“Flexicap has a leeway to dynamically invest in small, mid and largecaps without any restriction on the level of exposure towards these segments. They can dynamically change the exposure as the fund manager thinks fit. It is a go anywhere strategy where a fund manager will invest depending upon where he sees optimal value,” says Vrijesh Kasera, Fund Manager at Mirae Asset Flexicap Fund. Edited excerpts:
What is a Flexicap fund?
What is a Flexicap fund?
Vrijesh Kasera: Flexicap is an open-ended fund, a dynamic equity allocation fund. It makes investments across the businesses — in the largecap, midcap, smallcap universe. There is no floor or cap with respect to market cap investment. So, one can allocate 100% of the funds to either midcap, smallcap or large cap. So there is no restriction on that front. A flexicap fund requires at least 65% of the scheme’s corpus invested in equity investments with exposure to equity or capital markets. The primary objective of this mutual fund category is to generate wealth over a longer period of time.
What is the difference between a Multicap and Flexicap mutual fund scheme?
Vrijesh Kasera: In September 2020, the SEBI came out with a circular mandating multicap funds to invest minimum 25% each in large, mid and smallcap stocks, meaning these funds will now have to mandatorily allocate 25% of their AUM or corpus in each of these midcap, smallcap and largecap stocks at any point in time as per the AMFI classification of stocks.
On the other hand, flexicap has a leeway to dynamically invest in small, mid and largecap without any restriction on the level of exposure towards these segments. They can dynamically change the exposure as the fund manager thinks fit. It is a go anywhere strategy where a fund manager will invest depending upon where he sees optimal value.
Hence in a case when a multicap fund is more tilted towards smallcap or midcap, it shall carry a higher risk and will be suitable for an investor with a higher risk-appetite. On the other hand, flexicap funds are suitable for the unversed who are not known to the market dynamics. Here the decision of fund allocation or deployment is at the discretion of the fund manager.
What shall be the ideal time duration for an investment in Flexicap fund?
Vrijesh Kasera: Equity mutual funds must be viewed for a longer term horizon. Flexicap funds aim to capture growth opportunities across market cap and hold them for a longer period of time. Thus the ideal period for investment is at least three to five years.
(The Author is Vrijesh Kasera, Mirae Asset Flexicap Fund)
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