Flexicap category emerges as a hot segment in Rs 11 trn equity MF space

After ICICI Pru MF's record-breaking NFO, multiple funds look to follow suit with offers

The recently-created flexicap fund category is emerging as the hottest segment in the Rs 11-trillion equity mutual funds space.

Buoyed by the success of ICICI Prudential Flexicap Fund, more fund houses are lining up new fund offerings (NFO) in this area. Industry players say the flexicap category could emerge as the biggest segment in the equity MF space.

Last week, ICICI Pru Flexicap NFO’s collected a record Rs 10,200 crore. Meanwhile, Nippon India MF on Tuesday announced the launch of Nippon India Flexicap Fund and ITI MF filed an offer document with market regulator Sebi for a flexicap scheme.

At the end of June, the assets under management for the flexicap segment stood at Rs 1.76 trillion, second most after largecap fund category, which had an AUM of Rs 1.95 trillion.

Flexicap schemes are market cap agnostic, giving the fund manager the flexibility to dabble in small-, mid-, large- and microcaps without any minimum investment threshold.

Given the new scheme launches and underperformance of largecap stocks, experts say it is only a matter of time that the flexicap segment climbs to the top in terms of AUM, say industry watchers.

The Securities and Exchange Board of India (Sebi) had introduced the flexicap category in November last year after modifying characteristics of multicap schemes in September 2020. Multicap schemes are mandated to invest at least 25 percent of the corpus in large, mid, and small cap stocks each.

Given the broad-based rally in the market, flexicap funds have clocked encouraging returns and have been able to attract strong inflows. In the last four months flexicap funds have seen net inflows of around Rs 3,700 crore. The assets of the category have also gone up sharply from Rs 75,614 crore in January to Rs 1.76 trillion in June.

Flexicap funds have on an average given returns of 52 per cent in the last one year better than the large cap funds which have given returns of 46 per cent. While Sensex is up by just 41 per cent in the last one year.

Funds such as BOI AXA Flexicap fund and PGIM India Flexicap fund have given returns of 74.23 per cent and 69.84 per cent in the last one year.  Advisors are also advising investors to look at the flexicap category if they want exposure across market capitalisation.

Suresh Sadagopan, Founder of Ladder7 Financial Advisories says, “In current situation it's better to allow fund managers to choose the sector. We are currently in a dynamic situation and flexicap cap fund managers can invest in some promising stock in the mid and the smallcap segment as mandate here is very broad.”

Nippon India MF says its flexicap fund would seek to capitalise the relative stability of large caps through reasonable allocations to established leaders along with an optimal mix of the growth opportunities offered by the mid & smallcap segment.

“A flexicap strategy can dynamically adapt to varied market scenarios and thus has the potential to outperform across market cycles,” said Manish Gunwani, CIO – Equity Investments, Nippon India MF.