Parag Parikh Mutual Fund has recently announced its sixth scheme, the Parag Parikh Dynamic Asset Allocation Fund. The new fund offer (NFO) for the same is closing on Thursday, February 22, 2024. The scheme falls under the category of an open-ended hybrid scheme - Dynamic Asset Allocation or Balanced Advantage and offers some income tax benefits.
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The fund is benchmarked against the CRISIL Hybrid 50+50 Moderate Index.
Investment objective
This fund is designed to predominantly invest in debt while maintaining an equity allocation between 35 and 65%.
The primary objective of the Parag Parikh Dynamic Asset Allocation Fund is to generate income and achieve long-term capital appreciation, the mutual fund house said.
Investment amount
The minimum subscription amount for investors to participate in the scheme is set at ₹5,000.
Fund managers
Rajeev Thakkar, Raunak Onkar, Raj Mehta, Rukun Tarachandani, and Mansi Kariya will manage the Parag Parikh Dynamic Asset Allocation Fund.
Load structure
The fund will not impose an exit load for the first 10% of units from the date of allotment.
However, a 1% exit load will be applicable if units are redeemed within one year of the date of allotment for amounts beyond 10% of the total units, with no exit load thereafter.
Tax benefits
The tax benefits associated with the Parag Parikh Dynamic Asset Allocation Fund can be attributed to the greater allocation towards debt within the fund's portfolio.
This allocation will allow investors to benefit from indexation.
Before April 1, 2023, the tax treatment for long-term capital gains on debt funds involved a 20% tax rate, and investors could avail themselves of indexation benefits if the investment was held for more than 36 months.
Indexation is a process that adjusts the purchase price of the investment for inflation, reducing the taxable capital gains and, consequently, the tax liability.
Post-April 1, 2023, the Indian government removed the indexation benefits for gains on the sale of debt mutual funds.
However, greater allocation towards debt instruments within the Parag Parikh Dynamic Asset Allocation Fund positions investors to potentially benefit from indexation, according to Value Research.
This is because, despite the removal of indexation benefits for debt funds in general, the fund's exposure to debt allows investors to enjoy the advantages of indexation for the debt portion of their investments.
A look at returns of some of the existing dynamic asset allocation funds
| Scheme name | 3-year return | 5-year return |
|---|---|---|
| Motilal Oswal Balance Advantage Fund - Direct Plan - Growth | 10.59% | 11.62% |
| Axis Balanced Advantage Fund - Direct Plan - Growth | 13.91% | 12.26% |
| HSBC Balanced Advantage Fund - Direct Plan - Growth | 13.77% | 11.94% |
| Baroda BNP Paribas Balanced Advantage Fund - Direct - Growth | 16.09% | 17.32% |
(Source: Moneycontrol)
Investment considerations
Investors should be mindful of the fund's investment strategy and allocation, as it impacts the tax treatment of gains.
Also, tax implications can vary based on individual circumstances.
As with any new fund, financial experts advise potential investors to exercise prudence and wait for a performance track record to emerge before making investment decisions.
(Edited by : Amrita)
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