Which is better among a flexi-cap and a multi-cap fund?

Which is better among a flexi-cap and a multi-cap fund?
- Renu

Flexi-cap funds are better because the fund manager has the flexibility of investing wherever he wants to, and he can opportunistically shift the allocations between large, mid, and small caps. However, multi-caps are mandated to invest at least 25 per cent of the total corpus in each large, mid, and small-caps.

But even flexi-caps have a constraint when they get bigger, more than Rs 10,000 crore. Then it becomes difficult for the fund manager to find opportunities in the small-cap space because even a 10 to 15 per cent allocation becomes quite meaningful.

So in that sense, flexi-caps with smaller assets under management (AUM) are even better.

This article was originally published on March 24, 2022.