Balwant Jain

Of late Flexicap Fund have been in news for more than one reasons. Let us understand what Flexicap funds  are and why they have been in new of late.

Historical Background

SEBI had issued a Circular on 6^thOctober 2017 to standardize scheme under various categories as well as to bring in uniformity in the characteristics of similar type of schemes. Under this circular SEBI had prescribed limit of minimum of 65% of total assets to be invested by Multicap Fund in equity products. However, SEBI had observed that the Multicap Fund had in practice were not Multicap fund as they invested their substantial assets in large cap companies. So in order to ensure that the scheme remain true to its label SEBI on 11^th September 2020 prescribed minimum of 25% of investment each in Large Cap, Mid Cap and Small Cap Companies for all the Multicap funds. These fresh guidelines created a hue and cry in the mutual fund industry as it virtually took away the freedom the fund manager had under this category to invest the funds the way they wanted which this forced SEBI to announce creation of a new category of Flexicap fund on 6^thNovember 2020. This prescribed a requirement to invest minimum 65% of its assets in equity on overall basis without any restriction as to the market capitalisation segment. This circular also allowed fund houses to convert their existing Multicap fund schemes into Flexicap funds.