Multi-Cap vs Flexi-Cap Funds: Which Is the Right Choice for You in 2025?
As an investor aiming to strike the perfect balance between stability and growth, you might find yourself torn between multi-cap and flexi-cap funds. Both offer diversified exposure across large-cap, mid-cap, and small-cap stocks—but with subtle differences in approach.
In this comprehensive guide, we break down the differences between multi-cap and flexi-cap funds, explore their respective benefits, and help you make an informed choice based on your financial goals and risk appetite.
What Are Flexi-Cap Funds?
The unique feature of flexi-cap funds is their allocation flexibility. Fund managers have the freedom to decide the allocation percentages across different market caps based on market conditions and opportunities, provided that at least 65% of the portfolio remains invested in equities at all times.
What Are Multi-Cap Funds?
Multi-cap funds, on the other hand, are required to maintain a fixed allocation—as per SEBI regulations:
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Minimum 25% in large-cap stocks
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Minimum 25% in mid-cap stocks
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Minimum 25% in small-cap stocks
This mandates a more evenly distributed exposure across all three market caps, with a total equity exposure of at least 75%.
Benefits of Investing Across Market Caps
1. Diversification
Both categories offer exposure to a range of sectors and market caps, reducing the risks associated with investing in a single segment.
2. Return Optimization
Diversified investments allow investors to capitalize on different growth cycles, maximizing returns across market conditions.
3. Balanced Portfolio Growth
Top 5 Multi-Cap Funds by AUM (As of March 2025)
| Fund Name | AUM (₹ crore) | 3-Year Return | 5-Year Return |
|---|---|---|---|
| Nippon India Multicap Fund | 35,353 | 21.35% | 35.50% |
| SBI Multicap Fund | 17,579 | 16.52% | – |
| HDFC Multicap Fund | 14,650 | 20.91% | – |
| Kotak Multicap Fund | 14,374 | 22.67% | – |
| ICICI Prudential Multicap Fund | 12,901 | 19.27% | 31.37% |
Top 5 Flexi-Cap Funds by AUM (As of March 2025)
| Fund Name | AUM (₹ crore) | 3-Year Return | 5-Year Return |
|---|---|---|---|
| Parag Parikh Flexi Cap Fund | 88,004 | 16.91% | 31.79% |
| HDFC Flexi Cap Fund | 64,124 | 22.03% | 34.19% |
| Kotak Flexi Cap Fund | 45,433 | 14.47% | 25.78% |
| UTI Flexi Cap Fund | 23,403 | 7.33% | 22.87% |
| Aditya Birla Sun Life Flexi Cap Fund | 20,079 | 13.55% | 27.26% |
Evaluating Risk-Adjusted Performance: Sortino Ratio and Downside Capture
What Is Sortino Ratio?
What Is Downside Capture Ratio?
5-Year Average Sortino and Downside Capture for Multi-Cap Funds
| Fund Name | Sortino Ratio | Downside Capture Ratio |
|---|---|---|
| Nippon India Multicap Fund | 0.1694 | 90.31% |
| SBI Multicap Fund | 0.1120 | 71.46% |
| HDFC Multicap Fund | 0.0979 | 90.76% |
| Kotak Multicap Fund | 0.0905 | 92.15% |
| ICICI Prudential Multicap Fund | 0.1706 | 83.23% |
5-Year Average Sortino and Downside Capture for Flexi-Cap Funds
| Fund Name | Sortino Ratio | Downside Capture Ratio |
|---|---|---|
| Parag Parikh Flexi Cap Fund | 0.2108 | 62.14% |
| HDFC Flexi Cap Fund | 0.1838 | 86.57% |
| Kotak Flexi Cap Fund | 0.1356 | 97.77% |
| UTI Flexi Cap Fund | 0.1314 | 88.43% |
| Aditya Birla Sun Life Flexi Cap Fund | 0.1481 | 95.02% |
Key Insights
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Flexi-cap funds tend to deliver better risk-adjusted returns, as reflected by higher Sortino ratios.
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They also display a lower downside capture ratio, meaning they are better at protecting investors’ capital during market declines compared to multi-cap funds.
Multi-Cap vs Flexi-Cap: Which One Should You Choose?
| Factors | Multi-Cap Funds | Flexi-Cap Funds |
|---|---|---|
| Investment Mandate | 25% each in large, mid, and small-caps | No fixed allocation—manager’s discretion |
| Flexibility | Rigid | High |
| Downside Protection | Moderate | Better downside capture |
| Suitability | Investors seeking structured diversification | Investors looking for tactical allocation |
| Risk Appetite | Moderate to High | Flexible, adjustable based on market cycles |
Conclusion
Both multi-cap and flexi-cap funds offer exposure to all segments of the market, but they differ in structure and flexibility. While multi-cap funds ensure a balanced distribution across all market caps, flexi-cap funds provide fund managers with the liberty to shift allocations dynamically based on market opportunities.
Given the superior Sortino ratios and downside protection, flexi-cap funds have demonstrated better resilience during market downturns. However, your final decision should consider your risk tolerance, investment goals, and time horizon.
For tailored advice, always consult a SEBI-registered investment advisor before making your move.