As global investors explore Indian markets, choosing the right mutual fund becomes crucial—especially for Non-Resident Indians (NRIs) aiming to build wealth or diversify portfolios. Two popular categories often compared are Flexi Cap Funds and Multi Cap Funds.
While both offer diversified exposure across market capitalizations, their investment strategies, risk profiles, and return potential differ significantly. This blog breaks down these differences to help you make a more informed investment decision.
In this Article
What Are Flexi Cap Funds?
Flexi Cap Funds are equity mutual funds with the freedom to invest across large-cap, mid-cap, and small-cap stocks without any fixed allocation. Fund managers can dynamically adjust asset distribution based on market conditions, aiming to maximize returns and manage risk effectively.
Must Read: Top Mid-Cap Mutual Funds for NRIs in 2025: High-Growth Options for Long-Term Investors
For instance, if small and mid-cap stocks are booming, the manager may increase exposure there. In uncertain times, the portfolio may shift towards large-cap stocks to provide stability.
As per SEBI guidelines, Flexi Cap Funds must invest at least 65% of their assets in equity or equity-related instruments.
What Are Multi Cap Funds?
Multi Cap Funds also invest in large, mid, and small-cap companies. However, they come with regulatory mandates on asset allocation: a minimum of 25% must be invested in each segment—large-cap, mid-cap, and small-cap.
This fixed structure ensures consistent diversification but limits the fund manager’s ability to adjust the portfolio based on market trends. During market downturns, the mandatory allocation to small and mid-caps can increase risk.
Also Read: Best Small-Cap Mutual Funds for NRIs to Invest in 2025
According to SEBI regulations, Multi Cap Funds must hold a minimum of 75% in equities.
Key Differences Between Flexi Cap and Multi Cap Funds
| Feature | Flexi Cap Funds | Multi Cap Funds |
|---|---|---|
| Equity Exposure | Minimum 65% | Minimum 75% |
| Allocation Flexibility | High (no fixed allocation) | Fixed (25% each in large, mid, and small caps) |
| Risk Profile | Moderate | Higher |
| Suitability | Balanced investors | Aggressive investors |
| Fund Manager’s Role | Active allocation based on market trends | Limited flexibility due to fixed ratios |
Flexi Cap vs Multi Cap Funds: Performance Comparison
Let’s compare top-performing funds in both categories based on recent returns (1-year and 3-year):
Multi Cap Funds
| Fund Name | 1-Year Return | 3-Year Return |
|---|---|---|
| Kotak Multi Cap Fund | 51.23% | 26.00% |
| Nippon India Multi Cap Fund | 45.55% | 27.60% |
Flexi Cap Funds
| Fund Name | 1-Year Return | 3-Year Return |
|---|---|---|
| Quant Flexi Cap Fund | 49.53% | 22.77% |
| Nippon India Flexi Cap Fund | 37.10% | 18.12% |
Though Multi Cap Funds have recently outperformed Flexi Cap Funds, this may not always be the case. Flexi Cap Funds tend to shine in volatile or bearish markets due to their adaptable approach.
What Should NRIs Choose: Flexi Cap or Multi Cap?
The right mutual fund for an NRI depends on multiple factors:
Choose Multi Cap Funds if:
- You prefer equal exposure across all market segments.
- You have a higher risk appetite.
- You plan to invest with a long-term horizon (5–7 years).
Choose Flexi Cap Funds if:
- You want dynamic asset allocation based on market cycles.
- You seek relatively lower risk during volatile times.
- You value professional fund management and adaptability.
Tips for NRIs Before Investing in Mutual Funds
Before choosing a mutual fund in India, NRIs should consider:
- Investment Goal: Wealth accumulation vs. regular income.
- Investment Horizon: Long-term goals suit equity funds; short-term goals may require debt funds.
- Risk Tolerance: Match fund type with your comfort level.
- Tax Implications: Understand NRI mutual fund taxation under Indian and home country rules.
- SIP or Lump Sum: SIPs are ideal for rupee-cost averaging; lump sum is better for bullish markets.
- Regulatory Compliance: Ensure FATCA compliance if you reside in the US or Canada.
FAQs: Flexi Cap vs Multi Cap Funds
What is the main difference between Flexi Cap and Multi Cap funds?
Flexi Cap Funds can invest freely across market caps, while Multi Cap Funds must allocate 25% each to large, mid, and small-cap stocks.
Are Multi Cap Funds riskier than Flexi Cap Funds?
Yes, due to mandatory allocation to small-cap and mid-cap stocks, Multi Cap Funds carry higher volatility risk.
Which fund type performs better in bear markets?
Flexi Cap Funds typically perform better during downturns because fund managers can shift towards stable large-cap stocks.
Can NRIs invest in both fund types?
Yes, NRIs can invest in both, provided they comply with FEMA and KYC norms. Some platforms like Kuvera and Scripbox make the process easier.
How are these funds taxed for NRIs?
Both are taxed as equity funds:
- Short-Term Capital Gains (sold within 1 year): 15%
- Long-Term Capital Gains (held over 1 year): 10% above ₹1 lakh
Which is better for long-term wealth creation?
Both can deliver long-term returns, but Multi Cap Funds might have an edge in bull markets, while Flexi Cap Funds offer safety nets during market volatility.
While Multi Cap Funds may have recently outperformed, Flexi Cap Funds offer more control and stability through active management. NRIs must evaluate their financial goals, risk tolerance, and tax obligations before making a decision.
Still unsure which to choose? It may be wise to diversify your investment across both categories to balance risk and returns over time.