Parag Parikh Flexi Cap Fund reopened for investors on Tuesday. The fund discontinued accepting lumpsum money after market regulator Securities Exchange Board of India’s (Sebi) asked fund houses investing in overseas stocks to stop accepting money following the breach of overall limit of overseas stocks of $7 billion prescribed by RBI.
As per Value Research data, this fund invests around 30 percent in overseas stocks, while the remaining in the domestic equity markets. This is how it gave global diversification to investors, which was one of the key reasons for its popularity.
However, the limit for overseas limit has yet not been revised. The fund house decided to resume accepting contributions so that the funds can be readily available well before the investment limit is increased in the near future.
While giving reasoning for accepting the lumpsum payments by investors, Rajeev Thakkar, CIO & Director of PPFAS Mutual Fund on March 10 said, “As of now, we have no visibility on if / when and by how much the limit for overseas investments will be revised. As I write today, there is a conflict going on between Russia and Ukraine, Crude Oil prices have risen and the Indian Rupee has fallen somewhat. In such a scenario, having funds readily available will be advantageous rather than opening the scheme after the limit increase only to see the industry wide cap get breached again.”
Let us closely look at the returns posted by the flexi cap fund in past few years.
On January 31, PPFCF’s AUM (assets under management) was ₹20,412 crore. Its one-year return was 39.89 percent (for direct investors), three- year return was 29.14 percent and five-year return was 22.53 percent.
Returns posted by the Parag Parikh Flexi Cap Fund
|Time||Returns* (in %)|
(*Returns are direct as on January 31, 2022)
However, these returns can be partly attributed to a significant contribution to global stocks. With the restrictions imposed on investment in global stocks, the current contributions are likely to be invested in domestic stocks. The AMC’s director Mr Thakkar hinted that the fresh contributions would be utilised by making investment in domestic securities which are trading at lower prices.
“We have been getting feedback from investors that they would like to benefit from lower stock prices and invest in Parag Parikh Flexi Cap Fund,” stated Mr Thakkar.
The returns posted by Parag Parikh Flexi Cap Fund are higher than most (not all) flexi cap funds for the same time durations as it can be seen from the below table.
Returns posted by other flexi cap funds
|Flexi Cap Mutual Funds||1-yr-return*||3-yr-return*|
|Axis Flexi Cap Fund||30.79||21.83|
|DSP Flexi Cap Fund||31.05||23.62|
|Edelweiss Flexi Cap Fund||37.76||20.62|
|HFDC Flexi Cap Fund||42.48||18.12|
|L&T Flexi Cap Fund||29.52||16.21|
|Tata Flexi Cap Fund||28.17||19.49|
*(Returns are direct as on Jan 31, 2022)
Despite the fact that the fresh contributions to the fund will likely make their way to the domestic stocks, this might change not too long from now.
“As and when overseas investment limits are increased, we will rebalance the portfolio as per the then prevailing situation and valuations,” said Thakkar.
Until then, investors who want to have a higher exposure to foreign stocks need to use their individual limits under the RBI’s Liberalised Remittance Scheme to invest in overseas stocks or mutual fund.