Flexi-cap vs Multi-cap funds

 

Flexi-cap vs Multi-cap funds — in-depth comparison + actual performance (with sources)

Short answer first: Flexi-cap funds give the manager complete freedom to shift between large, mid and small caps (no mandated allocation). Multi-cap funds must keep at least 25% in each of large-, mid- and small-cap stocks (SEBI mandate for the category). That structural difference drives their behaviour, risk profile and performance patterns. iNRI+1

Below I give (A) the formal definitions and practical consequences, (B) an empirical performance snapshot with real fund numbers, (C) risk / when-to-use guidance, and (D) a short checklist for choosing between them.

A. What they are (formally) and why it matters

  • Flexi-cap funds — manager can allocate across market caps freely; no fixed floor/ceiling on large/mid/small cap weights. This gives the manager tactical flexibility to rotate into whichever segment looks attractive. Managers can also tilt strongly to large caps (lower volatility) or to small/mid (higher upside & risk) depending on view. ET Money+1

  • Multi-cap funds — must maintain minimum 25% allocation to each of large-, mid- and small-cap stocks (i.e., a forced diversification across caps). That reduces one type of manager discretion but enforces exposure to mid/small caps even when they are out of favour. iNRI

Practical consequences:

  • Flexibility → variable risk. A flexi fund can behave like a large-cap fund for long periods (lower volatility) or like a small-cap aggressive fund (high volatility) depending on manager decisions. StockGro

  • Multi-cap → predictable diversification. Multi-cap funds typically show steadier exposure mix (you know they must hold all three caps). In a small-cap rally they will participate, but they can’t overweight small-caps beyond limits if manager wants concentrated small-cap exposure. iNRI

B. Actual performance — representative numbers (real funds / index figures)

Dates / numbers below are taken from publicly available mutual-fund data pages (October 2025 snapshots). Past performance ≠ future returns — presented so you can see how the categories and specific funds behaved recently. Moneycontrol+3Moneycontrol+3Moneycontrol+3

Representative fund performance (selected funds; annualised returns)

Fund (category)1-yr (approx)3-yr (annualised)5-yr (annualised)Source
HDFC Flexi Cap (Flexi)~22% (recent year-to-date spike years vary)22.66% (3-yr)29.04% (5-yr).Moneycontrol/HDFC. Moneycontrol+1
Parag Parikh Flexi Cap (Flexi)~11%~22.49%~22.3% (5-yr).Moneycontrol / Tickertape / ETMoney. Moneycontrol+2Tickertape+2
Kotak Multicap Fund (Multi-cap)~9.1%~25.3% (3-yr)~ (strong 3-yr showing; 5-yr shown ~— varies by source).Kotak MF / Moneycontrol. Kotak Mutual Fund+1
HDFC Multi Cap Fund (Multi-cap)~5–6%~21.9% (3-yr)(varies; strong long-term history).ETMoney / Moneycontrol. ET Money+1

Notes on table:

  • These are example funds to illustrate behaviour. You’ll see flexi funds with very high 5-yr returns (some flexi funds have delivered >25–30% p.a. over 5 years) and multi-cap funds that have also shown strong multi-year runs (e.g., Kotak Multicap ~25% over 3 years in recent data). Moneycontrol+1

  • Category averages differ by provider and timeframe. One aggregator reported average 5-yr returns for Flexi-cap (Nifty500-benchmarked) ~16% p.a. and 3-yr ~13% (aggregated averages vary by period and index). Always check the specific window you care about. INDmoney

Because the two categories overlap in permitted holdings (both can hold large/mid/small), performance differences are often driven by manager style and market cycle rather than category label alone. In some recent periods flexi caps outperformed (manager agility to ride mega-cap rallies), while in other stretches multi-cap standouts beat benchmark because of stock selection and mandated diversification. The Economic Times+1

C. Risk profile, behaviour in different market scenarios

  • Rising broader market led by large caps (blue-chip rally): Flexi-cap managers who tilt to large caps can capture returns with lower volatility; multi-cap funds also benefit but are constrained to maintain mid/small exposure. Outcome: flexi funds that shift to large caps may do better or similarly with lower drawdown. StockGro

  • Mid/small-cap rally: Multi-cap funds are forced to hold minimum mid/small exposure and so must participate; flexi funds may choose to increase small/mid exposure but are not forced — performance will vary more by manager. iNRI

  • Market downturn / risk-off: Flexi-cap managers can defensively increase large-cap or cash exposure faster; multi-cap funds must still keep minimum allocations (so they may show higher drawdowns if mid/small segments tumble). StockGro

Other risk points:

  • Volatility & drawdowns: Both can be volatile, but multi-cap funds’ mandated small/mid exposure can mean higher downside in sharp small-cap crashes. Conversely, some flexi funds have large mid/small exposure by style — so always check the actual portfolio weights and historic drawdowns. StockGro

  • Manager skill matters more than label. Because both categories can hold the same universe of stocks, the fund manager’s stock-picking and tactical allocation matter a lot. Recent industry analyses show a handful of funds (across categories) delivering consistent 20%+ CAGR over 5–7 years — these are more about process/people than category. The Economic Times

D. How to choose (practical checklist)

  1. Decide your allocation objective — do you want a manager who must stay diversified (multi-cap) or one with freedom to time caps (flexi-cap)?

  2. Look at actual portfolio weights (not just category) — check recent factsheet: what % in large/mid/small is the fund holding today? That tells you the real risk tilt.

  3. Performance over multiple horizons — check 1-yr (market timing), 3-yr, 5-yr and 7-10-yr (consistency). Prefer track records that match your horizon. Moneycontrol+1

  4. Risk metrics — standard deviation, max drawdown, Sharpe ratio. Two funds with same return may have very different risk.

  5. AUM & capacity — very large AUM in a strategy that needs small caps can reduce agility.

  6. Expense ratio / Direct vs Regular — use Direct plan for lower TER if investing yourself.

  7. Fund house / manager continuity — manager changes can materially affect future performance.

  8. Overlap with your portfolio — if you already hold concentrated mid/small cap funds, a multi-cap may add unwanted overlap.

E. Practical examples (decision scenarios)

  • You want a single diversified equity product and prefer manager discretion to chase opportunities → Flexi-cap may fit (but check manager style).

  • You want guaranteed baseline exposure to small and mid caps (for diversification) → Multi-cap enforces that 25% floor.

  • You want lower volatility generally → pick funds (flexi or multi) where the manager historically kept a large-cap tilt and exhibited lower drawdowns.


Sources (select)

  • What flexi vs multi cap mean and SEBI/category explanation: goinri, stockgro / iBulls writeups. iNRI+1

  • Flexi / multi fund lists & averages (aggregated returns pages): ETMoney, IndiMoney, Groww, Moneycontrol. Moneycontrol+3ET Money+3INDmoney+3

  • Fund pages (actual returns shown above): Moneycontrol (HDFC Flexi cap), Parag Parikh pages, Kotak MF performance. Moneycontrol+2Moneycontrol+2

  • Market commentary & consistent performer analysis: Economic Times / ETMoney reporting.

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