Parag Parikh MF explains need for new Large Cap fund

Neil Parikh (Left), Chief Executive Officer, PPFAS Mutual Fund and Rajeev Thakkar, Chief Investment Officer and Director of PPFAS Mutual Fund.

Parag Parikh Financial Advisory Services (PPFAS) saw much social media discussion around the asset manager's plan to file papers with the regulator for a fresh Large Cap fund offering. Speaking at the 2025 Unitholders Meeting, the management clarified that the proposed product is designed to be a low-cost, broadly diversified offering for investors seeking index-like returns with selective active advantages.

Addressing concerns about the need for a new fund, which moves away from PPFAS' philosophy to avoid proliferating products, CEO Neil Parikh reiterated that the firm continues to stand by its philosophy.

“We have maintained that we will launch a fund only when there is a general investor need that we can meet and where we can bring in some differentiation. The Large Cap fund is a step in that direction,” he said. The fund house currently operates only two equity schemes: a Flexi-cap fund and an ELSS.

Fund manager Rukun Tarachandani also noted that there are many investors prefer products that do not deviate significantly from the index. These are investors who “want low active share, do not want the fund to be very different from the index, and also do not want a very high expense ratio.”

The new fund will be built around the Nifty 100, chosen for its broad market representation. According to Tarachandani, “Nifty 100 gives you much broader exposure of almost 70% of the market cap and profit pool, versus the Sensex and Nifty at about 40–45%.” The portfolio will aim to hold all Nifty 100 constituents with index-like weights, subject to a maximum 10% cap per stock.

Although the structure is designed to behave similarly to an index fund, PPFAS believes it can generate incremental value through ‘smart execution strategies.’

“We differentiate ourselves in how we obtain this exposure and how we implement and execute trades,” he said, citing examples such as using futures when they trade at a discount and capturing efficiencies around corporate actions like mergers.

He also pointed out that active managers are not compelled to trade on index rebalancing dates, unlike passive funds, and can therefore avoid paying elevated prices for stocks added ahead of index changes.

Cost-competitiveness remains central to the fund’s positioning. Tarachandani noted that current Nifty 100 index funds charge between 10 and 30 basis points, and PPFAS intends to price its fund within this range. As the fund grows, “the endeavour will be to move the expense ratio toward the lower end of this range.”

The fund is aimed at investors seeking broad large-cap exposure, low costs, and long-term returns that stay close to the index. It is expected to remain more than 95% invested in equities. The fund house aims to launch the NFO by January 2026.

Also Read | PPFAS could list in 2030 as final ESOPs vest five years from now, says Neil Parikh

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