If you are an investor in Parag Parikh Long Term Equity Fund, you have most likely received a communication about change in fundamental attributes of the scheme.
A fundamental attribute is one which alters the core proposition of the scheme and includes things such as change of asset allocation, which the Parag Parikh scheme is doing.
Update in Aug 2019: the scheme has now included REITs or Real Estate Investment Trusts and InvITs or Infrastructure Investment Trusts as a part of its allocation. The scheme can invest upto 10% of the NAV in REITs and InvITs.
As per SEBI guidelines, no scheme will have more than 10% allocation to these investment options and the limit for any single issuer is 5%.
Update as on Sept 12, 2020: The scheme is also now going to use covered call options as a part of they investment strategy.
Why the change in fundamental attributes?
Fair question. When the scheme was launched, these options were not available and hence not mentioned as part of the scheme offering. Given the mandate of Parag Parikh Long Term Equity fund, they would like to include these options too for any future investment opportunity that may come up.
It is only an enabling provision.
Does it increase the risk of the scheme?
In my view, it actually gives the scheme options to diversify further, and hence reduce risk. This is not a certainty though.
What should you do?
The core mandate of the scheme is the same, to be a go anywhere, multi cap fund. The fund’s options increase to work on that mandate.
I don’t think any action is required on the basis of these changes.