Detailed Analysis
SEBI created the multi cap category in 2020 by mandating minimum 25% allocation to each market cap segment, leading to the creation of the separate flexi cap category.
Flexi cap funds can invest any percentage in any market cap. In practice, most flexi cap funds hold 60-80% in large caps. The fund manager can shift to mid/small caps during opportunities or go defensive during downturns.
Multi cap funds must maintain at least 25% each in large, mid, and small caps. This ensures built-in diversification but means the fund always has small-cap exposure — adding both return potential and volatility.