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Flexicap vs Multicap Funds: Find out the difference

On November 06, 2020 SEBI introduced a new equity fund category—Flexicap Funds. This category followed a more flexible investment mandate and is in addition to the existing Multicap Funds category.
With the new category introduced, few fund houses could choose to re-categorise erstwhile multicap schemes as Flexicap schemes if they wanted to continue with the flexible investment style.
Stock markets always provide opportunities for long term investment. Most of the equity schemes including Multicap mutual funds and Flexicap mutual fund schemes are precisely meant to make use of such opportunities. Both of these schemes have a large canvas to invest across large-cap, mid-cap and small-cap stocks but with an important difference. Many investors want to know difference between Flexicap and Multicap funds and some are confused if Flexicap and Multicap are the same?

How Flexicap Funds are 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 funds while investing across market cap segments without any restrictions.
Flexicap funds invest in equities of companies across capitalisation with no fixed percentage of allocation towards any. The fund manager has the leeway to change the asset allocation depending on the markets. If you are comfortable with high exposure in small, mid or large cap, investing in Flexicap funds is the right option for you.
> SEBI's very purpose of creating different mutual fund categories is to provide more options and clarity to investors and help them make informed investment decisions. Different investors have different risk appetites, investment needs, experience, knowledge, and preferences. Multicap and Flexicap funds are suitable for different types of investors


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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.

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