Hello Readers!!

After a long wait, finally, to lessen the burden of the new guidelines regarding asset allocation in multi-cap funds, SEBI come up with a solution, Flexi-Cap Funds. 

After the new asset allocation rule announced for multi-cap funds by SEBI, the investors of multi-cap funds have become worried. This was because as per the new asset allocation rule, that stated multi-cap funds should allocate at least 25 percent of their portfolios to each of large-cap, mid-cap, and small-cap stocks by February 2021.

With the new regulation, there was a possibility of an increase in the risk of multi-cap funds. Investors were in dilemma, what to do with their multi-cap funds and were, again and again, approaching financial experts for the suggestion.

Well, on 6^th November 2020, SEBI introduced Flexi- Cap Fund category, providing relief to mutual funds. Under this new fund category, the scheme should have a minimum investment of 65 percent of total assets in equity and equity-related instruments, while it is an open-ended dynamic equity scheme investing across large-cap, mid-cap, small-cap stocks, the regulator added.

This step was taken by keeping the flexibility of mutual funds in mind and considering the recommendations of the Mutual Fund Advisory Committee (MFAC).

For the new fund's category, it is the responsibility of the AMC, to ensure that a suitable benchmark is adopted for the Flexi-Cap Fund.

Financial experts have heartily welcomed this decision of SEBI. As per them, SEBI has come up with this idea, by keeping in mind the potential disruption in existing multi-cap equity funds.

The new fund category, Flexi-cap funds, will provide the flexibility of asset allocation to any capitalization. With this new category fund, mutual funds have the option to convert an existing scheme into a Flexi-Cap Fund subject to compliance with the requirement for change in fundamental attributes of the scheme.

Fund schemes that would be converted to flex-cap category fund will have the change in their name only, everything else viz. fund manager, investment process, and fund portfolio will remain the same as before.

The new fund category is Flexi-cap funds is effective from the date of its launch that is 6^th November, mutual funds can launch the scheme under the Flexi-Cap Fund category from the same date.

Experts have classified this decision of regulator SEBI as a good decision. They say this new category of funds will help investors who want complete flexibility in the ownership of companies across market cap buckets. Investors would rely more on the fund managers' capabilities and decisions to decide market cap bias.

For any kind of query or more details on the new category of fund, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee of future returns).