DEFINITION of 'Flexi-Cap Fund'

A flexi-cap fund is a type of mutual fund that is not restricted to investing in companies with a predetermined market capitalization. This type of fund structure will be indicated in the fund's prospectus and can provide the fund manager with greater investment choices and diversification possibilities.

BREAKING DOWN 'Flexi-Cap Fund'

Unlike other funds, such as mid-cap or small-cap funds, size is not a constraint for flexi-cap funds. A flexi cap fund may invest in any company regardless of the company's size.

Flexi-Cap and Market Capitalization

Market capitalization is one of the most common ways mutual funds select companies in which to invest. Market capitalization refers to the total dollar market value of a company's outstanding shares. Commonly referred to as "market cap," it is calculated by multiplying a company's shares outstanding by the current market price of one share.

Using market capitalization to show the size of a company is important because company size is a basic determinant of various characteristics in which investors are interested, including risk.

Large-cap companies typically have a market capitalization of $10 billion or more. These large companies have usually been around for a long time, and they are major players in well-established industries. Investing in large-cap companies does not necessarily bring in huge returns in a short period of time, but over the long run, these companies generally reward investors with a consistent increase in share value and dividend payments.

Mid-cap companies generally have a market capitalization of between $2 billion and $10 billion. Mid-cap companies are in the process of expanding. They carry inherently higher risk than large-cap companies because they are not as established, but they are attractive for their growth potential.

Small-cap companies that have a market capitalization of between $300 million to $2 billion. These small companies could be young in age and/or they could serve niche markets and new industries. These companies are considered higher risk investments due to their age, the markets they serve, and their size. Smaller companies with fewer resources are more sensitive to economic slowdowns.

Example of a Flexi-Cap Fund

The Fidelity Stock Selector All-Cap Fund is a diversified domestic equity strategy that invests broadly across all sectors, market capitalizations and styles. The fund is managed by two members of Fidelity's Global Asset Allocation division and a team of sector portfolio managers. Portfolio sector weightings are kept similar to those of its benchmark in an effort to add value through active stock selection and also to minimize the risks associated with sector or market timing.

The fund had a 10-year annualized return of 8.26%, as of April 30, 2018, compared to 9.29% for its U.S. large growth benchmark. Its 10 largest holdings, which made up 13.57% of the fund, were:

  • MICROSOFT CORP
  • AMAZON.COM INC
  • UNITEDHEALTH GROUP INC
  • NVIDIA CORP
  • BANK OF AMERICA
  • CORPORATION
  • TESLA INC
  • BECTON DICKINSON & CO
  • JPMORGAN CHASE & CO
  • BERKSHIRE HATHAWAY INC CL B
  • SALESFORCE.COM INC
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