PPFAS Mutual Fund has filed a draft document with capital market watchdog SEBI for the launch of the Parag Parikh Large Cap Fund, its third mutual fund scheme in the equity category. The NFO dates are not published yet. With two of its equity funds doing well across short and long time-frames, this upcoming fund from Parag Parikh fund house has generated curiosity.
We read the draft document in detail to break down everything you need to know.
What is Parag Parikh Large Cap Fund?
Parag Parikh Large Cap Fund will be an open-ended equity mutual fund scheme that will predominantly invest in large-cap stocks. The stated objective is to generate long-term capital appreciation along with income distribution by investing primarily in equity and equity-related instruments of large companies.
However, as the document clarifies, there is no guarantee that the scheme’s objective will be achieved, and returns are not assured.
Where will Parag Parikh Large Cap Fund invest?
The core of the fund will remain large-cap exposure. The scheme may invest 80% to 100% in equity and equity-related securities of large-cap companies. Its investment can be up to 20% in equity and equity-related securities of foreign companies and Indian companies outside the large-cap universe. Investment can be up to 10% in REITs and InvITs.
A standout feature is its planned overseas allocation. The draft document notes: “Investment in Foreign Securities/Overseas ETFs would be as per SEBI Master Circular for Mutual Funds dated June 27, 2024, as may be amended from time to time. The Scheme may invest up to US $100 million in foreign securities.”
It further explains the broader regulatory cap: “As per SEBI Master Circular for Mutual Funds dated June 27, 2024, Mutual Funds can make overseas investments subject to a maximum of USD 1 billion per mutual fund within the overall industry limit of USD 7 billion. The overall ceiling for investment in overseas ETFs that invest in securities is USD 1 billion subject to a maximum of USD 300 million per mutual fund. The Scheme may invest up to USD 30 million in overseas ETFs.”
This makes Parag Parikh Large Cap Fund one of the few large-cap funds with a defined framework for foreign exposure.
The fund will benchmark its performance against the Nifty 100 Total Return Index (TRI).
As per the draft document, “The composition of the aforesaid benchmark is such that, it is most suited for comparing the performance of the scheme.”
Given that Nifty 100 TRI covers the full universe of large-cap companies in India, the document add, “Since the fund is a large cap fund, the Nifty 100 TRI is an appropriate benchmark and will be able to give a true and accurate comparative analysis.”
Investment strategy: Discipline with global flexibility
This will be an actively managed equity scheme targeting two outcomes: Long-term capital appreciation and Income distribution to unitholders
Within that mandate, the fund will deploy the following strategies:
-A disciplined yet flexible long-term approach with focus on wealth creation
-Investment in overseas markets via GDRs, ADRs, equity, bonds, mutual funds, and other permitted instruments
-Stock lending activities, where allowed
-Use of equity derivatives such as stock and index futures, options, swaps, or any other permitted instruments
-Macroeconomic analysis of political, economic conditions, liquidity, and interest-rate trends to help position the portfolio
-The AMC’s emphasis on macro-evaluation indicates an attempt to manage risk cycles more dynamically.
Parag Parikh Large Cap Fund: Plans, options, and default choices
The scheme offers two plans:
- Direct Plan
- Regular Plan
Both Regular and Direct Plan(s) offers only two Options, viz.
-Growth Option
-Income Distribution cum capital withdrawal Option (IDCW)
Income Distribution cum capital withdrawal Option have the following sub-options/facilities:
-Payout of IDCW (“Payout”) and
-Re-investment of IDCW (“Re-investment”)
Under this Option, it is proposed to declare IDCW subject to the availability of distributable surplus, as computed in accordance with SEBI (MF) Regulations. Investors should note that the IDCW amount can be distributed out of the investor’s capital (Equalisation Reserve), which is part of the sale price that represents realised gains.
Taxation: What investors should know
Long-term capital gains (LTCG): 12.5% on gains above Rs 1.25 lakh
Short-term capital gains (STCG): 20%
(Note: These are applicable under the new tax regime rules.)
Load structure: No Entry or Exit Load
The draft specifies that the scheme will not charge any entry or exit load. Investors can buy or redeem units at any time without an additional fee, offering full flexibility.
Parag Parkih Large Cap Fund minimum investment requirements
The minimum contribution amounts are: Monthly SIP or lump sum Rs 1,000 and multiples of Re 1
Quarterly SIP: Rs 3,000 and multiples of Re 1
Additional purchases: Rs 1,000 and multiples of Re 1
The scheme will also offer SIP, SWP, STP, SIP Top-Up, and SIP pause features.
Parag Parikh Large Cap Fund managers
Parag Parikh Large Cap Fund will be managed by Rajeev Thakkar, Raunak Onkar, Raj Mehta, Rukun Tarachandani, Tejas Soman and Aishwarya Dhar.
All of them currently manage the existing schemes of PPFAS Mutual Fund, maintaining continuity in investment philosophy.
