Parag Parikh Flexi Cap has a proven track record.
But it has no exposure to exciting sectors like:
Railways
Defence
Infra
Renewable energy
EV
Rajeev Thakkar, CIO of @PPFAS Mutual Fund explains why.
He also shares why PPFAS doesn’t have a small-cap fund.
A 🧵
But it has no exposure to exciting sectors like:
Railways
Defence
Infra
Renewable energy
EV
Rajeev Thakkar, CIO of @PPFAS Mutual Fund explains why.
He also shares why PPFAS doesn’t have a small-cap fund.
A 🧵
Mr Thakkar recently wrote a letter to PPFAS MF’s unitholders.
We found 3 points quite interesting:
1. Why PPFAS doesn’t invest in many exciting companies
2. Why it doesn’t plan to launch a small-cap fund
3. What returns investors should expect from equities hereon
We found 3 points quite interesting:
1. Why PPFAS doesn’t invest in many exciting companies
2. Why it doesn’t plan to launch a small-cap fund
3. What returns investors should expect from equities hereon
1. NO EXPOSURE TO EXCITING STOCKS
There are many sectors that PPFAS Mutual Fund hasn’t invested in.
Some of them include railways, defence, PLI/manufacturing, Infra, renewables, & electric vehicles.
Why?
Because they don’t meet certain conditions that the fund house follows.
There are many sectors that PPFAS Mutual Fund hasn’t invested in.
Some of them include railways, defence, PLI/manufacturing, Infra, renewables, & electric vehicles.
Why?
Because they don’t meet certain conditions that the fund house follows.
The fund house doesn’t invest in companies just because the current policies favour them.
It follows an investment checklist (Details in the image below)
If a company doesn’t meet those criteria, the fund house doesn’t invest in it.
It follows an investment checklist (Details in the image below)
If a company doesn’t meet those criteria, the fund house doesn’t invest in it.
He mentioned two case studies to make his point.
A. Airlines
B. Telecom
Both opened up to the private sector in the 1990s.
Due to this policy change, many thought companies in these sectors would create enormous wealth for investors.
But that hasn't happened.
A. Airlines
B. Telecom
Both opened up to the private sector in the 1990s.
Due to this policy change, many thought companies in these sectors would create enormous wealth for investors.
But that hasn't happened.
Private airlines such as Sahara, Kingfisher and Jet Airways, and mobile operators like Tata Docomo, Aircel and Reliance Communications faced challenges on multiple fronts.
They couldn’t make money for shareholders.
They couldn’t make money for shareholders.
With a touch of sarcasm, Thakkar explains that an equity portfolio isn’t a zoo where you need to collect every "animal".
The key to making money in stocks is following a process that avoids big mistakes and secures reasonable returns over time.
The key to making money in stocks is following a process that avoids big mistakes and secures reasonable returns over time.
2. REASONS FOR STEERING CLEAR OF A SMALL-CAP FUND
In recent years, small-cap funds have given crazy returns.
And investors have flocked to these funds.
But PPFAS MF (which doesn’t have a small-cap fund) has refrained from launching a new scheme in this space.
In recent years, small-cap funds have given crazy returns.
And investors have flocked to these funds.
But PPFAS MF (which doesn’t have a small-cap fund) has refrained from launching a new scheme in this space.
The fund house thinks the small- & mid-cap allocations are best handled under the Flexicap construct.
There’s no need for a separate scheme.
Will it increase the allocation to mid-caps and small-caps in Parag Parikh Flexi Cap?
Yes. But not right now.
There’s no need for a separate scheme.
Will it increase the allocation to mid-caps and small-caps in Parag Parikh Flexi Cap?
Yes. But not right now.
So, when will Parag Parikh Flexi Cap see higher allocation to mid- and small-caps?
Mr Thakkar believes that investing in small-caps is more beneficial during market downturns rather than times of high optimism, such as the present.
Mr Thakkar believes that investing in small-caps is more beneficial during market downturns rather than times of high optimism, such as the present.
3. RETURN EXPECTATIONS FROM EQUITY
Mr Thakkar expects “reasonable” equity returns over the long run.
However, he cautions that the high returns of the past 3-5 years may not happen again.
A reasonable return, we believe, would be around 12% over the long term.
Mr Thakkar expects “reasonable” equity returns over the long run.
However, he cautions that the high returns of the past 3-5 years may not happen again.
A reasonable return, we believe, would be around 12% over the long term.
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Please like, share, and retweet the first tweet. 👇
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