PPFAS Mutual Fund CIO Rajeev Thakkar has responded to concerns about the Parag Parikh Flexi Cap Fund, which returned 0.4% over the last year compared to a category average of 7%. Thakkar argues that the fund's large asset size is not to blame for this gap. Instead, he points to the fund’s specific investment strategy of picking out-of-favor stocks, which can lead to temporary periods of lower returns.
Rajeev Thakkar, the Chief Investment Officer (CIO) of PPFAS Mutual Fund, has addressed recent investor concerns regarding the performance of the Parag Parikh Flexi Cap Fund. In a note to unit holders, Thakkar challenged the common market view that a large asset base is the main reason for the fund's recent underperformance. The fund recorded a return of approximately 0.4% over the past year, trailing behind the category average of 7%.
Many market observers often argue that when a mutual fund grows to a large size, it becomes difficult for managers to execute their strategy effectively. However, Thakkar described attributing the fund’s recent performance gap solely to its asset size as being incorrect. To support his point, he shared his own past experience from 2007, where he managed a much smaller portfolio that saw significant price drops during a tough market period.
Historical Context and Strategy
Thakkar emphasized that the fund’s investment philosophy involves selecting stocks that are currently out of favor with the broader market. By nature, this contrarian approach can cause the fund to look less attractive in the short term, especially when popular sectors are rallying. He noted that there will inevitably be periods—lasting three months, a year, or even longer—where the stocks held by the fund may not rise in price or could even fall.
According to Thakkar, this strategy requires patience rather than a search for quick answers regarding fund size. He maintains that the focus remains on identifying long-term opportunities based on risk-reward assessments rather than chasing market trends that might be temporary.
Cash Deployment and Market Outlook
Investors often track how much cash a fund holds as it indicates the manager's view on market valuations. In recent years, the fund had increased its cash holdings, which peaked at approximately 25% in 2024. As of August 2026, these cash levels have been reduced to about 14-15%. This shift suggests that the fund manager is finding more investment opportunities at current market valuations compared to the previous period.
While this reduction in cash shows active deployment of funds, investors should remain aware that investing in out-of-favor stocks carries inherent risks. If market conditions do not improve for these specific sectors or if valuations in the broader market remain high, the fund's performance may continue to deviate from the category average in the short term. The key monitorable for investors will be how effectively the fund's current investment bets perform as the market environment evolves.