Widely read:
Khyati Simran Nandrajog/AI-generated image
Summary: Rajeev Thakkar’s latest letter to Parag Parikh Flexi Cap Fund investors makes several claims about its cash position, recent underperformance and investment choices. The fund’s monthly disclosures will offer investors a way to test whether Thakkar’s promises and positioning hold up.
Rajeev Thakkar has told unitholders that the cash in Parag Parikh Flexi Cap Fund has fallen from a peak of near 25 per cent to 14 or 15 per cent, and will reach single digits. Monthly portfolio disclosures will show whether it does. Nothing else in his letter dated August 4 can be checked as cleanly.
The letter answers two hard years. The fund lost 9.97 per cent in the fourth quarter of FY26 against the Nifty 500 TRI, and its five-year annualised return is 13.77 per cent. At Rs 1.43 lakh crore on June 30, it is India’s largest actively managed equity scheme. Value Research rates it five stars.
Critics blame the size. Thakkar rejects that, and points to 2007, when he managed a worse stretch of underperformance on a portfolio management book of a little over Rs 100 crore. The strategy explains it better. A fund that buys stocks and sectors the market has turned against will trail for stretches of a year or more. This one is ordinary by that standard.
Nifty 100 trades at 20.8 times earnings, Nifty Midcap 150 at 30.7 and Nifty Smallcap 250 at 34.6 (screener.in, August 4). Small companies cost about two-thirds more per rupee of profit than large ones. Anyone treating it as a law of physics that smaller companies deliver higher returns, he writes, should look at the US.
On IT services, he is buying the sell-off, and says this makes him an outlier. AI may write much of the code, but the work of implementing it remains, and attackers using AI will create demand for cyber security. He cites two essays by Benedict Evans (see the text below the line).
He declines the fashionable themes. No Defence, no Energy Transition, no Fintech and no direct holding in the companies building AI models, though he owns the hyperscalers selling the computing beneath them.
HDFC Bank is the fund’s largest holding at 8.33 per cent, and he is staying. The problems reported so far are unwelcome, he writes, but do not threaten the customer franchise, and he separates them from what he describes as the fraud at one private bank and the under-reported derivatives losses at another. He held ICICI Bank through similar criticism.
Read it as a document you can hold him to later, which is more than most fund manager letters offer. It gives no reason to sell a five-star fund behaving as a flexi-cap fund should across a full cycle. Note the cash figure today, then check the March portfolio disclosure. That number will tell you whether he meant it.
What Benedict Evans argued
Thakkar’s letter points readers to two essays by Benedict Evans, a technology analyst, as background for his view that fears about AI and employment are overblown at the aggregate level. This is one of them, AI and the automation of work, published in July 2023. Automation has destroyed jobs for 200 years, he argues, and every wave created new ones nobody could forecast.
The lump-of-labour fallacy is the mistake of assuming a fixed quantity of work exists. The Jevons Paradox says that making something cheaper leads people to use more of it. Typewriters let one clerk do the work of 10, and employers hired more clerks. The computer spreadsheet arrived in 1979, and accounting employment rose.
A language model does not look up an answer. It produces the kind of answer such a question usually attracts. That makes it useful wherever you want many interns who draft fast and whose work you then check.
Also read: Why PPFAS's CIO isn't worried about FII selling
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
