As the market volatility increased due to global factors and foreign capital outflow, retail investors have shown increased interest in flexi-cap funds. The Association of Mutual Funds of India (AMFI) data for November shows that flexi cap funds received the highest inflow of ₹8,135 crore last month compared to ₹8,928 crore in October. The flexi-cap category of mutual funds now has assets under management (AUM) of about ₹5 lakh crore.
The performance of flexi-cap funds has been robust over the last 10-15 years, attracting significant interest from investors.
For example, an SIP of ₹10,000 in the Kotak Flexi Cap Fund since 2009 ( ₹19.50 lakhs in total) would have grown to ₹76.25 lakhs today. That’s a CAGR of 15.17%, a significant outperformance against the benchmark Nifty 500 TRI’s 14.41% return. The fund has outperformed its benchmark 83% of the time over 10 years.
Similarly, other flexi-cap funds, including HDFC Flexi Cap Fund, Quant Flexi Cap Fund, and Parag Parikh Flexi Cap Fund, have given healthy returns over the long term.
Flexi-cap funds best suited to navigate market volatility
Experts say that during market volatility, investing in flexi-cap funds makes sense because they are largely tilted towards large caps, with only a very small portion in mid- and small-cap stocks. So when large caps outperform, these funds naturally do well. The Kotak flexi cap fund has outperformed its benchmark 83% of the time over a 10-year period, and has maintained a 100% outperformance record over 12 and 15 years.
One of the reasons for the success of flexi cap mutual funds is that these funds invest in large, mid and small cap stocks across sectors, giving them flexibility and allowing the fund manager to dynamically adjust the portfolio based on market trends, blending stability with growth potential.
Their adaptive strategy and broad diversification make them a popular choice for long-term equity investors. Flexi-cap funds have been known to outperform the benchmark indices even in choppy market conditions and when the markets are in a bearish mode.
Experts say that an investor with a five-year horizon, looking for flexibility to rotate across market caps through market cycles without the hassle of manual rebalancing or tax implications from switching between market cap funds, flexi-cap funds are suitable for them.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.