A category of mutual funds (equity funds) that can invest across all levels of market capitalization, segments, and industries without limitations or caps on their concentrations. These funds, however, are required to invest a minimum percentage (often 65%) of their total assets in equity (shares and similar instruments). A fund’s exposures/ concentrations can be changed in reaction to changes in market conditions (fundamental factors). Therefore, fund managers can identify and take advantage of any opportunities that may arise in the market. A multi-cap mutual fund allows investors to avail the stability of large-cap firms and growth prospects of mid-cap and small cap firms. As a result, multi-cap mutual funds can potentially achieve better performance (higher returns at lower risk).

This fund is also broadly known as a flexi-cap mutual fund. However, the main difference revolves around restricted exposures (in multi-cap mutual funds). Other flexibilities are common factors between the two types.