{"id":40890491,"date":"2026-06-12T12:07:23","date_gmt":"2026-06-12T06:37:23","guid":{"rendered":"https:\/\/stockviz.biz\/index.php\/?p=40890491"},"modified":"2026-06-12T12:07:23","modified_gmt":"2026-06-12T06:37:23","slug":"winning-with-market-cap-etfs","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2026\/06\/12\/winning-with-market-cap-etfs\/","title":{"rendered":"Winning with Market-cap ETFs"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">The Parag Parikh stable of funds attract a lot of attention because they are good story-tellers. In their Flexi-cap Fund, they are simultaneously placing concentrated bets on US and Indian equities, hedging, arbitraging, selling cover-calls, making cash allocation calls, and so on. And they talk about it a lot. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">All this activity should surely result in superior performance?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">We had written a couple of notes around this back in <a href=\"https:\/\/stockviz.biz\/2015\/02\/26\/funds-also-invest-foreign-markets\/\">2015<\/a> and <a href=\"https:\/\/stockviz.biz\/2019\/03\/12\/what-is-the-right-benchmark-for-funds-owning-us-equities\/\">2019<\/a>. Our concern revolved around return-attribution. When you are doing so many things, how do we know if you are actually good at any one of them?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you look at returns since the first note came out, they under-perform the MIDCAP 150 index.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/ppfas2\/historical%20returns.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Not that there weren&#8217;t years where they out-performed. However, given all that activity, is this all they could do?<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/ppfas2\/historical%20returns.bar.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/ppfas2\/stats.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">In our second note, we had mentioned that you could, technically, replace the fund with a midcap and S&amp;P 500 index ETF in a 65-35 ratio. So, from that point on, if you were to construct such a portfolio, it would beat the fund as well.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/ppfas2\/PPFAS.vs.ETFs.cumulative.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">It is not that their stock picks are bad. If you analyze the Indian equity portion of their portfolio over time, their stock picks, on average, has delivered 2% over the midcap index during the holding period.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/ppfas2\/charts\/holding_period_summary.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">And while digging through this, we noticed that there is alpha in keeping track of stocks that they have exited.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/ppfas2\/charts\/entry_vs_exit_scatter.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/ppfas2\/charts\/removed_positions_bar.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">There is a decent skew in favor of entries but not as much as exits.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/ppfas2\/charts\/new_positions_bar.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">It is often said that exiting a position is tougher than entering it. In that sense, the fund managers have displayed good skill.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Tracking the current portfolio may not yield much. For example, if you look at positions held for more than 12 months, excess returns are distributed across the spectrum.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/ppfas2\/charts\/holding_period_returns.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Our suggestion is that you can treat the fund as a research project for your own edification, but when it comes to deploying your own capital, you can stick with market-cap ETFs and index funds.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Code and charts on <a href=\"https:\/\/github.com\/stockviz\/blog\/tree\/master\/ppfas2\">github<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Parag Parikh stable of funds attract a lot of attention because they are good story-tellers. In their Flexi-cap Fund, they are simultaneously placing concentrated bets on US and Indian equities, hedging, arbitraging, selling cover-calls, making cash allocation calls, and so on. And they talk about it a lot. All this activity should surely result &hellip; <\/p>\n","protected":false},"author":2,"featured_media":2106273,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[17],"class_list":["post-40890491","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-mutual-funds","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890491","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=40890491"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890491\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2106273"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=40890491"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=40890491"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=40890491"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}