PPFAS punches above its weight to have first active fund at Rs 1 trillion

Built on value and guided by restraint, this fund let performance do the talking

India’s largest mutual fund (MF) players are typically backed by major banks, but the country’s biggest actively-managed scheme comes from a relatively lesser-known fund house outside mainstream market circles. 

The Parag Parikh Flexi Cap Fund, the flagship scheme of Parag Parikh Financial Advisory Services (PPFAS) MF, recently became the first active scheme to cross ₹1 trillion in assets under management (AUM). 

What explains PPFAS MF’s ascent? 

Experts point to the fund’s consistent performance and a distinctive investment approach. The Parag Parikh Flexi Cap Fund is the only scheme in its category with a mandate to invest up to 35 per cent of its corpus in international stocks, while also retaining the flexibility to take large cash positions. 

“This differentiation has been an advantage, especially during periods of market turmoil. For example, in 2016, the impact of demonetisation was limited for us due to international exposure. High cash holdings helped us during the 2018 turmoil and the pandemic correction in 2020,” said Neil Parikh (pictured), who took over as chief executive officer (CEO) in 2015 after the death of his father, Parag Parikh, in a car accident in the US. 

The senior Parikh — a well-known figure in value investing circles — founded the company in 1992. 

As of May 9, the fund ranked second on the 10-year returns chart and fifth over a five-year period. Its regular plan has delivered an annualised return of 19 per cent since inception, compared to about 15 per cent compounded annually by the benchmark Nifty 500 TRI. 

PPFAS MF entered the MF space in 2013 with the launch of its flexicap fund, transitioning from portfolio management services (PMS) firm following a sharp increase in the minimum investment threshold for PMS. The fund house remained a fringe player until 2019, constrained by limited brand recognition, a short track record, and restricted distribution reach. 

To grasp the pace of its growth: the scheme’s AUM first crossed ₹1,000 crore in 2018 and had only grown to ₹2,500 crore before the pandemic, even as its performance was beginning to gain wider recognition. 

Since its inception, the flexicap fund has been managed by Rajeev Thakkar, a fellow value investing advocate. Thakkar joined PPFAS in 2001 as head of research and managed PMS strategies before becoming chief investment officer in 2013. 

For any MF scheme, performance is critical, but communication and distribution matter too. PPFAS MF’s communication strategy has been a key differentiator. 

Despite lacking a sponsor bank’s distribution network, the fund house built reach through independent distributors. It is also the only fund house that hosts a Berkshire Hathaway–style unitholders’ meet annually, where the brass explains investment decisions and fields questions from investors. 

“The business has taken a relatively understated approach to sales and marketing, choosing instead to focus on its product. It’s a near textbook example of product-led growth. The well-executed annual investor meetings also set it apart in the industry,” said Nirav Karkera, head of research at Fisdom. 

The focus on a single scheme, combined with an ability to explain its nuances to investors while delivering results, has helped PPFAS grow organically. “Its simple philosophy of disciplined, bottom-up value investing with a long-term focus has worked well,” said Dhirendra Kumar, CEO of Value Research. 

The scheme’s popularity is evident from the fact that PPFAS has the highest share of AUM from direct plans in the industry, around 65 per cent. Direct plan inflows typically come from do-it-yourself investors, unlike regular plans, which rely on distributor recommendations. 

Compared with other large- and mid-sized fund houses, PPFAS has the fewest schemes — just six — with the flexicap and equity-linked saving scheme instruments being the only active equity offerings. 

One concern flagged by some distributors and analysts is the fund’s size, which they say could make it harder for the manager to shift positions quickly. However, the fund house says that while size does impose constraints, it isn’t a concern yet, given the scheme’s buy-and-hold philosophy.

 

The declining international exposure due to regulatory constraints on foreign investments since 2022 has also diluted its positioning. Some analysts also highlight that cash calls and prolonged underperformance in the US market could weigh on the scheme’s returns in the short to medium term if the Indian market sees a prolonged bull run.