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PPFAS Mutual Fund recently introduced its sixth scheme, the Parag Parikh Dynamic Asset Allocation Fund. The NFO (new fund offer) will remain open for subscription from February 20, 2024, till February 22, 2024.
NFO snapshot
| Fund name | Parag Parikh Dynamic Asset Allocation Fund |
| SEBI category | Hybrid: Dynamic Asset Allocation |
| NFO period | February 20, 2024 to February 22, 2024 |
| Investment objective | To generate income and long-term capital appreciation by investing in equity, equity derivatives and fixed-income instruments |
| Benchmark | CRISIL Hybrid 50+50 Moderate Index |
| Fund managers | Rajeev Thakkar, Raunak Onkar, RajMehta, Rukun Tarachandani, Mansi Kariya |
| Exit load | No exit load will be levied for the 10 per cent of units from the date of allotment. However, 1 per cent load will be applicable if redeemed within one year of the date of allotment for the beyond 10 per cent of the units. Nil thereafter. |
| Tax treatment | Enjoys indexation benefit. If sold after three years: Gains are taxed at 20 per cent after providing the indexation benefit. If sold within three years: Gains are added to the taxable income and taxed as per the applicable slab. |
About Parag Parikh Dynamic Asset Allocation Fund
The Parag Parikh Dynamic Asset Allocation Fund will predominantly invest in debt and maintain an equity allocation between 35 and 65 per cent.
Neil Parikh, the chairman and CEO of the AMC, stated that the equity allocation would be static at around 35-40 per cent. It will combine long equity positions boasting strong cash flows and cash for future arbitrage. In a video published earlier, Neil added, "Please consider this fund as a debt allocation and do not consider this fund as an equity allocation."
Regarding holding the debt securities, the fund will primarily invest in AAA-rated debt paper, high-quality PSUs (public sector undertaking units) and sovereign and state government securities. Its performance will be benchmarked against the CRISIL Hybrid 50+50 Moderate Index, a Tier I Benchmark Index.
Does the fund provide any taxation benefits?
Before April 2023, long-term capital gains on debt funds, if sold after 36 months, were taxed at 20 per cent with indexation benefits. However, post-April 1, 2023, the indexation benefits were removed, and all gains on the sale of debt mutual funds would be taxed at the applicable slab rates.
In 2021, PPFAS Mutual Fund launched the Parag Parikh Conservative Hybrid Fund, primarily a debt fund with an exposure of 75-90 per cent to debt. However, due to the removal of indexation benefits for debt funds, the fund house decided to introduce a dynamic asset allocation fund. Yet, with its greater allocation towards debt, investors will receive indexation benefits.
About the AMC
PPFAS Mutual Fund is sponsored by Parag Parikh Financial Advisory Services Limited, an investment advisory firm incorporated in 1992. Since May 2015, PPFAS Asset Management Private Limited (investment manager to PPFAS Mutual Fund) has been led by its chairman and CEO, Neil Parag Parikh.
About the fund managers
Similar to the AMC's other schemes, this fund will also be managed by several fund managers. Rajeev Thakkar, the fund house's chief investment officer, will be helming the scheme, along with Raunak Onkar, Rukun Tarachandani, Raj Mehta and Mansi Kariya.
Our take
We at Value Research prefer funds with static allocations over those that are dynamically managed. As mentioned by the fund house, keeping the equity allocation static at around 35-40 per cent would be attractive to risk-averse and conservative investors. Further, owing to its low exposure to equity, this fund may suit someone seeking regular income.
Like every new fund, we always say it is best to wait and see its performance before deciding to invest.
Also read: SBI Energy Opportunities Fund NFO review
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