The multi-cap funds frenzy: How do these stack against flexi caps?

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Subscribe to enjoy similar stories. As the mutual fund industry in India grows, investors looking for a well-rounded approach across market segments are becoming more interested in multi-cap funds. The distinctive feature of multi-cap funds is their mandatory minimum 25% allocation to large, mid, and small-cap categories, providing opportunities for growth and diversification.

Multi-cap funds are required to invest in companies across different market caps for exposure to all market segments. As of September, 24 multi-cap funds with ₹1.2 trillion in assets under management (AUM) were available in India. The 5.7 crore active SIPs in this group demonstrate the growing popularity of this segment and their strong preference for diversified investments.

Thanks to this framework, fund managers can take advantage of opportunities in various segments according to market movements. The primary distinction between flexi-cap and multi-cap funds is how they are allocated. Multi-cap funds are required to adhere to the 25% rule, which offers a standardised framework.

Flexi-cap funds can dynamically alter their allocations, between the large, mid-, and small-cap segments based on the potential seen by the fund management. The AUM for flexi-cap funds as of September 2024 is ₹0.9 trillion, indicating a similar interest but meeting distinct investor needs. The present developments in market valuation can be connected to the growing popularity of multi-cap funds.