Flexi Caps: Are they true to Label?

Everyone loves the Flexi Cap story:
“Go anywhere! Invest in anything! True flexibility!” 

As per SEBI guidelines, Flexi Cap funds can invest freely across market caps with no minimum limits, unlike Multi caps which have to maintain 25% each in large, mid, and small caps.

But how do Flexi Caps actually use this freedom?
Let us look at the top 20 schemes that hold ~93% of category AUM. 

1. Average Market-Cap Allocation – (Apr–Oct ’25)
▸13 of 20 funds → 50–70% in large cap. In fact 5 of them hold more than 70% in large cap. 19 funds hold less than 25% in mid cap and all 20 funds have exposure less than 25% in small caps.

This average holding has remained the same for the last 3 FYs give or take +/- 4%.
→ Flexibility exists, but large caps remain the comfort zone. 

2. Flexi Cap allocation vs Benchmark: The Reality Check 

 (Apr–Oct ’25)
▸Large Cap: 63% vs 71%
▸Mid Cap: 17% vs 19%
▸Small Cap: 13% vs 10%

Top 20 Flexi caps allocation ended up hugging the benchmark. 

→ Full freedom on paper, but not in practice. 

3. Where Flexi Caps actually Allocated 

▸Nifty Mid caps delivered higher returns in 3 of the last 4 FYs, yet Flexi Caps kept mid-cap exposure <20% on an average.
▸Even when Nifty Small caps outperformed, exposure never went >12% on an average. 

Portfolios remained mostly Large cap dominated, even when mid/small caps performed better. No tactical shift in portfolio allocation based on market cap.

4. Are Flexi Caps an alternative to Large caps?
▸Given their heavy tilt toward large caps, Flexi caps can be seen as a large-cap alternative.
▸While pure large-cap funds struggle to generate alpha, Flexi caps — with a strong large-cap core, a pinch of mid caps, and a dash of small caps could offer a better chance at alpha with similar stability.

Is that why funds are moving to Flexi cap as a category?

Disclaimer: The above viewpoints are based purely on category market-cap allocation trends and do not consider scheme returns. The views expressed here are personal.