Both multi-cap and flexi-cap funds invest across companies of different sizes — large, mid, and small-cap — rather than restricting themselves to just one category, giving investors broad diversification through a single fund. The difference lies in flexibility: a multi-cap fund is required by regulation to hold a minimum percentage in each of the three categories, while a flexi-cap fund gives the fund manager complete discretion to shift the mix based on market opportunities.
This makes flexi-cap funds a bit more adaptable during changing market conditions, since the manager can lean more heavily into whichever segment looks attractive at the time, while multi-cap funds offer more predictable, rule-based exposure across company sizes. Both are popular as a single, diversified core equity holding for investors who don't want to separately manage large-cap, mid-cap, and small-cap fund allocations themselves.