Flexi-cap schemes are seen as equity mutual fund products that offer flexibility to decide where to invest. But investment managers are now leaving no stone unturned in loading up on blue chips in these schemes as exposure to smaller companies could lead to sharp swings, reported The Economic Times.
Analysts said flexi-cap schemes are taking the place of large-cap funds, which have largely been underperformers in recent years.
Average allocation of flexi-cap schemes to large-caps is 65%, mid-caps is 17% and small-caps is 9. 9% in June 2022.
Flexi-caps, the second largest category in the equity mutual fund space, handle assets of ₹2. 11 lakh crore across 31 schemes.
For instance, Kotak Flexicap — the largest fund in the category with assets of ₹33,341 crore, has an allocation of 69% to large-cap companies.
“Since the inception of the fund, we have been managing it with an allocation pattern of 65-75% in large-caps and the rest in mid-caps and small caps,” Harsha Upadhyaya, chief investment officer-equity at Kotak Mutual Fund told ET.
Fund managers believe valuations are in favour of large caps. The Nifty 50 trades at a price-to-earnings (PE) ratio of 20. 18 times, while the Nifty Midcap 150 is at a PE of 24. 37 times, and the Nifty Small Cap 250 is at 20. 79.
Analysts assert that there is large-caps offer better liquidity and stability in uncertain market conditions.