New Delhi, June 8 -- Flexi cap funds are designed to give fund managers maximum freedom. Unlike large-cap funds, which must invest at least 80% of their corpus in large-cap stocks, flexi cap funds can allocate money across large-, mid- and small-cap companies without any regulatory limits.

That flexibility appears to have helped over the past year.

The Nifty 500 TR index declined 3.71% during the period. In comparison, 33 of the 38 flexi cap funds delivered better returns than the benchmark. The category average return stood at -1.29%, outperforming the Nifty 500 by 2.42 percentage points.

At first glance, that looks like a strong result for active fund managers.

A closer look at where investors' money is parked tells a different stor...