Parag Parikh Monetary Advisory Providers has filed an NFO doc for Parag Parikh Giant Cap Fund with SEBI. I used to be initially reluctant to opine on it, however since we acquired a number of requests, I assumed I’d throw in my two cents. Notice: that is solely on the submitting stage. Put up-approval, the launch (if the AMC decides to go forward) will happen within the coming months.
Earlier than we start, I’ve a private bias for the fund home (I maintain three of their funds, with an enormous weight of their flexicap fund, the place I’m a since-NFO investor). See: Auditing my retirement portfolio for Mint Newspapers Guru Portfolio and 17 years of mutual fund investing: My Journey and classes realized.
Nonetheless, as issues stand, I’ll neither make investments* nor advocate the Parag Parikh Giant Cap Fund, and it’ll not function in our quarterly Handpicked record of Mutual funds (PlumbLine). The straightforward motive is that almost all lively funds** battle to beat benchmarks, and traders can put money into the Nifty 50, Nifty 100, or Nifty 500 based mostly on their FOMO ranges. See: Nifty 50 or Nifty 500, which index fund ought to I select?
* 10 years in the past, I may need, however right now I’m too bored and too drained to fret about my portfolio and am at a “do nothing” section.
** Most traders incorrectly imagine that solely lively massive cap funds fail to beat benchmarks constantly. That is true additionally of mid and small cap funds too!
The NFO submitting of Parag Parikh Giant Cap Fund (observe: an NFO submitting doesn’t imply will probably be launched) is a curious selection IMO. It’s because, given the recognition with unitholders, they may have filed for a mid cap or small cap fund (they nonetheless may in future!) and raked within the AUM.
As an alternative, they’ve opted for the big cap house, which is saturated with previous heavyweights. The SEBI guidelines could not enable them a lot wiggle room to outperform considerably. They have to maintain no less than 80% in money. Based on the submitting (topic to alter), additionally they wish to make investments a bit in REITs and InvITs, a bit in mid cap or small cap shares, a bit in worldwide fairness and a bit in bonds.
Given their fame, I count on the big cap to be much less unstable than, say, the Nifty 100. However will it outperform is one other matter, however I wouldn’t put it previous them both. Nonetheless, their fame will not be sufficient to commit cash to this fund. We advocate that traders anticipate a major interval earlier than deciding (however there may be little level in ready!).
The AMC has stated it should clarify its selection in forthcoming unitholder conferences. However it’s the efficiency that counts. I’m positive the AMC would have brainstormed completely different concepts and in addition anticipated no less than a few of the criticism aimed toward this submitting. They might not have gone forward if they’d not anticipated appreciable influx.
In a current article, we’ve proven how the Parag Parikh Flexi Cap Fund is sort of a big cap fund as a result of its excessive AUM Will Parag Parikh Flexi Cap Fund’s massive AUM have an effect on its efficiency?
Parag Parikh Flexi Cap Fund’s historic market cap allocation
So there may be appreciable criticism on social media that the big cap fund will serve in its place low AUM fund for AMC fanboys to get some worldwide publicity or retirees to get dividends.
That is truthful as it might be arduous to distinguish oneself within the massive cap house in comparison with the AMC’s current launches like Parag Parikh Dynamic Asset Allocation Fund and Parag Parikh Conservative Hybrid Fund.
When the Flexicap fund was launched, its “go anyplace” mandate was a USP. Burgeoning AUM and SEBI MF class restrictions, together with RBI’s worldwide AUM limitations, have severely restricted the fund’s means. A lot of the fund’s returns I take pleasure in right now are in all probability from when it was much less common.
Based on AMFI, about 65% of the Flexicap AUM is within the direct plan (the remainder is within the common plan by way of distributors). Will the big cap fund be as common amongst direct plan traders?
All that apart, I do admire the fund for not chasing AUM and choosing a big cap fund launch (as of now). How profitable will probably be stays to be seen. Usually, it’s higher to look at from the sidelines with out committing cash. This looks as if one such time. However then once more, the long run is unpredictable.
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