@rainbowj funds can underperform for certain number of years. If you like those funds stick with them for the duration of your goal. You need to be invested for minimum 7 years in midcaps to make decent returns.
@henry_ Parag Parikh flexi cap fund is a very popular fund. It provided good returns with relatively lower risk. However the aum is now 29000 crore. The fund philosophy is good. But due to the big size aum is it still. Good investment option for next 10 years ?
I have invested in it on n off.
There isn't a direct correlation I guess, but I have a feeling that they'll become a normal large cap fund now. Getting small cap and maybe even mid cap would be difficult now, which is what gives any flexi cap scheme the x factor growth. Also, their foreign portfolio has reduced significantly due to the RBI limits last year which has still not been lifted, which was also one of their growth drivers.
I try to stay away from the most popular/recommended MF scheme just because I've seen funds underperform once it becomes popular. I've seen it with Axis long term equity fund, where the aum rose significantly and it has been performing poorly since last 2-2.5yrs.
So, I had stopped couple of months ago due to the same reason and picked up another fund.
@xsmbchunhat Funds with large aum wouldn't be able to invest in a lot of small and mid cap companies. This is a key to performance potential of flexi cap funds IMO.
@xsmbchunhat If your aum is ₹100, and the small cap company's market cap is ₹10, you can't really invest in it. If they want to have a 5% weight of their total aum, they will have to invest 5cr in the company, which would be 50% of the company's ownership, which is not ideal. The MF will no longer be a minority shareholder in that case. Weightage of
@zaplecza For flexi cap funds, the only condition is that they have to invest at least 65% in equity. How much to invest in small cap, etc, is left to the fund.
@tiffy209 Yes, I'm aware of that. Just wanted to convey that if I want a flexi cap fund, I'd like it to have a decent portion in small and mid cap as well, else what's the point of having a flexi cap. The allocation depends on the fund manager, agreed but with high AUM, flexi cap funds generally aren't able to invest in small caps and some mid caps as well. Thereby, unable to unlock return potential of small and mid cap stocks.
There's no hard and fast rule, one might be fine with a large cap heavy flexi cap fund, but my investment philosophy is a bit different. I'd rather have a risk taking flexi cap and an index fund combo.
@zaplecza Every flexicap will eventually become a clone of large caps as AUM increases. If you need mid/small caps better to invest separately in those funds instead of going via flexicaps. There are some flexicaps with low AUM but do not have significant exposure to mid/small caps maybe due to market conditions.
It is mandated that these funds should invest a minimum of 65% in small caps. So, even if the opportunity isn't there, they'll be forced to invest in it and thus giving worse risk adjusted returns. If AUM, increases that's another problem for them.
But you gotta make a portfolio for yourself which you're comfortable with at the end of the day. There's no perfect product for everyone.
