Parag Parikh’s long-term equity fund scheme is one of the oldest equity-linked schemes, which was launched in May 2013. Parag Parikh Long-Term Equity funds were one such scheme where the main objective of the scheme was to provide capital growth for the long term under the Parag Parikh Mutual Fund scheme launched by PPFAS Asset Management Pvt. Ltd.
Initially, the scheme was categorized under the moderately high risky category. It provided a CAGR return of 17.9% from when it was launched. The fund was an open-ended mid-cap equity multi-cap fund under which most of the investment was made under mid-cap funds. The fund required minimum investment and minimum SIP of INR 1000.
However, the scheme was recently renamed Parag Parikh Flexi Cap funds from Parag Parikh Long-term equity funds because of the change in the SEBI norms and guidelines.
Why did the Parag Parikh long-term equity fund change its name to the Parag Parikh Flexi cap fund?
Parag Parikh Flexi Cap fund direct growth equity funds are the scheme under which PPFAS invests 65% of its fund in domestic equity stocks and the rest up to 35% in the overseas equity stocks in large-cap, mid-cap, and small-cap stocks. Parag Parikh Long-term equity was one of the handful of schemes. Under the investment in Flexi cap schemes, you have the freedom to invest in all three categories of equities in any proportion. According to SEBI, the Flexi Cap scheme is the one which is an open-ended scheme with a dynamic equity investment in large, mid as well as and small-cap stocks. However, the modified allocation raised concerns about the current multi-cap funds that were preferably the significant cap bias, indicating that they were forced to invest in the mid-cap and small-cap stocks, even though these investments are less liquid. These investments also attract higher inflow from mutual funds. However, after the mandate, AMFI also requested SEBI create a fresh category of Flexi cap stocks that will not have such provisions.
The new mandate of SEBI also instructed that a minimum of 25% of the corpus should be invested in the large, mid, and small-cap equity shares, with no restriction on the sectors or market capitalization. Parag Parikh Flexi Cap fund is a growth fund with diversified schemes generating the long-term growth of capital. The fund managers are free to invest in the equity stocks that can provide good opportunity and value to the investors according to their assessment.
What’s in it for the investors?
If you are looking for capital growth in the long-term horizon, then you can very well opt for Parag Parikh Mutual Fund. Investment in Parag Parikh Flexi Cap Fund requires a minimum investment of 5 years or more to fetch you good returns, thus beating the inflation rates and the return from the investment in the investment options under the fixed return schemes.
You can get some tax benefits if you are looking for those investments that provide you with some relaxation in tax payment. For example, if you have invested in Parag Parikh Flexi cap funds and sell the mutual fund units within a year will offer you the capital gain benefit of up to 15%. If you hold these units for a more extended period, there is no tax liability till the time you hold the units.
You will also receive an additional income in the form of a dividend. If your investment is above INR 5000, you are liable to get a 10% deduction under TDS before the dividend is distributed.
There have been no modifications in the investment process or the portfolio; the only change has been that the fund managers are free to invest in any stock of their choice that can help enhance the client’s capital. Thus, there is no specific change in how the fund was managed earlier. The strategy will remain the same and provide complete flexibility as earlier. You can start your investment amount of INR 1000 and subsequently invest in multiples of INR 1.
Another significant aspect of this change is that there are no limitations on the proportion of investment in the international equity market. The weightage of the stocks remains the same as earlier. Nevertheless, any changes in foreign investment limits will be done by balancing the current valuations in the market. Any investor who wants to acquire foreign stocks in a higher proportion than the prescribed limit must be done through RBI under LRS( Liberalised Remittance Scheme).