Should you hang on to Parag Parikh Flexicap Fund?
Is Parag Parikh Flexicap’s slump a change in strategy, or a phase the fund has been through before?
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Bhavana Acharya
Bhavana is Co-founder at PrimeInvestor.in. At PrimeInvestor PMS, she manages all four Prime Vision strategies (Balanced,Growth, Ultra and Max).
Bhavana has 15 years of experience across financial journalism and investment research. She served as Principal Research Analyst at the Hindu BusinessLine, then as Deputy Head of Research at FundsIndia. She created India’s first robo-advisory platform and built one of the most comprehensive portfolio review tools for mutual funds and stocks.
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10 thoughts on “Should you hang on to Parag Parikh Flexicap Fund?”
Thanks for the article. It cuts through the emotional reactions investors, and even non-investors, have to this fund. This is the time they can decide if they really are long term investors.
A few questions based on the article:
1. About the low allocation to small and mid caps. Is it a result of the huge AUM or the investing approach itself? Should investors look at it as a ‘Large cap++’ fund now?
2. I understand that it’s subjective, but how large a percentage of one’s equity portfolio is too large to be in this, or any single fund? Up to what level would you consider trimming it?
3. If I am looking for a value or contra fund, is this a good choice or is it better to go for a fund with that specific label?
4. Can a Nifty 50 or Nifty 500 index fund be used as a core holding and the foundation instead, especially considering the keyman risk? A number of star fund managers have started their own ventures.
The mid-and-smallcap allocation is owing to its strategy. As far as allocation goes, it depends on how large your portfolio is, but a ballpark figure can be 15-20%. Parag Parikh is a good value fund, if that is what you are specifically looking for. You can always add another fund from those categories if your portfolio allows for it, though, it doesn’t have to be the sole value-based style in your portfolio. As far as fund manager risk goes, it is there with every active fund, not just this one. A fund manager change in a fund is not always a negative. If a manager change results in deteriorating performance, it can be exited at that time. But if this risk concerns you and you do not wish to churn, then you can keep passive funds as your primary portfolio holdings. – regards, Bhavana
Is the AUM size of the fund now a major liability? Is this what is restricting it to invest meaningfully only in large caps and skip the mid/small caps? How will it be able to beat its peers in the flexicap category who are smaller in size and nimbler ?
No, the AUM is not a constraint. The fund was never one that was focused on mid-and-smallcaps, or decided to increase allocations here because markets were rallying. It was genuinely a bottom-up fund that looked for stocks across sectors and market caps, wherever it found these. Even with its size, its portfolio is actually quite compact. The fund is not meant to be one that delivers outsized returns during market rallies, which is why we have suggested pairing this fund with one that is more dynamic. – regards, Bhavana
Got a bit more clarity with it, & thereby I will be continuing with it, by acknowledging its stability pattern & a resaonable return. The buy-and-hold strategy is a potential tool, so I don’t mind the current underperformance of the fund; rather, I will wait optimistically.
Yes, the fund needs to be held over a longer timeframe through the phases of underperformance. Glad this helped you get a better understanding of the fund! Thanks, Bhavana
Dear Bhavana,
Thanks for the timely analysis. Had included a Multi Cap fund in the Portfolio, besides PPFC Fund. Now, have gone on to include a Large and Midcap Fund, considering large cap valuations, a Smallcap Fund and couple of sectoral funds in Commodities, Pharma and Heathcare with a max of 7-10% overlap across all the funds. All because of your guidance over the years. After retirement, SIPs will end soon except for minor portfolio tweaking.
Just sharing. I know, no reply is expected. Continuing thanks to you and your team.
Thanks for sharing…looks like you have a well-balanced portfolio! – Bhavana
Thank you so much for this elaborate article!!
Glad you found it useful! – Bhavana