Securities and Exchange Board of
India (SEBI) has introduced a new fund category, Flexi-cap, in mutual funds.
According to the circular, mutual funds in this category need to invest at
least 65 per cent of the portfolio in equities. However, there is no restriction
in terms of allocation to market capitalization range and they can dynamically
shift across large-cap, mid-cap and small-cap. So, effectively, the new
category of the fund in a mutual fund is how SEBI used to define the multi-cap
category until it changed the category's mandate.
On September 11, 2020, SEBI issued a
circular informing about the change in the mandate of the multi-cap fund's
category. According to the new guidelines of SEBI, multi-cap funds need to
allocate 25 per cent of the portfolio to each-large-cap, mid-cap and small-cap
stocks, increasing the minimum equity allocation to 75 per cent. AMC has been
given time until January 2021 to make the required changes in the portfolios of
their multi-cap funds. The new mandates of multi-cap funds category are quite
restrictive and have been criticized by the experts. But this new category of
the fund in a mutual fund will hopefully put an end to the criticism.
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