IIFL Mutual Fund has launched Flexicap Fund, which will open for subscription on the 8th.th May 2023. It is an open-ended fund that invests in the market capitalization of stocks, i.e. large-cap, mid-cap, and small-cap stocks. There are now already several flexicap mutual fund schemes that have generated annualized returns of up to 18% over the past five years. Should I invest in IIFL Flexicap NFO? What are the risk factors an investor should consider before investing in such Flexicap funds?
Also read: ChatGPT recommends mutual funds to invest in 2023
IIFL FlexiCap Fund – NFO Issue Details
Here are the details of the NFO issue:
| The scheme will open | 08-5-23 |
| scheme close | 22-5-23 |
| Schemes for continuous purchases/sales are reopened | Within 5 business days |
| Minimum amount | 1,000 rupees |
| Minimum SIP | Rs 1,000 for 6 months |
| Fund’s NAV | Rs 10 during NFO period |
| entry road | none |
| exit road | 1% redemption within 1 year |
| dangerous | very high risk |
| standard | S&P BSE 500 TRI Index |
| fund manager | Mr Mayur Patel |
| Maximum TER | 2.25% |
IIFL FlexiCap Fund Prospectus / SID
What is the investment objective of IIFL Flexicap Fund NFO?
The investment objective of the scheme is to generate long-term capital appreciation primarily by investing in equities and equity-related securities across the market capitalization range, with the remainder invested in bonds and money market instruments.
However, there is no guarantee that the investment objective of the scheme will be achieved..
What is the distribution pattern of this fund?
The investment pattern of this fund is as follows:
| instrument type | min % | Max % | risk profile |
|---|---|---|---|
| Equities or *equity-related products market capitalization |
65% | 100% | high risk |
| Listed preferred stock | 0% | Ten% | high risk |
| Debt Securities and Money Market Products | 0% | 35% | low to moderate risk |
| Investment units issued by REITs and INvITs | 0% | Ten% | moderately high risk |
Why invest in IIFL FlexiCap Fund NFO?
There are several reasons to invest in this fund.
1) Diversification: FlexiCap Mutual Funds offer a diversified portfolio of equities across a variety of sectors and market capitalizations. This helps spread the risk of an investment and helps investors mitigate the effects of market volatility.
2) Higher return potential: Flexicap funds have the flexibility to invest in companies of various market capitalizations, potentially yielding higher returns than investing in specific segments of the market.
3) Flexibility: Flexi-cap funds are flexible and allow portfolio composition to be adjusted based on market conditions, allowing fund managers to take advantage of market opportunities and optimize returns.
4) Consistency with market trends: The fund’s flexibility allows you to react quickly to changing market trends and take advantage of new investment opportunities.
Key risk factors to consider before investing in such funds
You should consider some of these risk/negative factors before investing.
1) Volatility: Because FlexiCap funds invest in companies of all sizes, they are subject to market volatility, which can impact returns in the short term.
2) Higher Risk: Compared to large-cap or mid-cap funds, flexicap funds are relatively riskier due to their exposure to small-cap and untested companies.
3) Liquidity risk: Flexi-cap funds may experience higher liquidity risk due to their exposure to small-capitalization stocks and may face difficulties selling such stocks in volatile markets.
4) High Risk Products: The fund invests in higher risk equity derivative preferred stocks, REITs and InvITs.
5) Investors should read the Scheme Information Document (SID) for the full risk factors of the Scheme.
How are the existing Flexicap funds performing in India?
Below is a list of flexicap mutual funds and their short, medium and long term performance.
| scheme name | 1 year | 3 years old | 5 years old | 10 years old |
|---|---|---|---|---|
| Quant Flexi-Cap Fund | 8% | 44% | 19% | twenty one% |
| Parag Parikh Flexi Cap Fund | 11% | 32% | 18% | – |
| PGIM India Flexi Cap Fund | 1% | 31% | 15% | – |
| HDFC Flexi Cap Fund | 13% | 33% | 14% | 16% |
| JM Flexicap Fund | 12% | 27% | 14% | 17% |
| Kanara Robeco Flexi Cap Fund | Four% | twenty four% | 14% | 15% |
| Union Flexicap Fund | Four% | 27% | 13% | 13% |
| Franklin India Flexicap Fund | 6% | 31% | 12% | 16% |
| DSP Flexi-Cap Fund | Five% | twenty four% | 12% | 16% |
| Axis FlexiCap Fund | -1% | 18% | 12% | – |
| Edelweiss Flexicap Fund | 7% | 27% | 12% | – |
| Kotak Flexicap Fund | 7% | twenty four% | 12% | 17% |
| UTI Flexi Cap Fund | -Five% | twenty three% | 11% | 15% |
| SBI Flexicap Fund | Four% | 26% | 11% | 17% |
| IDBI Flexi Cap Fund | 3% | twenty five% | 11% | – |
| Aditya Birla Sun Life Flexi Cap Fund | 3% | twenty five% | Ten% | 17% |
| HSBC Flexi Cap Fund | Four% | 26% | 9% | 15% |
| LIC MF Flexi Cap Fund | Four% | 18% | 9% | Ten% |
| Bandhan Flexi Cap Fund | 3% | twenty one% | 8% | 14% |
| Taurus Flexi Cap Fund | -1% | 20% | 6% | Ten% |
| Motilal Oswal Flexi Cap Fund | 2% | 17% | 4.5% | – |
Also read: List of low-cost index mutual funds for long-term investment
Should I invest in the IIFL Flexicap Fund NFO?
The IIFL FlexiCap Fund NFO invests in a wide range of market capitalizations including large cap, mid cap and small cap caps in India.
Large-cap stocks offer stable returns, while the mid-cap and small-cap segments can generate high returns. Such funds act like portfolio diversification for investors.
On the other hand, exposure to the mid and small cap segment is riskier. There are several flexicap mutual funds that have generated annualized returns of 4.5% over the past five years, and few have fallen short of the bank’s FD return, so there is no guarantee that this new fund offer will yield high returns.
High-risk investors who want to try new funds can invest in this scheme for 5 years or more. Otherwise, you can invest in the existing best performing FlexiCap mutual funds that have already proven themselves in various market cycles.
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Suresh KP is the founder of Myinvestmentideas. He is his NISM Certified – Investment Advisor and NISM Certified – Research Analyst. He has been analyzing financial markets for the past 20 years.
