Parag Parikh Conservative Hybrid Fund – Review
Parag Parikh MF has launched its new fund offer in hybrid segment. Parag Parikh Conservative Hybrid Fund NFO would open for subscription on 7th May, 2021. It is their first fund in the hybrid segment. Conservative Hybrid Funds would invest majorly in debt and some portion in equity. Parag Parikh AMC indicated that they would replicate the idea behind Flexicap fund which is a major success story. Should you invest in the Parag Parikh Conservative Hybrid Fund NFO? What are the risk factors in this Conservative Hybrid Fund?
Parag Parikh Conservative Hybrid Fund NFO Details
Parag Parikh Conservative Hybrid Fund would open for subscription on Friday, 7th May, 2021 and closes on Friday, 21st May, 2021. This is an open-ended mutual fund scheme. Here are the NFO issue details.
|Scheme reopens for continuous purchase/sale||28-May-21|
|Minimum Lumpsum||Rs 5000|
|Minimum SIP||Rs 1000 for 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Exit Load||< 1 year – 1%
> 1 year – Nil
|Risk||Moderately High Risk|
|Max expense Ratio (TER)||2.25%|
|Benchmark||CRISIL Hybrid 85+15 – Conservative Index TRI|
What is the investment objective of Parag Parikh Conservative Hybrid Fund NFO?
To generate regular income through investments predominantly in debt and money market instruments. The scheme also seeks to generate long term capital appreciation from the portion of equity investments under the scheme.
However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.
What is the allocation pattern in this mutual fund scheme?
This fund investment pattern is as follows:
|Type of instruments||Min %||Max %||Risk Profile|
|Debt securities (including securitized debt) & Money Market instruments||75%||90%||Low to Medium|
|Equities & Equity related instruments||10%||25%||Medium to High|
|Units issued by REITs and InvITs||0%||10%||Medium to High|
Why to invest in the Parag Parikh Conservative Hybrid Fund NFO?
Here are a few reasons to invest in this fund.
1) This fund invests 75% to 90% in debt segment. This is good for mutual fund investors who want to invest in fixed income options.
2) This scheme would invest 10% to 25% in equity. Such scheme would be good for investors who want to invest in debt, but want to invest some portion in equity to beat inflation.
3) AMC indicated they want to to replicate the idea behind Parag Parikh Flexicap fund on debt side. Its Flexi cap has outperformed in short to medium term. Such consistent performing funds can provide confidence among investors.
4) Fund house released a presentation which indicates that this fund would invest predominantly in state and central government securities and high quality PSU debt and AAA rated debt instruments. It would have a small exposure to corporate credit risk. It would filter stocks with high dividend yield and large margin of safety. Such portfolio would have a lower risk.
5) AMC indicated that while the max expense ratio is 2.25%, the fund would have an expense of 0.6% for regular plans and 0.3% for direct plans. Low expense ratio funds would help investors benefit with higher returns.
Major risk factors you should consider before investing in such funds
One should consider some of these risk factors / negative factors before investing.
1) This fund would invest majorly in fixed income options and some portion in equity. While such funds would aim to get returns to beat inflation, there is no such guarantee that it would get returns higher than inflation.
2) It invests in fixed income options where there is interest rate risk, price risk, credit risk (for non government securities), liquidity risk and pre-payment risk.
3) This mutual fund would invest up to 40% in derivatives, which is high risk.
4) This fund would invest in REITs and InvITs which are high risk.
5) For complete risk factors, check the scheme related documents.
Performance of Conservative Hybrid Funds
Here are the list of existing conservative hybrid funds and their performance in the last 1 to 5 years.
|Fund Name||3 Year
|5 Year Annualised||10 Year Annualised|
|Canara Robeco Conservative Hybrid Fund||9.7%||8.8%||8.9%|
|IDFC Asset Allocation Fund – Conservative Plan||6.4%||7.6%||8.5%|
|BNP Paribas Conservative Hybrid Fund||6.7%||7.4%||8.5%|
|Baroda Conservative Hybrid Fund||8.9%||8.4%||8.0%|
|L&T Conservative Hybrid Fund||6.8%||7.3%||7.3%|
|BOI AXA Conservative Hybrid Fund||0.3%||4.5%||6.5%|
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Should you invest in Parag Parikh Conservative Hybrid Fund NFO?
Parag Parikh Conservative Hybrid Fund would invest majorly in government securities, small portion in corporate instruments and some portion in equity. Fund house indicated that they want to replicate the idea behind its flexicap scheme on debt side now. If you are conservative investor and willing to invest for 3+ years, invest in this scheme. If you are moderate to high risk investor, you can go for Parag Parikh Flexicap Fund.
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