Parag Parikh Flexi Cap Fund to Revise Total Expense Ratio from April 1, 2025

In a move aimed at reducing costs for investors, Parag Parikh Flexi Cap Fund, managed by PPFAS Mutual Fund, has announced a reduction in the base Total Expense Ratio (TER) for its regular plan. 

The new base TER, which will be set at 1.15%, marks a decrease from the current 1.20%. This change is scheduled to take effect on April 1, 2025. This revision could provide long-term investors with potential cost savings, improving their overall returns.

What is the Total Expense Ratio (TER)?

The Total Expense Ratio (TER) is a key metric for evaluating the costs associated with a mutual fund scheme. It encompasses various operating expenses involved in managing the fund, such as investment management fees, administrative costs, marketing and advertising expenses, transaction costs, and more. Essentially, it reflects the percentage of a fund’s assets that go toward covering these expenses.

According to the Association of Mutual Funds in India (AMFI), the TER is calculated as a percentage of the fund’s average Net Asset Value (NAV). The fund’s NAV is disclosed after deducting these expenses.

The expenses that contribute to the TER include:

• Investment management fees
  
• Sales and marketing expenses
  
• Registrar and custodian fees
  
• Transaction and audit costs
  
• Administrative expenses
  

As per SEBI (Securities and Exchange Board of India) guidelines, mutual funds are allowed to charge certain operating costs for managing a fund scheme, but these charges must be in line with the regulatory caps.

Parag Parikh Flexi Cap Fund’s Revision

PPFAS Mutual Fund has communicated this change to its unitholders via a notice-cum-addendum. The notice highlights that the reduction in the base TER is well within the SEBI-prescribed limits, ensuring regulatory compliance.

It is important to note that the base TER mentioned does not include additional expenses such as those outlined in Regulations 52(6A)(b) and 52(6A)(c) of SEBI’s Mutual Fund Regulations, 1996, nor does it factor in GST on management fees.

Impact of the TER Reduction

The reduction in TER from 1.20% to 1.15% may seem small, but over time, even such modest reductions can result in significant cost savings for investors, particularly for those with long-term holdings. These savings can accumulate and potentially enhance the overall returns of the fund.

Investors should note that the change will take effect from April 1, 2025, so it is advisable for them to consider how this may impact their investment decisions going forward.

About Parag Parikh Flexi Cap Fund

Parag Parikh Flexi Cap Fund is an open-ended dynamic equity scheme, known for investing across a range of stocks in large-cap, mid-cap, and small-cap categories. Its objective is to generate long-term capital growth from an actively managed portfolio, primarily composed of equity and equity-related securities.

The fund also invests in Indian equities, foreign equities, related instruments, and debt securities to diversify and optimise returns for its investors.

As of February 28, 2025, Parag Parikh Flexi Cap Fund has emerged as the largest flexi cap fund in terms of assets under management, with a total of ₹88,004 crore in assets. The scheme is benchmarked against the NIFTY 500 (TRI) index. The minimum investment requirement for both lump sum and SIP (Systematic Investment Plan) is ₹1,000.

Conclusion

The reduction in the base TER for Parag Parikh Flexi Cap Fund signifies the fund house’s commitment to enhancing value for investors by lowering the cost of investment management. While this revision is a small change, it could have a positive impact on long-term investors, especially those in regular plans, by offering potential savings on the cost of the investment. With its strong performance and diverse investment strategy, the fund remains a popular choice for investors seeking long-term growth.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments in the securities market are subject to market risks, read all the related documents carefully before investing.