Due to the market volatility, in the last 1 year, equity mutual funds had a bad performance. The mutual fund return was quite low in the case of equity mutual funds. Beating the market, a few of the funds outshined. One such fund is Parag Parikh Long Term Equity Fund.
This multi-cap fund generated a whopping 17.5% return in the last 1 year. Whereas, the average returns for the multi-cap fund category were just 0.5%. PPFAS Long Term Equity Fund not only outperformed the market but also topped all the equity schemes.
Let us have a look at this fund and the secret strategy followed by the fund managers.
What is Parag Parikh Long Term Equity Fund?
This is a diversified multi-cap equity scheme where the investment universe is not limited in terms of market capitalization, sector, or geography. The fund managers are free to invest in any different sizes of companies. They can invest accordingly, depending on their expectations to gain maximum profit. This versatility makes it a suitable fund for long term investors.
However, most part of the fund corpus is allocated into equities to generate high capital gains. As a result, it also benefits in the form of tax treatment accorded to the scheme.
Currently, Mr. Raunak Onkar, Mr. Rajeev Thakkar, and Mr. Raj Mehta are the fund managers. Mr. Rajeev Thakkar manages the domestic portion of the scheme. The foreign components of the scheme are managed by Mr. Raunak Onkar. Lastly, Mr. Raj Mehta manages the fixed income component of the scheme.
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Parag Parikh Long Term Equity Fund is only suitable for 'true' long term investors. This is a perfect fund for you if:
1. You are seeking to invest for a long term objective (more than 5 years).
2. You are seeking a fund that has experience in long-term investing and whose sponsors are practicing in for nearly two decades.
3. Who does not believe that a 'larger' scheme' is always best?
4. You are seeking a fund whose fund manager relies on investment principles, which are time-tested. And does not focus only on technical charts or algorithms while investing.
Parag Parikh Long Term Equity Fund Performance
The fund was launched on 23rd May 2013 and has generated returns of 17.01% since inception. The expense ratio is 2.05% for this fund (as of 30th September 2020). It requires a minimum of Rs.1000 to start investing in this scheme. The fund is a moderately high risky fund.
This fund not only performed extraordinarily in 1 year by generating a 17.5% return during volatility. But in the last 3 years also, the scheme generated returns of 11.75% and topped all categories in the 3-year period. Whereas in a 5-year period, returns were 11.64% and the scheme occupied second place.
Secret strategy to generate 17.5% returns during volatility.
According to Mr. Neil Parikh, CEO, and Chairman of PPFAS Mutual Fund, the secret behind such a huge return was their investment discipline. When we asked him how they managed to perform extraordinary during such volatile market conditions. He said, “We are extremely conscious of the price we pay for our investments. If we do not find opportunities or if valuations are high, then we do not force ourselves to invest and prefer to remain in cash. When markets crash, we are aggressive to put our cash to good use”.
He explained how their team managed the market crises caused due to covid-19. He said, “Initially when the market crashed, they were able to deploy the cash at good valuations.” He further added, “The selection of the stocks played an important role. We are happy with the stocks we picked”. He said, “We are confident that the companies we have picked will perform outstandingly in the coming years”.
The asset allocation of PPFAS Long Term Equity Fund
The major corpus of the scheme has invested primarily in equity and equity-related instruments. In order to manage liquidity requirements, fund managers have invested some part in debt and the money market. Fund managers have also invested a small proportion in foreign securities like Amazon.com.
This scheme can invest in the following securities:
1) Equity and equity related instruments
2) Debt securities
3) Money Market Instruments
4) Investment in Securitised Debt
5) Investment in Mutual Fund Schemes
6) Applicable Derivatives
7) Foreign Securities (only equity and equity-related instruments)
As of now, fund managers have allocated 93.37% in equity assets, out of which fund managers have invested 27.67% in foreign equities. And around 6.63% in cash and cash equivalent assets.
There are 27 stocks under the scheme. The scheme has allocated 26.89% in large-cap investments, 14.12% in mid-cap investments, and 21.63% in-small cap investments.
Top Holding of Parag Parikh Long Term Equity Fund
The top five sector-wise holdings for this scheme are:
- Miscellaneous - 27.66%
- IT – Software - 16.58%
- Bank – Private - 8.27%
- Pharmaceuticals and Drugs - 7.32%
- Finance – NBFC - 7.08%
Top 10 companies where this scheme invests are:
- Persistent Systems Ltd. - 8.27%
- Amazon.Com Inc - 7.41%
- ITC Ltd. - 7.03%
- Alphabet Inc. - 6.87%
- Mphasis Ltd. - 5.64%
- TREPS - 5.61%
- Hero MotoCorp Ltd. - 5.26%
- Facebook Inc - 5.01%
- Microsoft Corporation - 4.68%
- Bajaj Holdings & Investment Ltd. - 4.47%
Parag Parikh Long Term Equity Fund has performed exceptionally well during the last one year. Where the market was crashing due to the Covid-19 and most equity-related schemes failed, this fund generated quite high returns.
We would recommend this scheme as one of the best performing funds of all time. If you are looking for a scheme to park your saving with an investment horizon of 5 or more years, this fund can make you super-rich.
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