Flexible Fund

What Is a Flexible Fund?

A flexible fund is a mutual fund or other pooled investment that has broad flexibility for making investment decisions and allocations. Flexible funds can be U.S. regulated or offshore funds.

These funds give the portfolio manager broad latitude for making portfolio investments. As a result, they are highly susceptible to style drift and may employ macro strategies such as sector rotation or macro hedging.

Investors in these funds will often invest based on the expertise of high-profile managers rather than specific market segment allocations.

Understanding Flexible Funds

A flexible fund usually does not have fundamental investing criteria or requirements that the portfolio manager must follow. This gives the portfolio manager the opportunity to choose from a broad universe of investments. Managers can also more actively allocate investments according to market opportunities and conditions rather than specific investing requirements.

Flexible funds usually target some universe of securities; however, they may also have the flexibility to invest across all types of assets. Similar to other market strategies, the fund will be required to disclose details on its investment intentions in a prospectus.

The prospectus will only provide details on the broad universe where the fund plans to invest, noting that its strategy has broad flexibility for investments. One of the key benefits of a flexible fund strategy is that its investments and allocations can change over time.

Mutual funds usually are pegged to a particular style box, such as large-cap growth or small-cap value, which helps them to reach a specific audience of investors. Flexible funds do not follow this standard approach, making due diligence even more important for investors.

Fidelity Magellan Fund

The Fidelity Magellan Fund is one of the most well known flexible funds, thanks in part to Peter Lynch, who advocated a flexible investment strategy while managing the fund in the 1980s and early 1990s. The Fund has continued to carry forward a flexible investing style in its investment strategy with its subsequent portfolio managers.

Peter Lynch advocated for broad market investment in a highly diversified portfolio of equity stocks. His portfolio held over 1,400 companies. The Fidelity Magellan Fund still offers a very open management style, giving the manager no specific style constraints for choosing investments other than the equity universe.

BlackRock Flexible Funds

BlackRock offers a wide variety of flexible funds for its investors, with many of its flexible funds investing in international equities. These funds give the portfolio manager flexibility to invest across all types of investments from a particular region with no defined allocation or style emphasis.

Examples of these funds include the China Flexible Equity Fund, Continental Europe Flexible Fund, Flexible Multi-Asset Fund, Japan Flexible Equity Fund, and the U.S. Flexible Equity Fund.