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Flexi-cap Funds

After large- and mid-cap funds, the latest trend is that of flexi-cap equity funds. Franklin Templeton and Chola Mutual Funds have recently filed an offer document with the SEBI for launching such product.

There was a time when most fund houses were launching funds dedicated either to large- or mid-cap segment of the market. But with both segments of the market performing as good (or bad) as the other, the fund houses are now planning to launch flexi-cap equity funds that will have the liberty to invest in entire market capitalisation range. Franklin Templeton and Chola Mutual Funds have recently filed an offer document with the SEBI for launching such product.

For Franklin Templeton, this will be a welcome addition to the family as all its existing equity schemes have a defined focus. Franklin India Bluechip only invests in large-cap stocks, Franklin India Prima concentrates on mid-cap segment; Franklin India Prima Plus invests in large-cap stocks with a spattering of mid/small-cap stocks (80:20) and Templeton India Growth has a value investment philosophy. Hence, flexi-cap fund will be a dynamic equity fund, which will not have any restrictions and will seek to invest in quality companies across market caps. However, a lot will depend on the fund managers' call here, but since their star fund managers K.N. Siva Subramanian and R. Sukumar will manage the fund, we can hardly expect any bad surprises. The fund will be benchmarked against the S&P CNX 500 Index.

Almost similar is the story with Chola Mutual Fund. The fund house has three equity funds with different investment style--Cholamandalam Growth is a large-cap focussed fund, Chola Mid-cap is a mid-cap fund and Chola Opportunities is an aggressive equity fund. Thus, Chola Multi-cap will give investors an opportunity to take benefit of entire market capitalisation segment.

This new trend of launching flexi-cap funds could be a good thing at this point of time. Unlike 2003, when majority of mid-caps made smart gains, the rally in 2004 has been stock specific irrespective of the market cap. While share prices of large-caps like Infosys has gained tremendously, HLL has lost the most. Similarly, among mid-caps, stocks like Aventis pharma and Siemes have gained 25 per cent each, while Ashok Leyland has been among the losers. So it won't be wrong to say that while 2003-04 saw emergence of mid-cap funds, coming years may belong to the flexi-cap funds. Let's wait and watch.