Popular mutual fund category—Flexi-Cap Mutual Funds. Many investors gravitate toward this category due to its flexibility and potential for attractive returns. Instead of delving into the basics, let’s focus on analysing four specific funds based on their recent performance and risk parameters.
Key Highlights
| Fund Name | 5-Year CAGR | 10-Year CAGR | Sharpe Ratio | Sortino Ratio | Beta | Expense Ratio | |
| Quant Flexi cap Fund | 32.55 | 19.37 | 0.70 | 0.06 | 1.12 | 0.59 | |
| HDFC Flexi cap Fund | 25 | 15.62 | 1.57 | 0.15 | 0.86 | 0.76 | |
| JM Flexicap Fund | 27.92 | 18.62 | 1.59 | 0.14 | 0.92 | 0.52 | |
| Parag Parikh Flexi cap Fund | 25.90 | 18.39 | 1.74 | 0.71 | 0.71 | 0.63 |
Performance Analysis
- Quant Flexi cap Fund
- This fund delivered stellar returns from 2020 to 2022 but has shown a declining trend since 2023 due to market corrections.
- The high Sharpe ratio earlier masked the elevated risk (reflected in a high beta of 1.12).
- It remains suitable for investors with a high-risk tolerance and a preference for aggressive growth strategies.
- HDFC Flexi cap Fund
- A consistent performer with 24% 3-year CAGR and 27% 5-year CAGR.
- Exhibits relatively stable risk metrics, making it a strong choice for medium-risk investors.
- Suitable for those aiming for balanced risk and reward over the medium to long term.
- JM Flexi cap Fund
- An underdog that has recently emerged as a top performer with exceptional returns of 27-28% over the last three years.
- Offers a unique composition with 47.37% allocation in large caps and 36.11% in small caps, indicating a higher risk-return profile.
- Recommended for investors who are willing to take calculated risks for potentially higher returns.
- Parag Parikh Flexi cap Fund
- Known for its consistency, with returns of 22-24% and low volatility.
- Its Sharpe ratio of 1.74 underscores superior risk-adjusted returns, making it ideal for conservative investors.
- Focused on minimizing downside risks, it’s a preferred option for long-term goals with a low-risk appetite.
Risk Metrics Overview
Sharpe Ratio
- Indicates risk-adjusted returns. Higher is better.
- Parag Parikh Flexi cap leads with 1.74, reflecting consistent performance with lower risk.
Sortino Ratio
- Focuses on downside risk. Again, Parag Parikh excels, ensuring better protection during market downturns.
Beta
- Measures volatility compared to the market. Lower beta suggests lower risk.
- Parag Parikh Flexi cap and HDFC Flexi cap have low beta values (0.71 and 0.86, respectively), ensuring stability.
Standard Deviation
- Reflects overall risk. Parag Parikh Flexi cap showcases the lowest deviation, affirming its consistency.
Choosing the Right Fund
For Conservative Investors
- Recommendation: Parag Parikh Flexi cap Fund
- Why: Low risk, consistent returns, and excellent downside protection. Ideal for those with long-term horizons and minimal volatility tolerance.
For Balanced Investors
- Recommendation: HDFC Flexi cap Fund or JM Flexi cap Fund
- Why: Both funds offer a balance between risk and reward. JM Flexi cap has recently outperformed, while HDFC Flexi cap provides stability.
For Aggressive Investors
- Recommendation: Quant Flexi cap Fund or JM Flexi cap Fund
- Why: Quant offers high returns in trending markets but comes with significant risk. JM Flexi cap, with its high small-cap allocation, presents a compelling case for aggressive growth strategies.
Additional Insights
- Expense Ratios: Should not be the sole deciding factor. High expense ratios may be justified if the fund delivers superior returns.
- Past Performance: While past performance is an essential indicator, it should not be the only criterion for fund selection. Evaluate consistency and risk metrics.
- Investment Horizon: Flexi-cap funds suit investors with varying goals, from short-term to long-term. Choose based on your financial objectives and risk appetite.
Final Thoughts
All four funds analysed here have their strengths and cater to different investor profiles. While Parag Parikh Flexi cap Fund stands out for its stability, HDFC and JM Flexi cap Funds provide a balanced approach to growth and risk. Quant Flexi cap Fund, though volatile, remains a strong contender for those with a high-risk tolerance.
Before investing, assess your financial goals, risk appetite, and investment horizon. Remember, mutual fund investments are subject to market risks. This content is for educational purposes only and should not be considered financial or investment advice. Always consult a financial advisor if unsure about your choices.