Does the term flexi-cap fund ring a bell? If you were an investor in the mutual funds segment about a year back, it should. In 2005, flexi-cap funds were the seasons flavour and fund houses were busy launching new fund offers of this variety. Simply put, flexi-cap funds are diversified equity funds with a mandate to invest in stocks across market capitalisations. Hence these funds can invest in large cap, mid cap and small cap stocks.
Flexi-cap funds work on the premise that a fluid investment style enables them to capitalise on attractive investment opportunities across market segments. Conversely, if stocks from a given segment turn unattractive, the fund manager can shift the corpus to an alternate segment. Thus flexi-cap funds can theoretically provide the best of both worlds - an opportunity to benefit from the hottest segment and a provision to exit from an unattractive one.
We thought this would be a good time to find out how some of the flexi-cap fund NFOs have fared. Equity markets after scaling record highs have witnessed a bit of a downturn in the recent past. For the purpose of this study we have chosen NFOs that have been in existence for at least a year. Albeit a 1-year period may not be the ideal time frame for evaluating a fund (at Personalfn, we believe a diversified equity funds performance should be assessed over a 3-year period and across market cycles), it is certainly a reasonable one.
|NAV (Rs)||1-Mth (%)||3-Mth (%)||6-Mth (%)||1-Yr (%)|
|Flexi Cap Funds|
|FRANKLIN FLEXI CAP (G)||17.54||(8.3)||5.9||26.1||74.4|
|RELIANCE [Get Quote] EQUITY OPP. (G)||17.64||(11.2)||11.0||31.6||72.8|
|HDFC [Get Quote] PREMIER MULTI-CAP (G)||15.46||(10.2)||1.2||14.6||48.6|
|Diversified Equity Funds|
|SUNDARAM GROWTH (G)||56.90||(11.9)||4.9||25.9||66.7|
|HDFC TOP 200 (G)||90.42||(8.2)||3.6||22.1||66.1|
|PRINCIPAL GROWTH (G)||43.72||(10.4)||4.0||24.1||57.0|
|S&P CNX 500||(9.2)||3.0||18.7||50.7|
Three funds fit into our specified parameters i.e. Franklin India Flexi Cap, Reliance Equity Opportunities and HDFC Premier Multi-Cap. We have also considered the performance of two benchmark indices i.e. BSE 100 and S&P CNX 500 to better evaluate the funds performances.
Over the 1-year period, Franklin Flexi Cap (74.4 per cent) surfaces as the top performer, while Reliance Equity Opportunities (72.8 per cent) comes in at second (albeit marginally) position. Both the funds i.e. Franklin India Flexi Cap and Reliance Equity Opportunities have been successful in outperforming their benchmark indices i.e. S&P CNX 500 and BSE 100, respectively.
A noteworthy feature in Franklin Flexi Caps performance is that it has fallen the least over the 1-month period, when the markets ran into rough weather. Furthermore, the fund has even bettered its benchmark index on this count (-8.3 per cent vis-�-vis -9.2 per cent for S&P CNX 500).
HDFC Premier Multi-Cap (48.6 per cent over 1-year), is found wanting on the returns parameter vis-�-vis its peers and index i.e. S&P CNX 500. Also its performance in curtailing losses (-10.2 per cent over 1-month) is nothing to write home about.
Now lets take this discussion further by comparing the performances of flexi-cap funds with those of conventional diversified equity funds. For this purpose, we have chosen 3 funds from Personalfns list of recommended diversified equity funds i.e. Sundaram Growth, HDFC Top 200 and Principal Growth. These are predominantly large cap diversified equity funds with the option to invest a smaller portion of their corpus in mid caps.
There is little differentiating diversified equity funds performance from that of flexi-cap funds over the shorter time period, i.e. 1-month. However, over the 1-year period, flexi-cap funds have broadly outperformed their diversified equity fund peers.
So does this mean diversified equity funds should be given the thumbs down in favour of flexi-cap funds? Not necessarily! Remember that flexi-cap funds have only been in existence for slightly over a year. Hence reading too much into their performance at this stage might be premature. Their performance over a longer time frame (at least 3 years) and across market cycles is yet to be tested.
Having said that, the performance of some flexi-cap funds over the last 12 months has been encouraging. Powered by a sustained performance, funds from the flexi-cap segment could emerge as mainstays in investors portfolios going forward.
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