Understanding NJ Flexi Cap Fund: Meaning, Features & Benefits
According to the Association of Mutual Funds in India (AMFI), the Indian mutual fund industry has witnessed AUM growth from ₹10.96 trillion to ₹67.26 trillion over a 10-year period. This uprise of above 6 times in AUM suggests investors' growing confidence in mutual funds as a strategic investment option.
Among the various types of mutual funds available, a notable one is the Flexi Cap Fund. The Flexi Cap Fund aims to provide investors with the benefit of long-term wealth creation through diversification across large-cap, mid-cap, and small-cap companies.
About Flexi Cap Funds
As the name suggests, a Flexi Cap Fund is a type of equity mutual fund that flexibly invests in stocks across all market capitalizations—large-cap, mid-cap, and small-cap – without any restrictions.
How Does a Flexi Cap Fund Work?
Flexible diversification across market capitalizations is the foundation of a Flexi Cap Fund. The fund chooses the best large, mid, and small-cap mix based on the fund’s investment strategy. The fund may invest largely in small-cap stocks during a bullish market to capture high growth potential. On the other hand, the fund may reduce risk in a down market by investing more in large-cap stocks.
Flexi Cap Funds Vs Multi Cap Funds
A Flexi Cap Fund provides greater flexibility and diversification compared to a Multi Cap Fund by investing across large-cap, mid-cap, and small-cap stocks without restrictions on the minimum or maximum allocation to any market capitalization. In contrast, a Multi Cap Fund must allocate at least 25% of its holdings to each of these categories—large, mid, and small-cap stocks.
This makes a Flexi Cap Fund more attractive than a Multi Cap Fund for investors looking for optimal diversification across market capitalizations.
Key features of NJ Flexi Cap Fund
The NJ Flexi Cap Fund is a unique Flexi Cap Fund that flexibly picks the best quality companies through its 100% rule-based investment strategy. Certain key features of the NJ Flexi Cap Fund are:
- Quality-focused: NJ Flexi Cap Fund emphasizes quality-focused investing, by selecting companies with strong financial performance viz. high and consistent profitability, steady cash flows and dividends, and low debt levels. The inclusion of quality companies enhances the potential for long-term growth while offering better downside protection.
- Diversification: The NJ Flexi Cap Fund adopts a market-cap agnostic strategy, diversifying across large, mid, and small-cap stocks without bias, while emphasizing quality. This approach helps mitigate risk and ensures optimal diversification by investing in high-quality companies across the entire market capitalization spectrum.
- Dynamic Weighting Methodology: The NJ Flexi Cap Fund employs a dynamic weighting methodology to optimally allocate across large, mid, and small-cap companies through momentum and value factors.
- Data-driven Decisions: The NJ Flexi Cap Fund bases its investment decisions on a 100% rule-based investment strategy, powered by the in-house NJ Smart Beta research platform.
NJ Flexi Cap Fund Portfolio Characteristics
The NJ Flexi Cap Fund demonstrates a unique market-cap agnostic investment approach, as reflected in its low portfolio overlap and high active share compared to both the Nifty 500 index and its peers. With only 15.72% overlap against the Nifty 500 Index and 10.69% against its peers, the fund's holdings show significant divergence, suggesting a strategy focused on unique stock selection.
Source: NJ Asset Management Internal Research, CMIE, NSE, ICRA MFI Explorer. NOTE: As on 30th September 2024. % Overlap Against Peer Group is calculated as the simple average of % overlap of NJ Flexicap Fund, respectively, against each of the live schemes i.e. all open-ended and close-ended (if any) in the Flexicap category, respectively, based on the unhedged equity portfolio holdings as on 30th of September 2024. % Active Share is equal to (100% - % Overlap). Past data may or may not be sustained in future.
The below table shows a comparison of the NJ Flexi Cap Fund and Nifty 500 index for various quality parameters. The NJ Flexi Cap Fund demonstrates superior quality and strong fundamentals compared to the Nifty 500, highlighting its true-to-label quality-focused approach.
NOTE: Simple averages of Quality parameters mentioned above for the respective portfolio constituents as on 31st October 2024. Lending companies are excluded from the calculation of Average Portfolio Debt To Equity for the portfolio. Financial companies are excluded from the calculation of Average Portfolio Current Ratio for portfolio. Source: NJ Asset Management Internal Research, CMIE, NSE
Reasons to Invest in NJ Flexi Cap Fund
The following are certain benefits of NJ Flexi Cap Fund investment:
- Rule-based Investing: The fund's investment strategy is built on rule-based investing, which removes emotional biases from decision-making. The NJ Flexi Cap Fund aims to maintain discipline in its investment approach by relying on data derived from pre-defined rules.
- Flexibility: The NJ Flexi Cap Fund's foundation is its commitment to flexibility. The fund's flexibility in investing among large, mid, and small-cap firms enables it to take advantage of emerging market opportunities.
- Long-term growth potential: Investing across the best quality large, mid, and small-cap companies in an unbiased manner offers great potential for long-term wealth creation with better downside protection.
Performance of NJ Flexi Cap Fund
By leveraging its flexible market-cap and rule-based investment strategy, NJ Flexi Cap has been more effective than the broader market index over the long term. Since its inception, NJ Flexi Cap Fund-Regular Plan-Growth Option has achieved a CAGR of 35.18%* as of 31st October 2024, outperforming its benchmark, the NIFTY 500 TR Index, which generated a CAGR of 27.88%** during the same period.
As of October 31, 2024, ₹10,000/- invested in the NJ Flexi Cap Fund-Regular Plan-Growth Option since inception, would have grown to ₹14,170.00^, while the same investment in its benchmark, the NIFTY 500 TR Index during the same period, would have grown to ₹13,288.07^^.
Inception date of the Scheme is Sept 5, 2023. Past performance may or may not be sustained in future and should not be used as a basis for comparison with other investments. The scheme has been in existence for more than 1 year but less than 3 years or 5 years, hence data for 3 year and 5 years is not provided. Different plans shall have different expense structures. In case the start/end date is a non business day, the NAV of the previous day is used for computation. Mr. Dhaval Patel has been managing the scheme since September 6, 2023 and manages other schemes namely NJ Arbitrage Fund, NJ Overnight Fund, NJ ELSS Tax Saver Scheme and NJ Balanced Advantage Fund. Mr. Viral Shah has been managing the Fund since May 1, 2024 and is also Fund Manager of NJ ELSS Tax Saver Scheme, NJ Overnight Fund and NJ Balanced Advantage Fund. For the performance of the Direct Plan of the Scheme and the other schemes managed by the Fund Managers, please click here.
Conclusion
For investors seeking to reap benefits from a flexible, data-driven strategy and diversify their equity exposure, the NJ Flexi Cap Fund offers a comprehensive investment option. With its focus on quality investing, it aligns well with the needs of investors seeking to navigate the complexities of the stock market.
FAQs
1) What are Flexi Cap Funds?
Flexi cap funds are mutual funds that invest across all market capitalizations, allowing for a flexible allocation based on market conditions.
2) Why should you invest in the NJ Flexi Cap Fund?
The NJ Flexi Cap Fund offers multiple benefits, including a rule-based investment strategy that eliminates emotional biases, a focus on quality companies, and a dynamic weighting approach that invests across large, mid, and small caps in a market-cap agnostic manner.
3) How can I invest in the NJ Flexi Cap Fund?
Contact your financial advisor or invest in the NJ Flexi Cap Fund by clicking here.
Investors are requested to take advice from their financial/ tax advisor before making an investment decision.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
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