Flexi-cap funds are back in favour. But do they really offer the best diversification?

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Benchmarking also plays a role. Rajat Chandak, senior fund manager, ICICI Prudential Mutual Fund, pointed out that most flexi-cap schemes benchmark themselves to broad market indices such as BSE 500, where large-caps account for over 70% of the weight. “Viewed against this benchmark, many flexi-cap portfolios could actually be underweight large caps and relatively overweight mid- and small-caps,” he said.