Parag Parikh Large Cap Fund: Foreign investment to scheme goals, key insights from draft document

PPFAS Mutual Fund has filed a draft document with the Securities and Exchange Board of India (SEBI) for the launch of Parag Parikh Large Cap Fund. This will be the fifth mutual fund scheme from the fund house. We read the draft document to explain the key details of the upcoming Parag Parikh Large Cap Fund in this article. Let's dive in:

What is Parag Parikh Large Cap Fund?

Parag Parikh Large Cap Fund (PPLCF) will be an open-ended equity mutual fund scheme that will predominantly invest in large-cap stocks. The scheme will aim to generate long-term capital appreciation and income distribution to investors by predominantly investing in equity and equity-related instruments of large-cap companies.

However, there is no assurance that the investment objective of the scheme will be achieved. The scheme does not assure or guarantee any returns.

Where will Parag Parikh Large Cap Fund invest?

The scheme may invest a minimum 80% and a maximum of 100% in equity and equity-related securities of large-cap companies. It may also invest up to 20% in equity and equity-related securities of foreign companies and other than large-cap companies in India.

Further, the scheme may invest up to 10% in REITs and InvITS and up to 20% in debt and money market Instruments.

"Investment in Foreign Securities/Overseas ETFs would be as per SEBI Master Circular for Mutual Funds dated June 27, 2024, as may be amended from time to time. The Scheme may invest up to US $100 million in foreign securities."

"As per SEBI Master Circular for Mutual Funds dated June 27, 2024, Mutual Funds can make overseas investments subject to a maximum of US $ 1 billion per Mutual Fund within the overall industry limit of US $ 7 billion. The overall ceiling for investment in overseas ETFs that invest in securities is US$1 billion subject to a maximum of US$ 300 million per mutual fund. The Scheme may invest up to US $30 million in Overseas ETFs."

How will the PPLCF benchmark its performance?

The scheme’s benchmark is Nifty 100 Total Return Index (TRI).

"The composition of the aforesaid benchmark is such that, it is most suited for comparing the performance of the scheme," the draft document says.

Nifty 100 TRI covers the overall universe of large-cap companies in India. "Since the fund is a large cap fund, the Nifty 100 TRI is an appropriate benchmark and will be able to give a true and accurate comparative analysis."

What are the investment strategies?

This will be an actively managed equity mutual fund scheme seeking to achieve two goals from a portfolio that predominantly invests in equity and equity-related securities of large-cap companies:

• Long-term capital appreciation, and

• Income distribution to unitholders

While the scheme will predominantly invest in large-cap stocks, the draft paper reveals the following strategies:

• Disciplined yet flexible long-term approach to investing with a focus on generating long-term capital appreciation.

• Investing a part of the scheme's corpus in overseas markets through Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds and such other instruments allowed by the regulator.

• It may engage in stock lending activities

• It intends to use equity derivatives in the form of Stock/Index Futures, Stock/Index Options, Swaps or any other instrument, as may be permitted by the regulator.

• The investment team of the AMC will study the macroeconomic conditions, including the political, economic environment and factors affecting liquidity and interest rates. The AMC would use this analysis to attempt to predict the likely direction of interest rates and position the portfolio appropriately to take advantage of the same.

What are the investment options?

The scheme will offer two plans: Direct and Regular. Both these plans will offer only two options:

• Growth Option

• Income Distribution cum capital withdrawal Option (IDCW)

Further, under the IDCW option, there will be two facilities: "Payout" and "Re-investment"

The Parag Parikh Large Cap Fund will have the following default options, unless changed by the investor:

• Default plan: Direct Plan

• Default option: Growth option

• Default IDCW facility: Payout

What is the New Fund Offer date for Parag Parikh Large Cap Fund?

It is not declared yet. The NFO date will be announced by the fund house later.

How will income from Parag Parikh Large Cap Fund be taxed?

Income from Parag Parikh Large Cap Fund will be taxed at 12.5% over ₹1.25 lakh for long-term capital gains and at 20% for short-term capital gains.

What is the load structure?

The scheme will have no exit and entry loads. Means you can enter and redeem your investments in this fund at any time without paying extra.

What is the minimum investment amount?

The minimum investment for a monthly SIP or lump sum investment is ₹1000 and in multiples of Re 1 thereafter. For quarter SIP, the minimum amount is ₹3000 and in multiples of Re 1 thereafter. Additional purchases can be made for ₹1000 and in multiples of Re 1 thereafter. The scheme will offer SIP, SWP, STP, SIP Top Up and SIP Pause facilities.

Who will manage Parag Parikh Large Cap Fund?

The scheme will be managed by the following fund managers:

Rajeev Thakkar, Raunak Onkar, Raj Mehta, Rukun Tarachandani, Tejas Soman and Aishwarya Dhar. All of them are currently managing the other four schemes of PPFAS Mutual Fund.