All You Need To Know About The Underperformance Of PPFAS Flexi Cap Fund | CA Rachana Ranade

laughter, calm down, please, calm down, please come down. Adventure, Excitement, US Stock Market Attractions Hello friends!!! CA Rachana Ranade here and I welcome you all to a very important video dealing with Parag Parikh Flexi Cap Fund. You may be wondering why I am making a video on this specific mutual

fund

. There are two main reasons for the same, the first is that we conducted a survey to understand how many of you have this mutual

fund

and have a look at the responses. Seeing this, I thought I should try it. Watch a video and try to understand the performance of this mutual fund that may be bothering you all a lot!!

Haven't you seen the performance? Take a look at this. You can see the poor performance very clearly. Now with this I'm sure you have many more questions in mind. The first is why are there negative returns? What is the effect of restrictions on foreign investments? And what should investors do now? To get answers to all these questions, keep watching the video until the end. Now to understand why this mutual fund gave negative returns? First we

need

to understand what the portfolio allocation of this fund is. If you take a look at this pie chart, you will clearly see that 32.2 percent of the total portfolio allocation went solely to the IT sector; now, of this 29.4 percent, education was there for IT companies but listed in the US like Alphabet, Amazon Microsoft, Meta.

Now, do you understand how much the portfolio allocation was specifically to Meta? It was almost six percent to understand whether it is due to this allocation that the mutual fund is giving negative returns or not, for that take a look at these charts. Firstly, you can see that the Nifty IT index was down almost 32 per cent in the first half of the year. You can also see that the NASDAQ 100 is down almost 35 percent in a single year and take a look at the target drop of 62.6 percent in just one year. Now, if you've seen it, I mean, if you've looked at all these graphs carefully, do I really

need

to tell you that this is the reason for the poor performance?

The answer is obviously Yes, but has this happened for the first time? For that, take a look at this chart. You can see very clearly that in 2014, 2016 and 2017, the blue bar chart represents Parag Parekh's soft cap funds and you can see that especially in 16 and 17, it has not only underperformed other funds in the category, but has also underperformed the benchmark. but in 2019-2020 and 2021 where I think most of them invested in this mutual fund it made positive returns but then 2022 was again the year where it underperformed and not only underperformed but also negative returns, but then the big question for everyone.

Does it seem to you that the fund manager was simply watching and observing what is happening in the entire IT sector? That's not the case, he was definitely active during that time too. Take a look at this graph so you can understand that IT allocation compared to 2021 versus 2022 you can see that 10 percent is the drop in IT allocation compared to the increase in allocation in the financial space by almost 8.2 percent. Now, just so you understand why financials might have been a preferred sector allocation, you should also watch this video where I explain in detail why financials as a sector is becoming a favorite for many mutual funds.

Managers, you'll have to watch that video to better understand all of this. But I hope the main question of why the negative returns has been adequately answered. Now let's move on to the second question, what is the effect of the restriction on foreign investments? If you have seen this video, you already

know

what I am talking about, but just in case, if you have not seen this video, let me try to explain to you in one sentence what it says that SEBI has banned mutual funds from investing abroad. Fairness, okay? Now you may have this question: is this restriction forever?

The answer is No, I mean, of course, the government said that they are basically going to lift this restriction, but when no one

know

s, now with negative yields and also with restrictions on investing in foreign stocks, there are investors who complain. like... and all that is now I want to say that these are the various questions that bother these investors so the first thing that bothers them is that this

underperformance

what has happened right now is due to the restrictions that SEBI Personally, I think the answer is partially yes, because all of these US stocks that I'm talking about right now, like Meta, Alphabet or Microsoft, most of them are down 30 to 40 percent.

Now, if mutual funds had been allowed to invest fresh money in US stocks, they would have had the opportunity to average these costs at lower levels, but due to restrictions they had no choice but to wait and watch. Now, the second point that investors need to keep in mind is that we will try to understand what the fund manager's strategy or thought process was while selecting various conversations. Take a look at this and you can see that the fund manager filters stocks based on great promoters, great management, great businesses that have high return on equity and you can see many more important points.

Now if you take a look at the policy documents even today you will see that the basic policy remains the same so overall I can say that the overall stock selection strategy of the fund has not changed but one last point that can still change. What worries you is that if this overseas limit never increases, then what? If you ask me, I think this is a hypothetical question, ideally the limit will increase some day or the other, but in case it does not increase, then what we have to try is to compare it with some other mutual fund that is owned again. by the same fund house Parag Parekh.

Have they performed well or not and have they outperformed the benchmark index or not? For that, take a look at this chart, you can clearly see that in the last one year Parag Parekh Tax Savings Fund has given a return of 12.76 percent versus the benchmark has given 10.2 percent and the additional benchmark has also given 11.93 percent, so from this chart you can understand that this Tax Savings Fund, which again is from Parag Parekh, has not only outperformed the benchmark but It has also outperformed the additional benchmark index. Even if I talk about his Chief Investment Officer Mr.

Rajiv Thakkar, he has been working as an equity manager for the last 20 years and in one of the interviews he said that it is okay, even if recently I have a very big career, just him He has started investing in US stocks, so his control over investing in Indian stock markets is also very good. I hope this answers all of his questions about restrictions and poor performance. And moving on to the final question about what an investor should do regarding this fund, but before I give you my answer, let's conclude what we have discussed now. First, has this mutual fund underperformed in the last year?

The answer is obviously yes. Number two, do they still exist? I mean, whatever restrictions SEBI had imposed, are they still in force? The answer is again Yes. Is there still uncertainty about when this ban will be lifted? The answer is again Yes and number four, if you were to talk about the proven performance of any other mutual fund from the same fund house, if you remember the Parag Parekh Tax Saver fund, is there any proven performance? The answer is again Yes. Now with this, should I stay invested in the mutual fund or should I leave this mutual fund?

Let us understand one or two more points. Parag Parekh Flexi Cap Fund is one of the flagship mutual funds of this fund house and the fund managers also have a hand in the game. what do I want to say with that? They have invested their personal money in this mutual fund to the tune of 308.86 crores and even if you look at this picture, you can see that maximum money is invested in this specific mutual fund. Even if you take a look at this image, this image is from the fact sheet where you can see the red circle that says that this scheme is suitable for investors who can stay invested for a minimum of five years.

Now if you had invested in this mutual fund thinking that I need money in just one year, this will give me fantastic returns, I will take out the money and use it for my goal, then you will definitely complain and then you will stay. no choice but to book the losses or whatever the minimum profit is and get out of this because if your goal is more to mature in a year, which is maybe right now, you will have to book the losses, but if you had read this and invested . For a long term goal, say five years or more, I think there is no need to worry because it is said that the class is permanent and the form is temporary, so this could be something like a temporary idiot that we are seeing in this mutual fund.

There is no need to worry about this, but if you want to learn very systematically how to choose the mutual funds that suit you best, you should check out my Mutual Fund Magic course, which will help you plan your investments better. In short, I think you have to understand that this has not underperformed for many years, I'm still not convinced! Take a look at this chart and here you can see very clearly that the fund has generated a CAGR of 15.52 percent over the last five years compared to the soft cap category average of just 9.05% and 11.08 of SNP BSC 500.

So I hope that by now you are totally convinced and if you are a long-term investor don't worry. One more important hashtag disclaimer: This is not a sponsored video because many of you said that we are already invested in this mutual fund, that's the only reason I thought I should make a video about this. I hope all the queries regarding Parag Parekh Flexi Cap Fund have been answered by the end of this video. If you like the analysis, don't forget to hit the like button, don't forget to share this video with your friends and if you want to know more about the top two stocks on my radar for this year, click here and if you want.

To know more about SEBI's foreign investment ban, you can click here till then, take care, Jai Hind and goodbye.