Investment alert: Why investors are ditching flexi-cap for multi-cap funds

Investors face confusion between multi-cap and flexi-cap funds. Multi-cap funds perform better with diverse portfolios, while flexi-funds focus on large-caps.

flexi-cap to multi-cap

In the world of investing, the performance of small, mid, and large-cap stocks plays a crucial role. The balance between stability brought by large-caps and the potential growth of smaller counterparts is a key consideration. This balance is often managed through multi-cap and flexi-cap funds, each with their unique approach.

A trend has emerged recently – multi-cap funds attracted Rs. 2,500 crores in net inflows, contrasting with flexi-cap funds experiencing outflows of Rs. 932 crores in July 2023. Is this shift signaling a new diversification strategy? Let's delve into the details.


  • Multi-cap and flexi-cap funds allocate varying proportions to small, mid, and large-cap stocks.

  • Flexi-cap funds prioritise stable large-caps, while multi-cap funds favour higher-performing small and mid-caps.

  • Multi-cap funds attracted more than 2.5 times the investments compared to flexi-cap funds in the recent quarter.

Also Read: How to choose between multi-cap and flexi-cap funds?

Flexi-cap vs multi-cap: What's the difference?

SEBI introduced new rules for multi-cap funds, as per which a minimum of 25% has to be invested in small, mid, and large-cap funds. Later, flexi-cap funds were launched as a new category where there was no such mandate. 

Currently, there are 33 flexi-cap funds available, while the number of multi-cap funds surged to 18 in July due to new launches.

Also Read: How are multi-cap funds different from flexi-cap funds?

Which mutual fund performed better?  

With more than 55% allocation to mid and small-cap stocks, multi-cap funds outpace flexi-cap funds, which allocate just 23%. Moreover, multi-cap raised Rs. 4,439 crores through New Fund Offers (NFO), compared to Rs. 964 crore by flexi-cap.

Total assets under management (AUM) for multi-cap funds stands at Rs. 2,80,965 crores and Rs. 85,031 for flexi-cap funds. 

Flexi-cap funds experienced a 15% rise, slightly lower than the 20% growth observed in multi-cap funds, adding to the factors driving heightened investor attention.

Additionally, flexi-cap funds appear to be pseudo-large-cap funds. However, multi-cap funds offer true diversification in the stock market, given their minimum allocation requirements. 

The risk element is more prominent in multi-cap funds, as 50% of their investments have to go to small and mid-cap stocks. Volatility is higher in these kinds of stocks. 

Fund managers possess the flexibility to adjust fund allocations and modify market capitalization exposure in flexi-cap funds based on market shifts. In contrast, such freedom is absent in multi-cap funds.

What's the best investment strategy for flexi-cap and multi-cap funds?

Investing your savings in the stock market can get confusing for investors considering the variety of funds available. 

Flexi-cap and multi-cap mutual funds have their own pros and cons. If your portfolio largely consists of large-cap funds, invest in multi-cap funds to diversify your portfolio and add better-performing assets. If otherwise, flexi-caps can ensure the needed stability and reduce your portfolio's risk profile.

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 Disclaimer: This article is intended for general information purposes only and should not be construed as insurance or investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.


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