Concept Clarifier - Flexicap Funds

What are Flexicap Funds?

The market regulator, SEBI had vide it circular dated November 6, 2020, introduced a new category of equity mutual fund scheme called ‘Flexicap Fund’. These are open-ended dynamic equity schemes investing across large-cap, mid-cap and small-cap stocks. The minimum investment in equity and equity-related instruments will be 65% of the total assets.

How do these funds work?

The fund managers of Flexicap category are allowed to invest in companies of all sizes without any restrictions. Fund managers can invest in high-growth, small-sized companies to benefit from high growth. They look for companies with strong balance sheets, relatively attractive return ratios and strong cash flows
Despite changes in the classification of stocks, fund managers’ investment decisions remain intact. A fund manager can stick to his conviction bets and focus on fundamentals for long term benefit. Flexicap scheme helps fund managers gauge the relative attractiveness of markets’ sub-segments and allocate investments accordingly.

Key benefits:

•  Fund managers to invest freely across the market capitalisation

•  Well-diversified equity strategy with a flexible ‘go-anywhere’ approach

•  Ability to harness opportunities across the market spectrum - Market cap, sector, or style agnostic

•  Aims to capitalize on investment opportunities across the market spectrum

•  Balances the risk and return aspects pretty well due to diversified portfolio

How is it different from Multicap Funds?

Multi-cap funds have to adhere to the 25-25-25 rule of keeping 25% each in large-cap stocks, mid-cap stocks and small-cap stocks, hence, putting minimum investment conditions across market cap segments.
In order to bring some flexibility to AMCs, SEBI introduced a new category i.e. “Flexi Cap Fund”, which shall be positioned as a dynamic equity fund and will not have any limit or bias towards any market cap segment.
Under the new category, these funds will continue to follow their investment strategy for the flexicap fund as it offers complete flexibility for the fund while investing across market cap segments.

Ideal for?

•  Investors who want complete flexibility to invest companies across market cap buckets

•  Investors with a moderate to high-risk appetite and investment horizon of more than 5 years

An Investor Education & Awareness Initiative.

Investors should deal only with Registered Mutual Funds, to be verified on SEBI website under Intermediaries/Market Infrastructure Institutions". Refer www.ltfs.com for details on completing one-time KYC (Know Your Customer) process, change of details like address, phone number etc. and change of bank details etc. For complaints redressal, either visit www.ltfs.com or SEBI's website www.scores.gov.in

Disclaimer – This information is for general information only and does not have regard to particular needs of any specific person who may receive this information. L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates; does not guarantee/indicate any returns/and shall not be held liable for any loss, expenses, charges incurred by the recipient. The recipient should consult their legal, tax and financial advisors before investing. Recipient of this information should understand that statements made herein regarding future prospects may not be realized or achieved.

The returns from mutual funds are subject to market fluctuations while returns on savings account, fixed deposits and bonds are fixed.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.