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Best Flexi & Multi Cap Mutual Funds for 2024

Created on 19 Dec 2023

Wraps up in 10 Min

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Updated on 26 Dec 2023

Best Flexi-Cap & Multi-Cap Mutual Funds 2024

As of 30 November 2023, there were a total of 1,472 mutual fund schemes. In the ever-changing world of mutual funds, we know how important it is to pick the winners for your portfolio. 

At Finology, we're here to provide you with trustworthy financial advice, always guiding you towards the top-performing mutual funds.

But before we spill the beans on the best fund, let's keep it chill. We'll start with the basics of what makes a mutual fund stand out. Then, we'll take you on a journey through how we handpicked the absolute best. Finally, we'll dive into the juicy details of each fund. 

So, grab a seat and let's make your money work for you! 

Understanding Flexi & Multi Cap Mutual Funds

When it comes to investing in mutual funds, spreading your bets across different market sizes is necessary. Funds that invest in both mid-cap and small-cap categories offer a balance of growth and stability, which is crucial, especially during volatile market conditions.

Now, let's talk about Flexi Cap Funds. These funds stand out because they have the freedom to invest across various market sizes. What's impressive is that they consistently show better risk and stability metrics compared to multi-cap, large, and mid-cap funds. 

They're known for their strategic flexibility, making them a preferred choice for many investors.

On the other hand, multi-cap funds and large and mid-cap funds have specific rules to follow. Multi-cap Funds have to spread their investments across different cap categories, and large and mid-cap funds have a bit stricter rules on where they can put their money. 

This slightly stricter allocation criteria limits their flexibility.

So, if you're wondering which team to join in this investment game, we've got the lowdown for you. Allow me to answer a question that you might ponder upon.

Why do we prefer funds that invest across market capitalisation?

When it comes to choosing funds in the mid-cap and small-cap categories, our focus at Finology has always been on finding a balance between growth and stability. 

We lean towards funds where the manager has the flexibility to invest across market capitalisation and let me tell you, it makes a real difference, especially in today's market dynamics.

Take, for example, the recent small-cap rally driven by market enthusiasm. The small-cap category boasted an average return of around 24.13% in 2023. It's been quite a ride, so much so that fund houses like Nippon India MF and Tata MF have put a pause on accepting lump sum investments in their small-cap funds.

Entering the small-cap space at the wrong time can potentially jeopardise your short and medium-term goals. There's a limit to what a fund manager can do in a small-cap fund if things get shaky in that space. 

On the flip side, funds that spread their investments across market capitalisations have the flexibility to reallocate based on market conditions and other factors. 

That's why we stand by these funds- they provide a safety net in unpredictable times. Trust us, it's a smart move.

Flexi Cap vs Multi Cap vs Large and Mid-Cap

When selecting funds from this category, you'll encounter three main options: 

These funds differ in their structure, and here's where it gets interesting. In the case of Multi Cap Funds, they are obliged to allocate a minimum of 25% of their portfolio to large-cap, mid-cap, and small-cap stocks each.

These funds differ in their structure, and here's where it gets interesting. In the case of Multi Cap Funds, they are obliged to allocate a minimum of 25% of their portfolio to large-cap, mid-cap, and small-cap stocks each.

On the other hand, Large and Mid-Cap Funds have a similar obligation, but with a minimum of 35% allocation each to large-cap and mid-cap stocks. However, there is no such restriction in the case of a Flexi Cap Fund

To make things clearer, check out the table below for a side-by-side comparison of the return percentages for each category. 👇

Large and Mid-Cap Funds have a similar obligation, but with a minimum of 35% allocation each to large-cap and mid-cap stocks. However, there is no such restriction in the case of a Flexi Cap Fund. 

Hence, when it comes to a Flexi Cap Fund, the manager enjoys a higher level of flexibility for both strategic and tactical investments. This flexibility is precisely why Flexi Cap Funds have consistently been our top choice among these fund types. 

To put our preference to the test, we conducted a thorough comparison of the three categories. The results were compelling- Flexi Cap Funds, on average, exhibited superior risk and stability metrics compared to the other two.

Aligned with our risk-averse approach, we've decided to go with a Flexi Cap Fund this year. 

Now, shifting gears, we conducted a quick analysis of the remaining two categories. On average, Multi Cap Funds showed slightly better return metrics than Large and Mid-Cap Funds. 

However, the real game-changer was the considerable variation among funds in the Multi-Cap category. Most failed to outperform the average over both 3 and 5-year periods, and the ones that did were characterised by higher risk and volatility.

That brings us to our choice for a Large and Mid-Cap Fund this year.

We'll start by checking out the Flexi Cap Fund, understanding why we chose it, looking at some fund details, and then shifting to the Large and Mid-Cap pick.

Flexi Cap Fund Selection

Out of the 80-odd Flexi Cap Funds in India, we narrowed down our search by focusing on those that outperformed the benchmark, Nifty 500 TRI. Since Flexi Cap Funds were introduced in November 2020, we took up to 3 years of data for screening.

Nifty 500 TRI showed a 14% Compound Annual Growth Rate (CAGR) in 1 year and a 20% CAGR in 3 years. Surprisingly, only 24 out of the 80 funds managed to outshine this benchmark.

Now, we didn't stop there. We dug deeper and assessed which of these 24 funds exhibited better risk-adjusted returns, being less risky and volatile than the average. We used metrics like Sharpe Ratio, Sortino Ratio, Standard Deviation, and Beta for this evaluation. Only 9 out of the initial 24 funds made the cut.

But wait, there's more. We then filtered out those funds with a low expense ratio, aiming for anything below the average of 0.75%. Voila! We've got our top 4 table-toppers! Let's take a closer look at these standouts.

Filtered out those funds with a low expense ratio, aiming for anything below the average of 0.75%. Voila! We've got our top 4 table-toppers! Let's take a closer look at these standouts.

Now, the spotlight shifts to the fund manager's philosophy and strategy. So, without further ado, our standout pick in this category is...

Why do we like this fund?

This fund follows a value investing strategy, making its mark by selecting stocks across different market caps and geographies. The core belief here is simple but powerful: acquiring quality stocks at discounted prices and holding onto them for the long haul. 

To mitigate country-specific risks, the fund also includes exposure to international stocks, capped at a maximum of 35% of the overall portfolio.

What sets this fund apart is the fund manager's unwavering conviction, reflected in one of the lowest turnover ratios in the category. Despite adopting a conservative investment approach, the fund has consistently delivered superior returns, securing its position as one of the best-performing funds in its category. 

It's all about quality, strategy, and a track record that speaks volumes. This is why it stands out among the rest.

Key Highlights of Parag Parikh Flexi Cap Fund

Parag Parikh Flexi Cap Fund Direct-Growth, part of PPFAS Mutual Fund, has been around for a decade and six months since its launch on 13/05/2013. With ₹48,294 crore in Assets Under Management (AUM) as of 30/09/2023, it's a medium-sized fund in its category, sporting a lower-than-average expense ratio of 0.65%.

Over the last year, the fund delivered a solid 32.08% return, boasting an impressive average annual return of 20.12% since its inception. Doubling the investment every four years, it's been a consistent performer. While its ability to generate returns aligns with similar funds, its performance in controlling losses during a market downturn is average.

Focused on sectors like financial services, information technology, communication services, automobiles and FMCG, the fund shows a preference for the financial services sector compared to others in its category.

The top holdings include HDFC Bank Limited, Bajaj Holdings & Investment Ltd., ITC Ltd., Axis Bank Ltd., ICICI Bank Ltd., HCL Technologies Ltd., Coal India Ltd., and Maruti Suzuki India Ltd. 

This simplicity and consistency make it an interesting option in the Flexi Cap space.

Source: Recipe Report
Source: Recipe Report

Large and Mid-Cap Fund Selection

In our screening for Large and Mid-Cap Funds, out of the 30 options, only 5 managed to outperform the benchmark. After our risk assessment, one more fund was eliminated, leaving us with 4 top contenders. 

Among these, three funds stood out with an expense ratio below the average of 0.80%. These selected funds passed our rigorous criteria, and now we're ready to dive into the details of our chosen standout in the Large and Mid-Cap category.

Upon closer examination, our analysis revealed that Kotak's fund outshines the competition with superior return metrics, both in terms of normal and risk-adjusted performance. Not only does it exhibit lower volatility, but it also boasts a lower expense ratio compared to the other two options. Therefore, the clear choice in this category is...

We chose both of these funds last year, and our positive outlook remains unchanged.

Why do we like this fund?

This fund primarily targets quality stocks with a long-term holding horizon of at least 8-10 years. Emphasising sustainable businesses and robust balance sheets, the fund manager aims for stable performance with minimal volatility.

While investments in mid-cap companies typically carry moderate to high risk, this fund has demonstrated lower volatility compared to peers in the same category. 

This is attributed to its extended-term perspective and well-thought-out diversification. As a result, it stands as a favourable investment option for those seeking a less volatile scheme.

Key Highlights of Kotak Equity Opportunities Fund

Kotak Equity Opportunities Fund Regular-Growth, part of Kotak Mahindra Mutual Fund, boasts a substantial 19 years and 4 months since its launch on 27/07/2004. With Assets Under Management (AUM) totalling ₹15,261 crore as of 30/09/2023, it falls within the medium-sized category. However, it does carry a slightly higher-than-average expense ratio of 1.65%.

Over the past year, the fund has delivered a commendable return of 23.26%, maintaining an impressive average annual return of 18.46% since inception. Doubling the invested capital every four years it has demonstrated consistency in performance.

While its ability to deliver returns aligns with most funds in its category, its performance in controlling losses during a market downturn is deemed average.

Focused on sectors like Financial, Automobile, Capital Goods, Chemicals, and Consumer Staples, the fund shows a preference for the Financial and Automobile sectors compared to its peers. 

The top 5 holdings include ICICI Bank Ltd., Maruti Suzuki India Ltd., State Bank of India, Axis Bank Ltd., and Larsen & Toubro Ltd. 

Despite a higher expense ratio, the fund's performance and strategic sector allocation make it an interesting choice in the Large and Mid-Cap categories.

Source: Recipe Report
Source: Recipe Report

The Bottom Line

For those prioritising financial stability, I firmly advocate Flexi & Multi Cap Mutual Funds as a savvy choice, striking a balance between growth opportunities and risk management. Their inherent adaptability syncs seamlessly with today's dynamic markets, presenting a compelling investment option.

Flexi & Multi Cap Mutual Funds stand out because of the diversification and growth potential in the ever-changing financial landscape. With Finology's commitment to research and data-driven insights, we consistently aim to deliver robust returns, aligning with investors' aspirations.

Take a moment to grab our free downloadable report available at Recipe by Finology. Alright, catch you on the flip side! 🚀

Disclaimer: The funds mentioned in this article are not a recommendation by Finology and should not be construed as such. The funds are mentioned based purely on numerical factors, and the process of selection should follow thorough research and professional advice.

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Sakshi Dhakre

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Sakshi is an adventurous spirit who enjoys both the intellectual stimulation of Finance and the sensory experiences of good food and nature’s beauty. She has a passion for delving into complex financial topics and distilling them down into easy-to-understand insights. When she's not poring over financial reports, you might find her exploring a new corner of the city, trying out new restaurants and cuisines or admiring the beauty of the night sky.

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