360 ONE Flexicap Fund: Strategic Allocations in Volatile Markets

Market Context

The market has been very volatile for the past few months. Volatility gripped the market in the last 3 months of 2024, and Nifty closed the year below the 24,000 level, down nearly 2,500 points from its record high due to heavy FII selling. Concerns about the pace of Fed rate cuts in the US, INR depreciation and uncertainty about the trade policies of the new US Administration have weighed heavy on the markets. Though midcaps and small cap stocks outperformed large caps in CY 2024, however, small and midcaps have underperformed large caps in January 2025.

Source: National Stock Exchange, Advisorkhoj Research (as on 27^th January 2025). Nifty 100 TRI represents large cap, Nifty Midcap 150 TRI represents midcap and Nifty Small Cap 250 TRI represents small cap stocks. Disclaimer: Past performance may or may be sustained in the future

In this scenario, a Flexicap allocation strategy has the potential to create higher alphas for your portfolio in the long term while limiting the downside risks in the short term.

About Flexicap Cap Funds

As per SEBI guidelines, Flexicap funds are diversified equity mutual fund schemes which can invest across market cap segments. There are no upper or lower limits with respect to allocations to any market cap segment. The fund managers of these schemes can invest any percentage of their assets in any market cap segment viz. large cap (top 100 companies by market cap), midcap (101^st to 250^th companies buy market) and small cap (250^th and smaller companies) according to their market outlook. Flexicap funds category is one of the most popular equity mutual fund categories in India due to their strategic diversification across all market caps. In this article, we will review 360 ONE Flexicap Fund.

Why Flexicap?

• Winners rotate across market cap segments: A particular market cap segment does not keep outperforming or underperforming across all market conditions or investment cycles. Historical data shows that winners rotate across different market cap segments – see the chart below. Flexicap fund managers can generate more consistent returns by rotating allocations to capture top performing market cap segments across investment cycles based on their market outlook.
  
  

  

  Source: National Stock Exchange, Advisorkhoj Research (as on 27^th January 2025). Nifty 100 TRI represents large cap, Nifty Midcap 150 TRI represents midcap and Nifty Small Cap 250 TRI represents small cap stocks. Disclaimer: Past performance may or may be sustained in the future



• Winners rotate across industry sectors: Like market cap segments, winners also keep rotating across industry sectors (see the chart below). Some sectors may outperform in some quarters or years, and others may outperform in other quarters or years. Flexicap funds diversify across industry sectors and can change sector allocations based on top down or bottoms up approach depending on the strategy of the fund manager.
  
  

  

  Source: 360 ONE Mutual Fund. Disclaimer: Past performance may or may be sustained in the future



• Manage downside risks: The table below shows the 5 biggest drawdowns in the market in the last 10 years or so and the impact on various market capitalization segments. You can see that large caps are considerably less volatile than midcap and small cap stocks. The manager of a Flexicap Fund can prudently manage risks by shifting allocations between market cap segments based on his / her outlook.
  
  

  

  Source: National Stock Exchange, Advisorkhoj Research (as on 27^th January 2025). Nifty 100 TRI represents large cap, Nifty Midcap 150 TRI represents midcap and Nifty Small Cap 250 TRI represents small cap stocks. Disclaimer: Past performance may or may be sustained in the future



• Ideal for retail investors: Diversification across different market cap segments can reduce unsystematic risks and generate more consistent returns. Flexicap Funds are ideal for investors who are not able to decide how much allocations they should have towards each market cap segments and want the fund managers to decide on market cap allocations

360 ONE Flexicap Fund Regular Growth

The 360 ONE Flexicap fund was launched in June 2023 after IIFL MF became 360 ONE MF. Since its inception the fund has delivered a 24.35% return (as on 27.01.2025), outperforming the benchmark index. The fund is managed by Mr. Mayur Patel and co-fund manager, Mr Rohit Vaidyanathan. The benchmark for the fund is BSE 500 TRI. The fund has an AUM of Rs 1334.85 Cr (as on 31^st December 2024). The investment strategy of 360 ONE Flexicap Fund is unique and has the potential of consistently generating alphas for investors over long investment horizons

Capital appreciation with 360 ONE Flexicap Fund

If you had invested Rs 1 lakh in the fund at its inception as a lumpsum, your invested amount would have grown to Rs 1.40 Lakhs giving a CAGR of 24.35% (as on 27^th January 2025). Look at the chart below to observe the fund performance compared to the broad market and other traditional investment options. As you can see, the 360 ONE Flexicap fund outperformed other asset classes as well as the broad market indices.

Source: Advisorkhoj Research as on 27^th January 2025

Upward trajectory

The 360 ONE Flexicap Fund has only completed one and a half year since its launch and in this short time, barring the initial struggle faced by most new funds, the 360 ONE Flexicap fund has been able to find its feet quickly and is now outperforming the broad market (see the monthly returns of the fund versus the broad market index Nifty 500 TRI). It has managed to give better returns and smaller drawdowns compared to its benchmark.

Source: Advisorkhoj Research as on 31-12-2024

Rolling Returns

The 1 year rolling return shows that the fund performed better by a wide margin when compared to the peer in its category since inception. (See the chart below)

Source: Advisorkhoj Research as on 27-01-2025

Smaller Drawdowns

The chart below shows the drawdowns of 360 ONE Flexicap Fund versus the broad market index, Nifty 500 TRI. You can see that the fund had smaller drawdowns compared to market.

Source: Advisorkhoj Research as on 27-01-2025

Market Capture Ratios – Superior Risk Adjusted Returns

Performance of a fund in different markets is measured by a set of metrics called the Market Capture Ratio. The ratio of the average monthly returns of the scheme versus the average monthly returns of the market benchmark in months when the market was up, constitutes the Up Market ratio. The converse holds for the down-market ratio which is the average monthly returns of the fund versus the average monthly returns of the market benchmark when the market was down. An up market ratio of more than 100% indicates that the fund was able to beat the market in bullish conditions and down market ratio below 100% suggests that the fund was able to limit the downsides in comparison to the market. We observed the market capture ratios of the 360 ONE Flexicap Fund versus the broad market index (Nifty 500 TRI) over the last one year and found that the up market ratio was 136% while the down market ratio was 80% which shows that the fund delivered excellent risk adjusted returns during this time.

Investment Strategy of 360 ONE Flexicap Fund

360 ONE Flexicap Fund does not have any market cap bias. The fund manager employs bottom-up stock picking approach. The fund manager follows SCDV Framework along with internal (financial analysis, corporate governance checks, risk reward evaluation, etc) and external analysis (conferences, investor presentations, management interaction, primary visits across supply chain, etc) for stock selection.

SCDV Framework

In the SCDV Stocks are classified into 4 categories based on their PAT (Profit after Tax) growth and ROE (Return on Equity).

• Secular: Companies delivering high PAT and ROE growth rates, playing out India’s secular upward growth shift.


• Cyclicals: High growth companies which typically have high capital expenditures and hence a lower ROE. These have relatively higher sensitivity to business and economic cycles.


• Defensive: Companies that have high ROE and lower growth rates, low capital expenditures and sensitivity to business cycles, but that provide a cushion to returns during downturns.


• Value Traps: Companies that register low growth rates and ROE, which are typically avoided across public equity strategies.

Current Portfolio Positioning

Source: 360 ONE Fund Factsheet as on 31^st December 2024

Why invest in 360 ONE Flexicap Fund?

• Unique SCDV framework – It enables the fund managers to capture ideas across different market cap segments (Growth, Quality, Value etc)


• Strong bottom-up stock selection – Identify investment opportunities across market cap segments based on in-depth fundamental research


• Technology enabled investment process – Custom build research management system, including multiple analytical tools that help to generate investment ideas


• Seasoned fund management team with a track record – The fund managers have combined experience of 45 years


• Opportunistic investment in special situations – The fund may also invest in opportunities arising from IPOs / FPOs, OFS, promoter buying, demergers and acquisitions

Who should invest in 360 ONE Flexicap Funds?

• Investors with long term investment horizon i.e., 5-7 years or more.


• Investors with a high-risk appetite who can tolerate the short-term volatility associated with equity investments.


• They are suitable for investors who want to invest from their monthly savings through SIP for their long-term financial goals like children’s higher education, marriage, retirement planning, wealth creation etc.


• Investors who wish to avoid the complexities of determining allocation among large, mid, and small-cap stocks independently.

Consult with your financial advisor or mutual fund distributor, if 360 ONE Flexicap Fund is suitable for your investment needs.