Ever since the Government ended tax benefit on debt funds, investors have been looking for tax-efficient alternatives within the debt mutual fund universe. PPFAS Mutual Fund (AMC) is apparently trying to lure such investors with its New Fund Offer (NFO) of Parag Parikh Dynamic Asset Allocation Fund.
While a lot of information about Parag Parikh Dynamic Asset Allocation Fund (PPDAAF) is already in public domain, this article relooks the key points you should know.
First the NFO dates.
The NFO opened today (22nd February) and it will close on 22nd February 2024. The allotment date of the scheme is 27th February 2024. Now on to meatier details.
PPDAAF is an open ended debt fund with indexation benefits for long-term gains!
Parag Parikh AMC’s website says the objective of the scheme is to “generate income/long-term capital appreciation by investing in equity, equity derivatives, fixed income instruments.”
“The allocation between equity instruments and fixed income will be managed dynamically so as to provide investors with long term capital appreciation while managing downside risk,” it adds.
Like all mutual funds, this scheme also provides no assurance that investment objectives will be realized. In other words, there is no assurance or guarantee of any returns.
Where will it invest?
Currently, exact share of equity and debt in this fund’s portfolio is not very clear.
As per reports, Parag Parikh Dynamic Asset Allocation Fund is expected to invest predominantly in debt instruments. It may have an equity allocation between 35% and 65%. Some of the equity allocation of the scheme will be hedged via SEBI-approved derivative instruments.
Further, PPDAAF can invest in all types of debt securities like Sovereign, State Government, PSU and corporate securities, money market instruments and units of debt-oriented mutual fund schemes.
PPDAAF’s benchmark is CRISIL Hybrid 50+50 Moderate Index.
Also Read: Should I Exit a Poorly Performing Fund ASAP?
Application Amount
The minimum application amount for initial purchase is Rs 5000 and and any amount thereafter. Investors may also start a monthly SIP in PPDAAF with a minimum amount of Rs 1000.
Fund Manager
The scheme will be managed by Rajeev Thakkar, Chief Investment Officer and Equity Fund Manager. A CA and CFA charter holder, Thakkar is also currently managing the Parag Parikh Flexi Cap Fund, Parag Parikh ELSS Tax Saver Fund and Parag Parikh Conservative Hybrid Fund. Other managers are Raunak Onkar, Raj Mehta, Rukun Tarachandani and Mansi Kariya.
What’s special?
As said initially, PPDAAF’s USP lies in promising better tax-efficiency compared to other debt funds.
The AMC describes it as a “credible and tax-efficient alternative to certain fixed income instruments (like bank fixed deposits), offering the scope to earn income along with the prospect of growth in Net Asset Value (NAV) when held for a reasonably long period.” (Know more about the tax benefit of PPDAAF here)
If reducing tax-burden on debt investments is your priority, you may consider this scheme but only after consulting an advisor.
You should also keep in mind that with long-term equity and bond holdings, PPDAAF may be volatile. It may, therefore, be more suitable for long-term holding only.
When to invest
Ideally, one should observe a new fund’s fund’s portfolio and performance for a while before making any investment decision. You should also read whether it is good or bad to invest in an NFO here.
As of now, the fund’s portfolio is not known. The scheme information document doesn’t give full clarity on the exact debt and equity allocations.
Disclaimer: The above content is for informational purposes only, based on information on Parag Parikh Mutual Fund website and various media reports. The 1% News recommends consulting SEBI-registered investment advisors before investing in mutual funds.
