Last Updated on December 29, 2021 at 5:20 pm
Investors captivated by Axis mutual funds stellar 2019 performance wonder if Axis Growth Opportunities Fund can be an alternative to Parag Parikh Long Term Equity Fund. Both funds can allocate a portion of their funds to international stocks. We compare their investment syles and portfolio allocation to understand how they differ.
The international exposure in these funds will make a difference to an investors portfolio only if they take on significant exposure. Most investor portfolios are cluttered with tens of funds and even if they buy either of these, they can manage only 5-10% exposure. This means their portfolios will have only about 5-10% of the international exposure in these funds. Therefore it is important to consider these funds only if your portfolio needs it!
It should be kept in mind that Axis Growth Opportunities Fund (AGOF) is less than 14 months old (launched in Oct 2018) while Parag Parikh Long Term Equity Fund (PPLTEF) is three months shy of its seventh birthday (launched May 2013).
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Thanks to Axis Bank distribution networks, AGOF already has 40% of PPLTEFs AUM (2585 Crores as on Dec 31st 2019). In this short period, it makes no sense to look at AGOF’s performance in terms of risk or reward (the featured image above shows the NAV movement since the launch of the Axis fund).
PPLTEF is a fairly established multicap fund with excellent risk-adjusted performance since inception. See Parag Parikh Long Term Equity Fund Review. Readers familiar with my yearly audits will know that this forms the core of my retirement portfolio. Its current AUM levels are still low and since it does not have an associated bank the risk of a sudden influx of funds is fairly low.
So choosing PPFLTEF over AGOF on the basis of past performance is a no-brainer. The biggest risk associated with PPFLTEF is the risk of active management. What if Rajeev Thakkar is no longer the fund manager? Will this not affect performance?
No one can say for sure but older investors may recall Rajeev Thakkar faced the prospect of jail for being involved in the accident that killed Parag Parikh and was later cleared. This worried many investors then. So it is a real risk. He could quit anytime to start on his own etc. The scheme has two other FMs for the international equity and bond segment but do they get as much attention?
As mentioned above, the biggest risks associated with AGOF is the lack of history and chances of huge influx over a short period of time via Axis Bank. With a 1% extra expense ratio in the regular plan, it is a definite possibility.
Also, how long would the recent performance of Axis funds last, is another problem. A top performer can only move down while an average performer has a lot more breathing space. It would better to give AGOF some more time to perform especially when the market falls (and the aum problem is temporarily out of the equation).
Aside from March 2016, PPLETF has also not been seriously tested during a market fall, although it has performed admirably after budget 2018 when the mid and small cap segments started falling.
Both funds have a common risk: if international markets collapse these funds can take a bigger hit than others with only Indian equity. Investors who want to “diversify their portfolio with international (read US) stocks” have to look beyond returns in the last couple of years and consider the risks of doing so.
With these remarks out of the way, let us consider some differences between these two funds. The importance of giving the AGOF fund more time can be clearly seen the graph below which shows the international equity exposure over time.
One cannot say whether AGOF will hold more or less or as many international stocks as PPLTEF. The market cap history of both the funds is shown below.
The significant midcap exposure in AGOF and the significant cash + derivatives (others) exposure in PPLTEF is striking. AGOF will tend to stay away from small cap stocks (although it has the freedom to invest), while PPLTEF has no such restrictions.
According to its scheme presentation, AGOF can invest up to 35% in international stocks (predominantly large caps), 30-35% in Indian large caps, 35-40% in Indian midcaps.
PPLTEF can also invest up to 35% in international stocks with no other restrictions related to market cap. AGOF is expected to be growth-oriented in its stock-selection style (a combination of bottom-up and top-down) as opposed to PPLTEFs focus on value investing (bottom-up stock selection with an emphasis on the long term).
Summary: Those are the key differences between these two funds. Investors opting for Axis Growth Opportunities Fund should bear in mind its lack of history and possibility of bank channel-driven AUM influx. Those who choose Parag Parikh Long Term Equity Fund based on past performance should keep in mind fund manager risk. Both funds can come under stress if international markets fall.
References:
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)