New Delhi, Aug. 6 -- Flexi-cap funds are among the most versatile equity mutual fund categories as they allow fund managers to invest across large-cap, mid-cap and small-cap stocks without any market capitalisation restrictions. However, this flexibility also makes it important to evaluate how effectively fund managers manage market downturns.

One of the key measures used to assess downside risk-adjusted performance is the Sortino ratio. Unlike the Sharpe ratio, which considers overall volatility, the Sortino ratio focuses only on downside volatility. It measures the return generated by a mutual fund for every unit of downside risk taken by the scheme.

A higher Sortino ratio indicates that a fund has generated better returns while takin...