Why Parag Parikh Flexi Cap Fund is most loved Mutual Fund? A Comprehensive Review

Imagine a mutual fund that doesn’t limit itself to just the Indian market but ventures across global borders, allowing you to invest in giants like Google and Amazon while still keeping a strong foothold in India's growth story. What if this fund also provided the flexibility to navigate across large-cap, mid-cap, and small-cap stocks, ensuring you’re always positioned for potential growth?

Welcome to the world of the Parag Parikh Flexi Cap Fund, one of the most sought-after funds for investors who crave a blend of domestic and international exposure with a value-driven approach. But does it truly live up to the hype? In this review, we dive deep into its performance, strategy, and whether it fits your financial goals. Stick with us as we unpack everything you need to know before making this fund a cornerstone of your investment portfolio

Overview of Parag Parikh Flexi Cap Fund

The Parag Parikh Flexi Cap Fund (PPFCF), managed by Parag Parikh Mutual Fund, is categorized under the flexi-cap segment, which means the fund has the flexibility to invest across market capitalizations—large-cap, mid-cap, and small-cap stocks. Launched in 2013, the fund has earned a reputation for its long-term, value-investing strategy and its distinctive feature of holding a portion of its portfolio in international equities.

Key Facts:

• Fund Manager: Rajeev Thakkar (Chief Investment Officer) along with Raunak Onkar, Raj Mehta (Jan '16), Rukun Tarachandani (May '22) and Mansi Kariya (Dec '23)

• Inception Date: 24th May, 2013

• Assets Under Management (AUM): ₹78,000+ crore (as of recent data)

• Benchmark: NIFTY 500 Total Return Index (TRI)

• Expense Ratio: Approx. 1.33% (Regular Plan), 0.63% (Direct Plan)

Investment Philosophy and Strategy

The PPFCF follows a value investing approach, which means the fund managers focus on identifying stocks that are trading below their intrinsic value, with the potential for future appreciation. This long-term value approach aligns with Warren Buffet's philosophy of buying strong businesses at reasonable prices.

What sets this fund apart is its global exposure. While most Indian equity mutual funds focus solely on domestic markets, PPFCF invests a portion of its portfolio in international equities, particularly in companies listed in the U.S. This international diversification helps mitigate domestic market volatility and opens up opportunities in well-established global companies like Alphabet (Google) and Amazon.

Portfolio Composition

The Parag Parikh Flexi Cap Fund typically allocates its assets across large-cap, mid-cap, and small-cap stocks based on market conditions, with a tilt towards large-cap stocks. However, its real strength lies in its ability to invest across geographies and sectors.

Performance Analysis

The performance of the Parag Parikh Flexi Cap Fund has been nothing short of impressive, especially for long-term investors. Over the past 5 years, the fund has consistently outperformed its benchmark and many of its peers in the flexi-cap category.

• 1-Year Return: 39.04% (vs 41.58% NIFTY 500 TRI)

• 3-Year Return: 18.38% (vs 18.95% NIFTY 500 TRI)

• 5-Year Return: 26.35% (vs 22.70% NIFTY 500 TRI)

The fund’s performance, however, should be viewed in conjunction with its long-term investment strategy. It isn’t designed for short-term gains but rather focuses on creating wealth over a period of 5-7 years or more.

We conducted an analysis of Fund Performance over multiple time periods and fund has been "Consistent Outperformer". Why we say so?

• On 3 Year Rolling Return (since inception), Fund return has been >12% on 85% of the outcomes. (100% of times for 7 year period!)

• Fund has outperformed NIFTY 50, 95% of times over 5 year period. (100% of times for 7 year period!)

Risk & Volatility

As with any equity mutual fund, the Parag Parikh Flexi Cap Fund carries market-related risks. However, its international diversification helps to reduce volatility, as global markets and domestic markets may not always move in tandem. Moreover, the fund managers’ emphasis on high-quality stocks and their buy-and-hold strategy further reduces the risk of sharp drawdowns.

Risk Metrics:

• Standard Deviation: Moderate (10.81%), reflecting a balanced approach.

• Beta: The fund's beta (0.72) is slightly lower than 1, indicating lower volatility compared to the benchmark.

• Sharpe Ratio: Positive (0.99), indicating the fund has delivered better risk-adjusted returns than many of its peers.

• Portfolio Turnover: Low (7.19%), showing their buy-and-hold strategy.

Pros & Cons

Pros:

• Global Diversification: Exposure to international markets, reducing reliance on domestic performance.

• Consistent Long-Term Performance: The fund has delivered impressive returns over a long horizon.

• Experienced Fund Management: Managed by a seasoned team with a track record of value investing.

  
  

Cons:

• Not for Short-Term Investors: Due to its long-term focus, the fund may not be suitable for short-term gains.

• Currency Risk: Exposure to global markets introduces currency risks, which could affect returns depending on the Rupee-Dollar exchange rate.

• Over Reliance on Fund Manager: Fund is very much depended on it's CIO (Rajeev Thakkar)

Conclusion

The Parag Parikh Flexi Cap Fund has earned its place as a standout option for long-term investors looking to diversify across both Indian and international markets. With its disciplined value-investing approach, global exposure, and flexibility across market caps, this fund offers a unique blend of growth potential and risk management. It has been top rated fund in it's category and a DIY favorite (64% of Scheme AUM is Direct).

However, like any equity fund, it requires patience and a willingness to weather short-term volatility. If you’re an investor with a long-term horizon and moderate to high-risk tolerance, the Parag Parikh Flexi Cap Fund could be a compelling addition to your portfolio. By aligning this fund with your financial goals, you can benefit from its potential to deliver consistent, strong returns over time.

Before making any investment decision, always consider consulting with a financial advisor to ensure this fund fits your risk profile and investment strategy. For those seeking a robust mix of domestic and global exposure, this fund certainly deserves a closer look.