This comes after Sebi changed the mandate of multi cap funds in September. According to the new rule, multi cap funds will now have to invest at least 25% of their corpus in large-, mid- and small-cap stocks. Many fund houses raised concerns about the risk in investing 25% in mid and small cap stocks and had demanded the formation of a flexi cap category.
“Mutual Funds have the option to convert an existing scheme into a Flexi Cap Fund subject to compliance with the requirement for change in fundamental attributes of the scheme in terms of Regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996,” Sebi said in the circular.
“This is a very good decision by the regulator in the interest of investors who want complete flexibility in ownership of companies across market cap buckets. Investors would rely more on the fund managers capabilities and decisions to decide market cap bias. This also would give flexibility to managers to make investment decisions basis their conviction on the companies irrespective of their market caps. Since this a new category which is getting created, most multicap funds may get their schemes reclassified in to flexi cap category. Further, multicap category is an additional option available to managers as product option which will be managed as per market cap ceilings prescribed by SEBI,” Akhil Chaturvedi, Associate Director & Head of Sales, Motilal Oswal Asset Management Company, said.
