DelhiDesk Parag Parikh Mutual Fund (PPFAS) has risen spectacularly in India’s crowded mutual fund industry, with its flagship Flexicap Fund among only 11 equity MF schemes in the country with assets under management of more than INR 30,000 crore. The fund was initially founded as a portfolio management service in 1996 by the late Parag Parikh, a broker who was also highly respected as a value investor, before it was converted into a mutual fund in 2013. Despite initial setbacks, the fund has outperformed in recent years, with the PPFAS FlexiCap delivering a scorching 33.55% return in 2020, compared to 16.75% for the category. However, the company has also faced criticism for its reliance on US tech stocks, prompting the launch of a purely domestic-focused fund, the Parag Parikh Taxsaver Fund, in 2019.
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👉 PPFAS Mutual Fund’s flagship Flexicap Fund is among only 11 equity MF schemes in India with assets under management of more than 30,000 crore.
👉 The Parag Parikh Flexicap scheme was launched in 2013 with just 150 crore in assets and has grown 200 times its size and delivered a stunning 18.8% CAGR.
👉 The fund was initially founded as a portfolio management service (PMS) in 1996 by the late Parag Parikh and was converted into a MF in 2013 after market regulator Sebi increased the minimum investment amount for PMSes.
👉 The AMC took a radically different approach with only one scheme on its menu that invests across market segments and international stocks (up to 35% of the corpus) and retains the ability to hedge during bull markets using arbitrage (derivatives) positions.
👉 PPFAS suffered some underperformance in highly bullish years, including in 2007, but its radical approach did not work in the initial years as the MF industry was driven by distributors and large banks who cared more about commissions.
👉 PPFAS stood out as one of the few exceptions during the 2018-2019 market slowdown caused by a default in IL&FS and its global portfolio was doing well.
👉 PPFAS has had its share of critics, but it responded by launching the Parag Parikh Taxsaver Fund in 2019 and a debt fund with the ability to invest a small amount in dividend-yielding stocks and real estate and infrastructure trusts (REITs/InVITs).
👉 The declining international allocation is a temporary challenge that can be overcome once India’s forex reserves strengthen and the central bank lifts the limits.
👉 After three years of increasing outperformance, PPFAS hit a rough patch in 2022, but the AMC has always advocated a minimum 5-year time horizon and has already seen a recovery in 2023.
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