Flexicap Funds: How they can help you optimise risk-adjusted returns of your portfolio

Flexicap fund managers even have the pliability to cut back their-small-cap publicity and enhance their large-cap publicity, if deemed match.

Within the background of the present surroundings, flexibility has taken on new that means. Corporations are proactively altering their processes and insurance policies. Make money working from home has turn into the brand new regular, and digital conferences and education are rising on everybody. Do you assume that every one of this is able to have been potential if folks and organisations had been inflexible? In the event that they weren’t versatile sufficient to answer the altering surroundings?

Most certainly not. Flexibility equals alternative. The one manner we will profit from new and rising alternatives is that if we’re versatile sufficient to seize them. That’s the primary premise of Flexicap funds.

Agile is the brand new mantra

Lately, the Securities Alternate Board of India (SEBI) launched a brand new mutual fund class known as Flexicap funds. These funds are multi-dimensional in nature. They’re required to take a position a minimal 65% of whole belongings in fairness and equity-related devices with dynamic allocation throughout giant cap, mid cap, and small cap shares. Which means that relying on market circumstances and alternatives, fund managers have the pliability to spend money on giant cap, mid-cap, and small-cap shares, all on the similar time.

Flexicap funds supply a number of advantages that may make it easier to optimise the risk-adjusted returns of your portfolio. A few of these advantages embody:

Threat mitigation by diversification: Everyone knows that investing throughout a number of asset lessons may also help us diversify our portfolios and scale back the chance of losses that stem from excessive actions in anyone asset class. The same profit is supplied by flexicap funds as nicely. Shares from totally different market capitalisations have various ranges of danger. For instance, small-cap shares are thought of comparatively riskier than large-cap shares. That is primarily as a result of large-cap shares are typically market leaders and have already demonstrated their progress and earnings potential. This makes them secure.

Then again, small-cap shares are corporations which can be nonetheless within the early levels of progress and haven’t but demonstrated their progress and earnings capabilities. Therefore, there’s a larger diploma of uncertainty in these shares. Now, in a falling market, small-cap shares are more likely to witness a sharper fall in comparison with large-cap shares. The diversification factor of flexicaps ensures that the losses accrued on small-cap shares are minimised as a result of publicity to large-cap shares. Furthermore, in such a situation, flexicap fund managers even have the pliability to cut back their-small-cap publicity and enhance their large-cap publicity, if deemed match.

Return optimization: Alternatives are available in varied styles and sizes. It pays to be flexibile to take a position throughout sectors and shares, with a view to capitalise upon the varied alternatives available in the market. As a result of dynamic and versatile nature of flexicap funds, fund managers can make investments throughout market capitalisations and leverage rising alternatives. Additional, the power to spend money on large-cap, mid-cap, and small-cap shares signifies that fund managers can create an funding portfolio that gives mixture of stability and progress. Investments could be unfold throughout secure large-caps and high-growth mid and small-caps.

ICICI Prudential Flexicap Fund: The flexibleness that you just want

Contemplating how worth accretive flexicap funds could be, ICICI Prudential Mutual Fund has introduced the launch of its flexicap fund. The fund will spend money on a mixture of large-cap, mid-cap, and small-cap shares and dynamically shift between them based mostly on prevailing market circumstances, the macro surroundings, and inventory particular alternatives. The fund follows a mixture of top-down and bottom-up method to establish alternatives throughout market cycles and rebalance publicity accordingly.

(By E Chandrasekaran, Founder & MD, ECS Monetary Providers(INDIA) Non-public Restricted)

Disclaimer: These are the non-public views of the writer. Readers are suggested to seek the advice of their monetary planner earlier than making any funding.