Flexi Cap NFOs are the in-thing among mutual funds

NFOs or new fund offerings have been the mutual fund equivalent of equity IPOs. But, the big challenge was to have a unique theme to offer to customers. SEBI has restricted fund houses to launching just 1 fund per defined category, so the NFO scope was quite limited on the equity front. It is here that the flexi-cap space offers an opportunity for mutual funds to launch NFOs with a unique proposition to clients.

The big splash was made by the ICICI Prudential Flexi-Cap Fund NFO, which collected an incredible Rs.10,200 crore through the NFO. This is the highest amount that has ever been collected in any single NFO in India. Flexi Cap are a more flexible version of the Multi-Cap funds where there are not restrictions on how the fund managers allocate the fund between large-cap, mid-cap and small-cap stocks.

After the success of the ICICI Prudential Flexi Cap NFO, others like Nippon MF and ITI MF are also lining up similar NFOs. In fact, Nippon MF Flexi Cap NFO will open for subscription on 26 July and will remain open till the end of August. What really must have impressed other funds to follow suit is not just the amount collected by Pru ICICI Flexi Cap NFO, but the fact that 400,000 investors applied for the NFO, showing strong retail appetite.

Flexi Cap funds currently have an AUM of Rs.176,000 crore, next only to large cap funds in the equity category. Flexi Cap funds have given 51.6% returns in the last 1 year, 14.5% in the last 3 years and 14.2% in the last 5 years. For investors, flexi-cap funds are emerging as a proxy for participating in alpha generation via mid-caps and small-cap stocks.