PPFAS’s new fund to run like an index fund, with an edge

Fund will use futures market discounts, merger opportunities and index-rebalancing tactics

- Maulik M.

As a fund house, PPFAS (Parag Parikh Financial Advisory Services) Mutual Fund has long avoided the industry trend of launching frequent schemes to chase assets—an otherwise common practice in the mutual fund (MF) industry.

That's why its announcement of a proposed large-cap fund drew unusual attention, with investors questioning how it would stand apart when all large-cap funds draw from the same top 100 stocks by market capitalization.

At a unitholders’ meet on 22 November, the fund house finally laid out the strategy, positioning and what it will—and will not—attempt to do.

PPFAS MF said the proposed large-cap fund is not meant for investors seeking concentrated sector bets or active stock selection to outperform the Nifty 100 TRI (total return index).

Instead, it aims to offer slightly better returns than index funds by using execution efficiencies—while keeping costs comparable to passive funds.

It will target investors, seeking broad exposure to the top 100 companies by closely following the index but paying a relatively low expense ratio. So, how will the scheme differentiate itself and offer more than what index funds do?

According to Rukun Tarachandani, executive vice-president and fund manager—equity at PPFAS MF, as an active fund, their use of ‘smart execution strategies’ (more on this later) is what will differentiate them and add value to what index funds offer.

The scheme expense ratio will be similar to what Nifty 100 Index funds charge their investors.

The scheme offering