Multi-cap or flexi-cap fund? Choose based on risk appetite

Year-to-date multi-cap funds have received inflows of Rs. 8,013.3 crore.

- Sudipta Mitu

Flexi-cap funds, on the other hand, have received only Rs. 3,147.9 crore. Over the past three months, while returns into multi-cap funds have remained positive, investors have pulled money out of flexi-cap funds to the tune of Rs. 1,317.2 crore. In this article, we will delve into the pros and cons of these two popular categories in the mutual fund space and try to assess their suitability for various categories of investors.

Fund characteristics 

A multi-cap fund is a type of mutual fund that invests across various market capitalisations-large-cap, mid-cap, and small-cap stocks. It is required by the Securities and Exchange Board of India (Sebi) guidelines to allocate a minimum of 25 per cent of its assets to each of these market cap categories.

A flexi-cap fund invests across the same categories but without any such allocation requirements. Essentially, fund managers have complete freedom to invest in segments where they see the best growth opportunities.

Pros and cons of a multi-cap fund