Best Flexi Cap Mutual Funds to Invest in February 2025

Volatility and uncertainty in the markets are always at the back of the minds of most mutual fund investors, particularly new and novice investors. Most of them are facing an issue choosing between large-cap, mid-cap, and others. Also, constant switching of categories based on market conditions is not going to be an easy task. For those who are facing this issue, flexi-cap mutual funds are a cost-effective solution.

Why Invest in Flexi Cap Mutual Funds?

Flexi-cap mutual funds give the freedom to fund managers to invest across different market capitalizations, sectors, and themes. This helps them to shift the portfolio dynamically depending on market trends and opportunities. Such schemes are usually suggested to moderate investors looking for long-term wealth creation. Ideally, investors need to prefer a five-to-seven-year time horizon while investing in these schemes.

Since the fund managers have the luxury of allocating investments based on the outlook of the market, some flexi-cap schemes become conservative, while others become aggressive. Hence, the investor needs to choose a scheme based on their risk appetite. For example, when the market is in a bull phase, the fund manager can invest heavily in mid-cap and small-cap stocks, and in a volatile market, he can invest in large-cap stocks.

Best Flexi Cap Mutual Funds for Investment in February 2025

Following the latest review, flexi-cap mutual funds have been ranked as strong investment recommendations for February 2025, are given below:

• Parag Parikh Flexi Cap Fund
• UTI Flexi Cap Fund
• PGIM India Flexi Cap Fund
• Aditya Birla Sun Life Flexi Cap Fund
• SBI Flexi Cap Fund
• Canara Robeco Flexi Cap Fund

Performance and Quartile Rankings

Recent quartile ranks indicate that some funds have been performing well consistently while others have not been performing as well. The list is given below:

• Aditya Birla Sun Life Flexi Cap Fund: Third quartile for 22 months.
• UTI Flexi Cap Fund: Fourth quartile for 21 months.
• Canara Robeco Flexi Cap Fund: Third quartile for 20 months.
• PGIM India Flexi Cap Fund: Fourth quartile for 12 months.

Selection Methodology

A comprehensive evaluation process has been utilized to shortlist the best-performing flexi-cap mutual funds. The selection criteria are:

1. Mean Rolling Returns

Returns are rolled over for the last three years on a daily basis to maintain uniformity in the performance analysis.

2. Consistency in the Last Three Years

The Hurst Exponent (H) is used to ascertain the consistency of a fund’s Net Asset Value (NAV) series.

• H = 0.5: The series is under a geometric Brownian motion, and it is difficult to predict.
• H < 0.5: The series is mean-reverting.
• H > 0.5: The series is persistent, with a strong trend. The higher the value of H, the lower the volatility.

3. Downside Risk

Downside risk considers only the negative returns of a mutual fund scheme. It is computed as:

• X = Returns below zero
• Y = Sum of all squares of X
• Z = Y / Number of days taken for computing the ratio
• Downside risk = Square root of Z

4. Outperformance

Jensen’s Alpha measures risk-adjusted return relative to expected market return based on the Capital Asset Pricing Model (CAPM). The larger the Alpha, the superior the performance of the fund relative to market expectations.

Formula:

Average returns earned by the mutual fund scheme = [Risk-Free Rate + (Beta of the Mutual Fund Scheme) × (Average Return of the Index – Risk-Free Rate)]

5. Asset Size

For equity mutual funds, the lowest asset size considered is Rs. 50 crore to ensure liquidity and stability.

Conclusion

Flexi-cap mutual funds provide a balanced approach to equity investment by allowing fund managers to react to changing market trends. Even though such schemes have growth opportunities, investors must assess their risk tolerance properly before selecting a fund. Monitoring fund performance and market trends on a regular basis can assist in making an informed investment decision.