Flexi-Cap Fund: What it Means, How it Works

What Is a Flexi-Cap Fund?

A flexi-cap fund is a type of mutual fund that is not restricted to investing in companies with a predetermined market capitalization. This type of fund structure will be indicated in the fund's prospectus. A flexi-cap fund can provide the fund manager with greater investment choices and diversification possibilities.

How a Flexi-Cap Fund Works

Unlike other funds, such as mid-cap or small-cap funds, the size of a company is not a constraint for flexi-cap funds. A flexi-cap fund may invest in any company, regardless of the company's size.

Types of Companies by Market Cap

Market capitalization is one of the most common ways mutual funds select companies in which to invest. Market capitalization refers to the total dollar market value of a company's outstanding shares. Market capitalization is commonly referred to as "market cap." Market cap is calculated by multiplying a company's shares outstanding by the current market price of one share.

Using market capitalization to show the size of a company is important because company size is a basic determinant of various characteristics in which investors are interested (including risk).

• Large-cap companies typically have a market capitalization of $10 billion or more. These large companies have usually been around for a long time, and they are major players in well-established industries. Investing in large-cap companies does not necessarily bring in huge returns in a short period of time. However, over the long-run, these companies generally reward investors with a consistent increase in share value and dividend payments.
• Mid-cap companies generally have a market capitalization of between $2 billion and $10 billion. Mid-cap companies are in the process of expanding. They carry an inherently higher risk than large-cap companies because they are not as established, but they are attractive for their growth potential.
• Small-cap companies have a market capitalization of between $300 million to $2 billion. These small companies could be young in age and/or they could serve niche markets and new industries. These companies are considered higher risk investments due to their age, the markets they serve, and their size. Smaller companies with fewer resources are more sensitive to economic slowdowns.

Example of a Flexi-Cap Fund

The Fidelity Stock Selector All-Cap Fund is a diversified domestic equity strategy that invests broadly across all sectors, market capitalizations, and styles. The fund is managed by a member of Fidelity's Global Asset Allocation division and a team of sector portfolio managers. Portfolio sector weightings are kept similar to those of its benchmark in an effort to add value through active stock selection and also to minimize the risks associated with sector or market timing.

The fund had a 10-year annualized return of 14.51% as of August 31, 2020, compared with 14.88% for its U.S. large growth benchmark. Its 10 largest holdings, which made up 25.46% of the fund, were:

• Microsoft Corp. (MSFT)
• Apple Inc. (AAPL)
• Alphabet Inc CL A. (GOOGL)
• Amazon.com Inc. (AMZN)
• Meta Platforms Inc. (formerly Facebook) Class A (META)
• Adobe Inc. (ADBE)
• United Health Group Inc. (UNH)
• Proctor and Gamble Co. (PG)
• Salesforce.com Inc. (CRM)
• Roche Holdings AG