi cap funds for investors. He says, “Often when you look at the whole equity universe to invest whether it is domestic or international, the most relevant question becomes where to invest, which size and which sector to invest in. While mutual funds can be something that investors may be looking for as an investment solution, the options may tend to make decision-making very difficult. A flexi cap fund has the flexibility to invest across sectors and companies of various market capitalizations and therefore the fund house and the fund managers can make that decision for investors. The investment decisions are based on market conditions at any given point of time.”

For investors who are still learning the nuances, figuring out the differences between different kinds of mutual funds and deducing which of them would be best suited for their goals can be a tricky affair. When it comes to hybrid funds, many investors often get confused between multi-cap funds and flexi cap funds. Datta explains, “While the scheme categorization rule came into effect in 2018, it is only from 2021 that flexi cap funds and multi-cap funds were demarcated into two different categories. For flexi cap funds, the mandate is that at all points of time, a minimum of 65 percent of investment should be held in Indian equities, and other than that there is no limitation of any kind. While in a multi-cap fund, a minimum of 25 percent each needs to be invested in large-cap, small-cap, and mid-cap, and the balance of 25 percent can be invested as per the fund manager’s discretion.

A major advantage of flexi cap funds, according to Datta, is that they are suitable for all kinds of investors. He says, “It is a judicious choice for investors who are new to the mutual funds space and do not have many insights about the different categories of funds and their relevance. It is also suitable for investors who are looking to create their core portfolio because flexi cap fund merits a decent allocation in the core portfolio. Your satellite allocations could be based on themes or sectors or they could be various other things. Flexi caps ensure you get decent equity participation and where it needs to be invested is being taken care of by experts depending on what the market conditions are.”

The information contained in this document is compiled from third party and publically available sources and is included for general information purposes only. There can be no assurance and guarantee on the yields. Views expressed by the speaker cannot be construed to be a decision to invest. The statements contained herein are based on current views and involve known and unknown risks and uncertainties. Whilst Mirae Asset Investment Managers (India) Private Limited (the AMC) shall have no responsibility/liability whatsoever for the accuracy or any use or reliance thereof of such information. The AMC, its associate or sponsors or group companies, its Directors or employees accepts no liability for any loss or damage of any kind resulting out of the use of this document. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein. Any reliance on the accuracy or use of such information shall be done only after consultation to the financial consultant to understand the specific legal, tax or financial implications.

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