Parag Parikh Flexi Cap mutual funds reopen their subscriptions after a brief break

The reason for imposing restrictions was that mutual funds industry had exhausted the allotted limit of $7 billion they can invest in foreign markets

Padmaja Choudhury   /   March 17, 2022

Parag Parikh Flexi Cap is now open for fresh investments. Parag Parikh Flexi Cap Fund (PPFCF) had stopped fresh lump-sum investments and new SIPs when SEBI imposed restrictions on mutual funds to invest in foreign equities.

The reason for imposing restrictions on mutual funds was that mutual funds had exhausted the allotted limit of $7 billion that fund houses can invest in foreign markets. There is also a limitation on investing in foreign markets through ETFs of $1 billion. SEBI imposed the restraints on 2 February 2022, and after this break, PPFCF reopens their subscription of fresh investments from 15 March 2022.

It is important to note these restrictions on international stocks by fund houses are still in place.

PPFAS is one of the best-performing equity mutual funds. It has offered 20.50% returns in 5 years from March 2017-2022, 25.35% returns in 3 years from March 2019-2022 and 25.92% in the last year. The fund’s strong performance was primarily because of its holdings of US stocks.

If we talk about the fund’s portfolio, PPFAS has diversified its portfolio between Indian and foreign equity and has managed well for so long. Parag Parikh Flexi Cap Fund has a total of 65.65% investment in Indian stocks, of which 44.77% is in large-cap stocks, 2.83% is in mid-cap stocks, 11.93% in small-cap stocks. Currently, the fund has 4.3% cash in the portfolio.

PPFAS is popularly known for its well-diversified portfolio in foreign markets, reducing country risk and enhancing investors’ returns. There is a higher probability that increasing the volume of domestic investments might affect the weightage of foreign investments. But as per the CEO, Neil Parikh, waiting for an increase in the limits of foreign investments by SEBI is not a suitable investment strategy. “We cannot miss the domestic opportunity to maintain the ratio of foreign and domestic investments”.

Importance of foreign investments

Foreign investments reduce the volatility in a portfolio and provide the highest potential returns to investors. It can also reduce overall domestic country risk by gaining upward market trends in foreign countries.

For example, suppose the domestic market is crashing down due to an industry breakdown. In that case, foreign investment can save you from such a market crash as those stocks might not be facing issues regarding and trending upwards, which is how a portfolio works. If every market is touching the high, it will give you the highest returns, and if one market goes down, you can benefit from portfolio management.

What should you do?

The Parag Parikh Flexi Cap Fund has a proven track record over time.

Investors may invest in the fund to achieve financial goals. Simultaneously, it is crucial to monitor the fund’s performance and how its foreign holdings evolve over time.

 We also need to note that only fresh investment in the domestic market doesn’t mean the old foreign investments are redeemed.

International ETFs can still invest in international stocks. So, if you are a new investor and want to invest in global markets, investing in international ETFs or through a brokerage that offers US stocks might be a good option.

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