Competition increases in flexi-cap funds category, shows data

The flexi-cap category, which was introduced in November 2020, has gained popularity in the short time it has been available. And, Samco Mutual Fund (MF) is  the latest entrant into the Rs 38.2 trillion industry, announcing the launch of its first new fund offer (NFO) “Samco Flexi Cap Fund”.

The net assets under management of the flexi-cap category ballooned from Rs 75,600 crore in January 2021 to Rs 2.14 trillion as of November 2021 becoming the biggest category among the equity funds.

Market participants say one of the main reasons why these funds have attracted such demand is because they provide a one-stop solution to capture opportunities across market capitalisations.

Managers of flexi-cap funds can invest across the large-, mid-, and small-cap buckets without any minimum threshold. Multi-cap schemes, which are similar, are however mandated to invest at least 25 per cent of the corpus in each of the three market cap categories.

Umesh Kumar Mehta, chief executive officer of Samco Asset Management, said: “Samco Flexi Cap Fund is a unique and a pure equity fund in the flexi-cap category by its design.

 
Unlike other funds, it only seeks to invest in Indian equities and global equities. No other assets like corporate debt, REITs, derivatives, etc are permitted which will allow the scheme to be a pure equity scheme. It’s 25 stock portfolio construction strategy ensures that investors enjoy benefits of reasonable concentration and diversification unlike other strategies which may be overly diversified.”

The fund will follow a simple three-step buy and hold strategy that shall invest in some of the world’s fast growing and capital efficient companies that can compound capital over the long term. Investors will get exposure to high growth companies globally since the fund shall invest 35 per cent of its assets in global stocks.

Industry participants also say that given the current situation in the Indian equity markets, flexi-cap funds can be helpful in the portfolio as fund managers can move money across the market capitalisation depending on their outlook.

In the last one year, the flexi-cap category has delivered returns of around 32.48 per cent, shows the data from Value Research. On the other hand, S&P BSE Sensex have delivered returns of 23.05 per cent in the last one year. Several of the top schemes in the flexi-cap category have given returns in the range of 40-48 per cent.