PPFAS (Parag Parikh Financial Advisory Services) Chief Investment Officer Rajeev Thakkar has defended the investment strategy of the Parag Parikh Flexi Cap Fund following a period of relative underperformance, stating that equity market volatility is the price investors must accept in pursuit of higher long-term returns.

The fund, which manages tens of thousands of crores in assets and is one of the most widely held actively managed equity schemes in India, has faced heightened investor attention as Indian equity markets have scaled record highs. A flexi-cap mandate allows the fund to allocate across large-, mid-, and small-cap stocks, giving the manager discretion over positioning—a flexibility that cuts both ways depending on market conditions.

In remarks addressing recent performance concerns, Thakkar said the fund's recent underperformance is not unusual and should be viewed within the context of its long-term value investing philosophy. He reiterated his commitment to the fund's established approach.

Thakkar specifically addressed three areas that have drawn investor scrutiny: the fund's cash holdings, its investment in HDFC Bank, and its broader long-term value investing strategy.

Cash Holdings

The Parag Parikh Flexi Cap Fund has maintained notable cash positions as part of its portfolio construction. Thakkar defended this stance, indicating that holding cash is a deliberate element of the fund's risk management and opportunistic investment approach rather than a passive decision. Cash levels in actively managed funds can become a drag on returns during strong market rallies, a dynamic that often draws scrutiny when benchmark indices are rising sharply.

HDFC Bank Investment

The fund's position in HDFC Bank, one of India's largest private sector lenders, has been a subject of discussion among investors. Thakkar stood by the investment, aligning it with the fund's value-oriented framework that seeks fundamentally strong businesses trading at reasonable valuations. HDFC Bank has been a long-standing portfolio holding for the fund and is among the most heavily weighted stocks in the Indian large-cap universe.

Long-Term Value Approach

Thakkar emphasized that the fund adheres to a long-term value investing philosophy, which can lead to periods of short-term underperformance when market conditions favor momentum or growth-oriented strategies. He framed equity volatility as an inherent characteristic of stock market investing and a necessary trade-off for achieving superior returns over extended time horizons. The Parag Parikh Flexi Cap Fund has also historically allocated a portion of its assets to overseas equities, a feature that distinguishes it from many domestic peers but can introduce additional return dispersion during periods of divergent performance between Indian and global markets.

PPFAS Mutual Fund, named after its late founder Parag Parikh, is known for its conservative, research-driven investment approach. The Parag Parikh Flexi Cap Fund is among the asset management company's prominent offerings in the Indian mutual fund landscape.

Source: CNBC-TV18