Flexicap funds are equity funds that are allowed to invest in any proportion of large, mid & small-cap companies. This gives the fund manager the flexibility to position his portfolio across market-capitalisations, based on evolving market conditions.

Multicap funds on the other hand, need to at times maintain a minimum of 25% each in large, mid & small-cap companies respectively. Under this category, fund managers are forced to maintain a minimum 25% in each market-cap segment, even if the view is that one of these segments is not attractive in the given market context.

In most cases, a flexicap fund would be preferable to a multicap, given the greater flexibility that this category gives fund managers to position their portfolios. However, if from an asset allocation perspective, you wish to ensure that a certain minimum will always maintained in each of these 3 market-cap segments, you may find a multi-cap fund to be more preferable.