Pros and Cons of Investing in JM Flexi Cap Fund

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Launched in September 2008, JM Flexi Cap Fund aims to invest across stocks and sectors by following a dynamic investment strategy.

The fund was originally categorised as a Multicap fund under which it maintained a large-cap biased portfolio.

However, it migrated to the newly formed Flexicap fund category in 2020. The fund is now mandated to invest across market caps and sectors without restrictions. Accordingly, the past performance of the fund is not directly comparable.

JM Flexi Cap Fund follows a momentum-based strategy which involves picking stocks that are on a rising trend, and shunning stocks that are lagging.

In the last couple of years, the fund held significant exposure in mid-cap and small-cap stocks.

This strategy helped it benefit from the stellar rally in the broader market over the last few years.

Subsequently, JM Flexi Cap Fund has managed to generate a significant alpha over the benchmark and many of its peers in recent years.

Its outperformance has attracted investors' attention and its corpus has now risen to Rs 56.3 billion (bn) as of April 2025 from just Rs 2.8 bn as of April 2023.

In this editorial, we will discuss the pros and cons of investing in JM Flexi Cap Fund.

Pros

#1 Solid performance

JM Flexi Cap Fund has shown superior performance in the last couple of years.

The fund performs particularly well during bull phases. It has delivered rolling returns of 39.2% and 27.7% respectively in the last 1-year and 3-year period.

Over this period, it has massively outperformed the Nifty 500 - TRI index and the category average. This superior performance has helped it significantly improve its returns across periods.

Over the longer time frame of 5 years, the fund has found a spot among category toppers and is much ahead of the benchmark.

The market rally in recent years along with dynamic management of the portfolio has worked well in the fund's favour over the last few years.

#2 Robust Risk-Adjusted Returns

JM Flexi Cap Fund's risk-adjusted returns denoted by the Sharpe ratio (0.38) and Sortino ratio (0.78) are much ahead of the benchmark index and are among the best in the Flexi Cap Fund category.

This highlights the fund's potential to reward investors well for the level of risk taken.

JM Flexi Cap Fund - Performance Snapshot

Cons

#1 High Portfolio Turnover

JM Flexi Cap Fund focuses on a few high-conviction stocks and balances them with short-term tactical holdings.

Its portfolio witnesses frequent changes as it holds many stocks with a short-term view. This is reflected in the fund's high turnover ratio of 130-160% in the last one year.

The fund's agile portfolio strategy has resulted in higher volatility (standard deviation is at 15.43%) compared to the benchmark (13.88%) and the category average (14%).

#2 High Exposure to Lower Market Caps

Over the past one-year, the JM Flexi Cap Fund's large-cap allocation has ranged between 36-60% of its assets.

Its combined allocation to mid and small caps ranged between 33-60% during this period.

Due to higher allocation to stocks in the lower market caps, the fund may struggle to limit the downside if market conditions turn unfavourable.

That said, its dynamic strategy gives it the flexibility to reduce exposure to lower market caps if the condition so requires.

Conclusion

JM Flexi Cap Fund has recorded extraordinary performance in recent years and now its returns across short to long-term time frames look encouraging.

It holds an actively managed portfolio with diversification across market caps and sectors. The fund frequently shifts the allocation based on market conditions and available opportunities.

This quick and flexible investment strategy gives it the potential to perform well in the long run.

Even though the fund's strategy has resulted in higher volatility, it has managed to reward investors with impressive risk-adjusted returns.

JM Flexi Cap Fund may be suitable for investors aiming for long-term growth through a momentum-driven exposure across market caps and having an investment horizon of at least 5-7 years.

# Table Note: Data as of May 28, 2025
The securities quoted are for illustration only and are not recommendatory
Past performance is not an indicator for future returns
Returns are on a rolling basis and in %. Direct Plan-Growth option.
Those depicted over 1-Yr are compounded annualised.
Risk ratios are calculated over a 3-year period assuming a risk-free rate of 6% p.a.

Disclaimer: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

With several years of experience in mutual fund analysis under her belt, Divya Grover (Sr. Research Analyst) is the editor of FundSelect - Equitymaster's flagship mutual fund research service. She also serves as the editor of The Fund Strategist newsletter and has been an integral part of PersonalFN (an associate of Equitymaster) since 2019.

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