How is Parag Parikh Large Cap Fund different from Parag Parikh Flexi Cap Fund? 5 points

This article explains the key differences between the two schemes based on information available on the fund's website.

Parag Parikh Flexi Cap Fund vs Parag Parikh Large Cap Fund

Scope of investment

Both schemes are required to invest a minimum 65% in equity and equity-related instruments to be qualified as equity mutual funds. But their similarities end there.

Parag Parikh Flexi Cap Fund is a diversified equity scheme that is not restricted by any self-imposed limitations in terms of sector, market capitalisation, geography, etc. It can invest in any of the Nifty 500 stocks.

In contrast, Parag Parikh Large Cap fund will invest only in the top 100 large-cap stocks, or top 100 stocks by market capitalisation comprising the Nifty 100 TRI. It is also going to be different from other large-cap schemes.

Generally, large-cap schemes use valuations and fundamentals for stock selection. Parag Parikh Large Cap scheme will be different as it plans to invest based only on market capitalisation. In this sense, it will look like a large-cap index fund, but actively managed.

"We seek exposure to the top ~100 index constituents in terms of market capitalisation, we do not BUY/SELL stocks based on their Valuation or Fundamentals," Parag Parikh Mutual Fund says in FAQs on its large-cap offering.

Further, the large-cap scheme will keep its portfolio positioning close to its benchmark.

Investing style

Parag Parikh Flexi Cap Fund follows the value investing style. On its website, the Parag Parikh Mutual Fund says, "As we will not pay mere lip service to value investing, it may mean that often we will be purchasing businesses which are going through a painful phase and are therefore unloved."

It further says that each of the businesses in which the flexi cap fund invests "will blossom at different points" and "there may be extended periods when you may feel that 'nothing is happening'."

In contrast, Parag Parikh Large Cap Fund will stay close to the benchmark, reducing stock selection risk. However, the fund house says that the fund managers will follow some "smart execution" strategies for managing execution costs and supporting net returns. These "Smart Execution" strategies include the following:

• Single‑stock futures at a discount

• Index futures at a discount

• Merger-related arbitrage by buying discounted stock if a company in the index is merging with another firm.

• Gradual rebalancing when the constituents of Nifty 100 change.

• Small opportunistic active share by phasing entries/exits around corporate actions like demergers, and other speciation situations.

International exposure

Parag Parikh Flexi Cap Fund has some international exposure. Parag Parikh Large Cap Fund will not have any international exposure as it will invest only in Nifty 100 stocks.

Fund manager

Parag Parikh Flexi Cap Fund is currently managed by seven people: Rajeev Thakkar, Raj Mehta, Raunak Onkar, Rukun Tarachandani, Mansi Kariya, Tejas Soman, Aishwarya Dhar.

The large-cap scheme will have six managers. From the above, Rajeev Thakkar, Raunak Onkar, Raj Mehta, Rukun Tarachandani, Tejas Soman and Aishwarya Dhar will also be managing the large-cap scheme.

Expense ratio

Parag Parikh Flexi Cap Fund's direct plan has an expense ratio of 0.63% and 1.28% for the regular plan. The large-cap scheme is expected to be cheaper in terms of expense ratio.