These Multi Cap Funds Will Be Reclassified as Flexi Cap Funds. What Should Investors Do? - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

These Multi Cap Funds Will Be Reclassified as Flexi Cap Funds. What Should Investors Do?
Nov 19, 2020

Fund managers of multi cap funds are happy about SEBI's recent announcement regarding the introduction of Flexi cap funds as a new category under Equity schemes. Flexi cap funds are characterised as schemes investing minimum 65% of its assets in equity and equity related instruments with dynamic allocation across large cap, mid cap, and small cap stocks.

With this new category, fund managers of multi cap funds now have a way out if they are apprehensive about the idea of reshuffling their multi cap fund portfolio to align with the recent change in definition of this category. If you recall, SEBI had in September issued guidelines asking multi cap funds to invest at least 75% of its total assets in equities, with at least 25% exposure each in large cap, mid cap, and small cap stocks.

--- Advertisement ---
These 3 Stocks are the Dark Horses of the Stock Market

The mainstream media mostly ignores them.

Mutual funds and hedge funds can't buy them in bulk.

Stock brokers rarely cover them.

These stocks are the dark horses of the stock market.

They only come in limelight after they have rallied by hundreads of even thousands of percent.

Our head of smallcap research, Richa Agarwal, has a knack for identifying such stocks before they begin their rally.

Over the years, she has spotted such stocks which have gone on to offer triple and even quadruple digit gains for investors. (* Past performance is no guarantee of future results)

Today, when the markets are near all-time high... and some investors are thinking of booking profits... Richa has spotted 3 such stocks which are set for a massive rally.

She will reveal the details of these 3 stocks on 28th January at her free online summit.

Click here to sign-up instantly. It's free.

Since most multicap funds hold a large cap biased portfolio and due to lack of investment opportunities and liquidity constraints in smaller caps, many multi cap funds were apprehensive about the change in definition of these funds. The move was also likely to make multicap funds riskier for investors, due to its higher allocation to mid and small caps.

Many multi cap funds holding a predominant exposure to large caps are expected, therefore, to reclassify itself as flexi cap fund. Some prominent multi cap funds have already announced their plans to convert into flexi cap funds.

Find out what these funds have to say about the reclassification to the flexi cap category:

Kotak Standard Multicap Fund

Kotak Standard Multicap Fund, the largest scheme in the multi cap funds category, has announced that it would shift to flexi cap category after taking requisite approvals and following due process. Nilesh Shah, Group President and MD, Kotak Mahindra Asset Management Company has clarified that except the name of the fund (to be renamed as Kotak Standard Flexi cap Fund), everything else including the fund manager, investment process, and fund portfolio will remain the same as before.

BREAKING: Full Details of the #1 Investment of the Decade...

Parag Parikh Long Term Equity Fund

Neil Parag Parikh, Chairman and CEO, PPFAS MF, has welcomed SEBI's move stating that the flexicap strategy will allow the fund manager to invest wherever value and opportunities are available without any market cap restrictions. Parag Parikh Long Term Equity Fund will continue to operate under the new flexi cap category, after taking all necessary approvals and following the due process. There will be no change in the fundamental characteristics, investment strategy and process of the scheme, except for change in name.

Motilal Oswal Multicap 35 Fund

MotilalOswal Multicap 35 Fund will be reclassified as flexi cap fund and the proposed name of the fund could be 'Motilal Oswal Flexi Cap 35 Fund'. MotilalOswal AMC has stated that there would be no change in the way the fund is being managed currently. Akash Singhania will continue to be the fund manager of the scheme. The fund will soon initiate the process to take requisite approvals and complete the necessary formalities.

--- Advertisement ---
Top 3 Stocks for 2020 and Beyond

We've uncovered 3 high-potential tech stocks after years of research.

These 3 cutting edge tech stocks could potentially create a wave of Indian millionaires.

First one is present in the sector which is expected to GROW over 300 times by 2030.

Second one is one of the leading players in Artificial Intelligence technology.

And the third one is involved in putting up a global safety net to save the world from cyber criminals.

These 3 tech stocks have the potential to offer life-changing gains in the long run.

Click here to get the details...

What should investors do?

It is clear from the statement of the respective funds that except for the change in name, the portfolio characteristics, investment processes and strategy, the fund manager, etc. will be the same. Therefore, there is no reason to be worried about the change in category of these multi cap funds to flexi cap funds.

Do note that flexi cap funds have the flexibility to change allocation to any particular market cap based on their outlook and growth prospects.

In the near term, flexi-cap funds are likely to hold a predominant exposure to large caps stocks. However, as and when the tide turns in favour of mid and small cap stocks, flexi cap funds may increase allocation in the segment.

Smaller caps are prone to higher volatility, which can increase the risk to the portfolio. That said, the presence of large caps in the portfolio would offset some of the volatility. This makes flexi cap funds suitable for investors having moderate to high risk appetite and an investment horizon of at least 5 years.

If a particular change in attribute of the scheme that you have invested in does not match your initial investment objective and expectations that you had while investing in the scheme consider revaluating your investment portfolio and make changes if necessary.

PS: If you wish to select worthy mutual fund schemes, consider subscribing to PersonalFN's unbiased premium research service, FundSelect. Each fund recommended under FundSelect goes through our stringent process, where funds are tested on both quantitative as well as qualitative parameters.

Every month, PersonalFN's FundSelect service will provide you with insightful and practical guidance on equity mutual funds and debt schemes - the ones to Buy, Hold, or Sell. Click here to subscribe to PersonalFN's FundSelect service.

Author: Divya Grover

This article first appeared on PersonalFN here.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get 'Daily Wealth Letter' and Exclusive Updates on Mutual Funds

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "These Multi Cap Funds Will Be Reclassified as Flexi Cap Funds. What Should Investors Do?". Click here!

2 Responses to "These Multi Cap Funds Will Be Reclassified as Flexi Cap Funds. What Should Investors Do?"

Pradeep Kumar Nair

Nov 23, 2020

How can they rename to Flexi Cap funds and claim that there will be no change in the investment process or portfolio profile? Isn't that contradictory to the overall investment objective they stated when they were originally started?



Nov 19, 2020

change in name to flexicap is good solution

Equitymaster requests your view! Post a comment on "These Multi Cap Funds Will Be Reclassified as Flexi Cap Funds. What Should Investors Do?". Click here!

More Views on News

Great vs Good: Which Stock Will Win in 2021? podcast (Views On News)

Jan 22, 2021

Rahul Shah discusses which group of stocks performed the best in 2020 and its implications for your portfolio.

One Chart to See Before You Sell (Fast Profits Daily)

Jan 22, 2021

In this video, I'll show you a crucial chart that you need to check before you decide to sell any stock or index.

SBI Small Cap Fund: Discovering Multi-bagger Ideas (Outside View)

Jan 22, 2021

PersonalFN's analysis on the features and performance of SBI Small Cap Fund.

How to Invest in Smallcap Stocks in 2021 and Beyond (Profit Hunter)

Jan 22, 2021

Here's why I believe there is a lot more steam is left in the smallcap rally.

You and Me (Fast Profits Daily)

Jan 21, 2021

An inside look into what happens behind the scenes in my trade recommendations.

More Views on News

Most Popular

Why Gold Hit Lower Circuit (Fast Profits Daily)

Jan 11, 2021

Were you shocked that bullion prices hit lower circuits on Friday on the MCX? Find out why it happened...

Time to Book Profits in Pharma Stocks (Fast Profits Daily)

Jan 15, 2021

In this video, I'll show you why it might be the right time to take money of the table in pharma stocks.

A Rare Chance to Invest in Potential Multibaggers in 2021 (Profit Hunter)

Jan 11, 2021

Our ace stock picker is ready to capitalise on a big growth opportunity.

Smallcap Stocks: Your Best Bet for 2021 and Beyond (Profit Hunter)

Jan 15, 2021

The pandemic failed to thwart Richa's investing success formula for 2020.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Jan 22, 2021 (Close)