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Feb 21, 2024 7 min read

New Fund Alert: PPFAS Mutual Fund Launches Dynamic Asset Allocation Fund

Today’s headlines are about the New Fund Offer (NFO) by Parag Parikh Mutual Fund House launches a new fund named Parag Parikh Dynamic Asset Allocation. This new fund offers (NFO) is open for subscription from February 20, 2024, and closed on February 22, 2024.

This new addition to their line-up is getting a lot of attention because it offers investors a smart and tax-friendly choice for their investments. But what does dynamic asset allocation mean, and how does it work? Let's dig deeper into the details and find out more about the features, benefits, and investment strategy of this innovative fund. Come along as we explore this new fund and its advantages in this blog.

Overview of PPFAS Dynamic Asset Allocation Fund

The Parag Parikh Dynamic Asset Allocation Fund will be benchmarked against the CRISIL Hybrid 50+50 Moderate Index. This latest addition to the fund house's portfolio will be handled by Rajeev Thakkar, Raunak Onkar, Raj Mehta, Rukun Tarachandani, and Mansi Kariya. With its inception, the fund hopes to fill a void in its product line by offering investors a tax-efficient choice for debt allocation due to the indexation benefit it provides.

Unlike many other offerings in the Balanced Advantage or Dynamic Asset Allocation categories, this fund will keep an equity exposure of 35% to 65%. This allocation approach is intended to maximize the benefits of indexation. As the sixth addition to the fund house's portfolio since its creation in May 2013, the Parag Parikh Dynamic Asset Fund is positioned to provide investors with a unique option to navigate the market in a balanced manner.

Furthermore, the fund has developed a transparent fee structure, with no exit load applied on 10% of units beginning with the allotment date. A 1% exit load will apply to redemptions of more than 10% of units within one year after the allocation date. Nonetheless, investors have the option of redeeming their units without incurring any exit fees after one year from the date of allotment.

Understand the Dynamic Asset Allocation Funds?

Dynamic Asset Allocation is a type of hybrid mutual fund also known as a Balanced advantage fund, this fund is similar to a flexible portfolio that can include equities and debt, In the dynamic asset allocation strategy, there is no predetermined or fixed asset mix required for the fund.

The allocation of assets can be adjusted and varied based on the prevailing market conditions and the fund manager's assessment of potential opportunities and risks. The benefit of this fund is that no matter if the market is bear or volatile. Dynamic funds are designed to give you steady returns. these funds are a good choice for investors seeking consistent returns.

How Does Dynamic Asset Allocation Work?

In a bear market, equities can suffer, which may result in losses. On the other hand, investing in dynamic asset allocation funds is a reliable strategy to generate returns in a volatile market. These funds offer a solution as their managers adjust the allocation between equities and debt assets based on the market’s state.

To increase returns over time, fund managers carefully invest in low-cost or possibly high-performing assets while limiting exposure to overpriced ones. In times of market instability fund managers may even adjust the portfolio on a daily basis.

This dynamic approach not only seeks to capitalize on potentially better-performing assets but also showcases the adaptability of dynamic asset allocation funds in navigating various market conditions.

Now comes the confusion- Are Hybrid Funds and Dynamic Asset allocation is same?

When it comes to understanding investment options, it's crucial to differentiate between Hybrid Funds and Dynamic Asset Allocation Funds. Let's break down the key differences:

Hybrid Funds

  • Hybrid funds invest in a variety of asset classes, often including equities and bonds.
  • The distribution of stocks and bonds in hybrid funds is largely set and planned.
  • These funds are intended to provide investors with a balance of growth and income.
  • Hybrid funds are sometimes classed according to their equity exposure, such as conservative, balanced, or aggressive.

Dynamic Asset Allocation Funds

  • Dynamic asset allocation funds invest in a variety of asset classes, but their allocation is not fixed.
  • The allocation in dynamic asset allocation funds is dynamically altered based on market conditions and the fund manager's expectations.
  • These funds seek to provide investors with long-term capital appreciation while actively reducing downside risk by altering asset allocation across asset classes.
  • Dynamic asset allocation funds provide a more flexible approach than hybrid funds since they can adjust the allocation based on changing market conditions.

Now let’s see the Investment objectives of this Funds

The scheme invests in fixed-income instruments, equity derivatives, and equities with the goal of providing both income and long-term capital growth. The strategy aims to produce long-term capital growth while limiting downside risk for participants by dynamically allocating funds between fixed income and equities.

The Strategy Construction of Equity and Debt?

In simple terms, the investment strategy prioritizes stability and consistent returns. For the fixed income portion, we will invest in secure options such as AAA-rated bonds, government bonds, Debt Mutual Fund and public sector securities. This blend tries to deliver stable returns with minimal variability.

For the Equity Mutual Fund Portion , we will invest in companies with robust cash flows and increased dividends or buybacks. This will provide a continuous cash source. To mitigate risk, some equities will be hedged. We will prefer equities with a "margin of safety," which means they have some wiggle room in case things do not go as planned.

Overall, the idea is to create a portfolio that balances stability and growth by mixing secure fixed-income investments with carefully selected shares.

Statement of Mr. Neil Parag Parikh about the PPFAS Dynamic Asset Allocation Fund?

Neil Parag Parikh, Chairman and CEO of PPFAS Mutual Fund, stated that the new fund fills an opening in their product line. He stated that due to recent changes in tax regulations, their conservative hybrid fund lost its indexation benefit, and will now be taxed at the investor's full marginal rate.

This created a demand in the market for a solution that still provides indexation benefits. Their distribution partners and investors expressed strong interest in having a fund with this benefit, so they decided to launch this new fund to match that demand. the chairman and CEO of Asset Management Company (AMC)

Who Should Invest?

Those Trying to Time Interest Rate Changes

People who try to predict when interest rates will go up or down may not find this fund suitable. It's risky to base investments on guessing interest rate movements.

Investors Uncomfortable with NAV Fluctuations

If you get nervous when the fund's value goes up and down often, this might not be the right choice for you. This fund can have fluctuations in its value, which may not suit everyone.

Those Expecting High Returns Like Equity Schemes

If you're hoping for very high returns like you might get with stocks, this fund may not meet your expectations. It's designed to be more stable, so the returns may not be as high as pure stock investments.

People Wanting to Invest for a Short Time

If you're planning to invest money for a short period and then take it out, this fund might not be the best fit. It's meant for longer-term investing, and you might not see the benefits if you withdraw your money too soon.


The Parag Parikh Dynamic Asset Allocation Fund, launched by PPFAS Mutual Fund, is a significant addition to their product lineup, answering the market's requirement for a tax-efficient choice for debt allocation. The fund's dynamic asset allocation strategy, which focuses on stable options such as AAA-rated bonds and cash-flow positive stocks, strives to provide investors with steady returns while successfully reducing downside risk.

investors must understand the differences between hybrid and dynamic asset allocation funds. While both invest in a variety of asset classes, dynamic asset allocation funds have greater flexibility in modifying allocations according to market conditions, allowing for a more adaptive strategy for navigating different market scenarios.

Potential investors who are looking to time interest rate changes, are concerned about NAV volatility, expect large returns akin to equity schemes, or are planning short-term investments may find this fund unsuitable. Individuals seeking consistent long-term returns might consider investing in this fund, particularly through a Systematic Investment Plan (SIP), to benefit from rupee cost averaging and a disciplined investing approach over time.

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