Four new mutual funds that have entered the Mint30 list
Although we have reduced the basket of funds to 30 from the earlier 50, four new funds have entered the Mint30 list
Parag Parikh Long Term Equity Fund
When PPFAS Asset Management Co. Ltd (PPFAS AMC) was launched five years ago at the beginning of 2013, it held promise. Its sponsor company, Parag Parikh Financial Advisory Services Pvt. Ltd (PPFAS Ltd), was among the oldest portfolio management service (PMS) providers. But when Sebi hiked the minimum investment amount to ₹25 lakh for new as well as existing investors of PMS in 2012, PPFAS Ltd converted its PMS to a mutual fund scheme under its newly set up AMC.
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Its founder, Parag Parikh, promised at the time that the fund house would launch just one equity scheme that would invest across scrips and sectors, in Indian as well as international companies. In May 2018, Parag Parikh Long Term Equity completed five years. The fund house’s example stands tall till today; the only other scheme it launched was a liquid fund, in May 2018.
“Investors may not be equipped to decide whether they should invest in large-caps or mid-caps and so on. We do the job for the investors by following a multi-cap approach with an option to invest overseas,” said Rajeev Thakkar, chief investment officer and equity fund manager, PPFAS AMC.
Parag Parikh Long Term Equity is ideal for at least five years. This is because it can underperform its peers in years when Indian equities do well since it holds around 30% of its corpus in international equities; schemes with full corpus in domestic equities outperform in such years. When equity markets fall in India, the scheme typically outperforms its peers. In a way, it works as a hedge, giving decent long-term returns.
The scheme has among the lowest portfolio turnover ratios—a ratio that measures the frequency and extent of portfolio churn—among equity funds. It is an ideal core equity holding.
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HDFC Small Cap Fund
Existing investors of HDFC Mid Cap Opportunities Fund can switch their money to HDFC Small Cap Fund, which is good even if you are investing in it afresh. The scheme is managed by Chirag Setalvad, the same manager who manages HDFC Mid Cap Opportunities. Having proved his mettle with the mid-cap fund (it returned 21% over the last 10-year period as against 16% by the category average), despite consistently becoming a large fund, HDFC Small Cap is a good pick. The fund’s size of ₹4,143 crore is a bit large to go with a small-cap fund, but it’s still a good option when compared to its peers. The fund is diversified and Setalvad goes up for bottom-up stock picking. He pays attention to a company’s quality and management. Due to the illiquid nature of small-sized companies’ shares, it holds up to 5-20% cash levels depending on market scenarios.
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HDFC Short Term Debt Fund
HDFC Short Term Debt Fund comes in because the earlier short-term fund from this fund house, HDFC Regular Savings Fund, moves out. HDFC Regular Savings is now merged with HDFC Credit Risk Debt Fund, which will invest in debt securities that are rated AA- and lower-rated corporate bonds. HDFC Short Term Debt, earlier known as HDFC Short Term Opportunities, is now the fund house’s short-term debt fund. Investors who had HDFC Regular Savings should now shift to HDFC Short Term Debt, which is more conservative of the two.
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HDFC Short Term Debt will invest in debt and money market instruments, as well as in government securities with no maturity restriction on individual securities. The scheme portfolio’s duration will be 1-3 years. Unlike HDFC Regular Savings that used to take credit risk by investing in low-rated scrips, this fund has been investing and is likely to invest in higher rated instruments. “HDFC Short Term Debt is ideal for investors looking for higher rated instruments portfolio with Macaulay Duration of 1-3 years,” said Anil Bamboli, senior fund manager-fixed income, HDFC Asset Management Co. Ltd.
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Axis Short Term Fund
The importance of asset allocation cannot be stressed upon enough and so we are bringing in another short-term debt fund. The main reason why we like Axis Short Term Fund is that it has maintained a good performance without taking credit risks. Like IDFC Bond Fund–Short Term Plan, Axis Short Term has trailed most of its peers that have consistently taken credit risks. But that doesn’t matter. It has maintained a duration of 1-3 years in the past and limited its investments in holdings that mature in less than five years.
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“To ensure this fund remains true-to-label, we buy only those scrips that mature in less than five years. There is no point in having a large allocation in money market instruments and then have, say, 30% or so in 10-year securities and then maintain the duration of about three years,” said R. Sivakumar, head-fixed income, Axis Asset Management Co. Ltd. The fund invests in government securities but restricts this to about 5-15% “to maintain liquidity”. Its portfolio is of high quality; it invests in AA-rated and equivalent instruments.
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