Are focused funds a better option than flexi-cap funds?

Summary: Five focused funds manage over Rs 10,000 crore each, yet the category remains a fraction of the size of flexi-caps. Are investors right to stay cautious, or are focused funds an underrated opportunity? Here’s what a decade of performance and volatility data reveal. Focused funds and flexi-cap funds are more similar than different. Both can invest across large-, mid-, and small-cap stocks. The big difference? Flexi-cap funds can hold as many stocks as they like, while focused funds are capped at 30. Despite sharing the same DNA, investors clearly have a favourite. According to the Association of Mutual Funds in India (AMFI), as of September 30, 2025, flexi-cap funds manage Rs 5.12 lakh crore, while focused funds manage a much smaller Rs 1.63 lakh crore, which is almost three times larger than the latter. So, are investors overlooking a hidden gem? Let’s find out. 10-year performance We decided to calculate five-year rolling returns, a more reliable way to judge performance than just looking at trailing or point-to-point returns. Think of it like this: if you only check your marks from one exam, you might get a distorted picture. But if you average all your test scores over many years, you get a fairer sense of how consistent you’ve been. That’s exactly what rolling returns do. They show how steady a fund’s performance has been over time, not just at one point. So, based on five-year rolling returns, 13 focused funds with 10-year history have delivered an average return of 16.4 per cent. In comparison, 18 flexi-cap funds with the same history averaged 17.1 per cent. This means that flexi-caps hold a slight performance edge over t