So, I decided to directly catch Rajeev Thakkar , CEO & Fund Manager of PPFAS Mutual Fund to answer few questions for our readers. This should give us a clear idea of their vision. Those of you, who would really like to invest in equities for a very long term like 10-12 yrs, can place your bets if you find you are interested.
Here are few questions I asked Rajeev Thakkar (he has been managing the PMS for PPFAS since 2003).
1. A lot of investors still do not know about PPFAS . Would you like to share its history?
PPFAS Ltd. our Sponsor, was incorporated in 1992. Prior to that, our Chairman, Mr. Parag Parikh, ran a proprietary organisation from 1979. It was one of the earliest recipients of the Portfolio Management Service (PMS) licence, having secured it in 1995.
Over the years, it has transformed itself from being a stock and fixed income brokerage house to a reputed Portfolio Manager and currently manages over Rs. 300 crores in its flagship scheme. It has now embarked on the next step in asset management by sponsoring PPFAS Mutual Fund.
2. Why PPFAS entered Mutual funds when you already had a successful PMS ?
The main reasons behind this move are -
a) Over the years, the landscape for PMS has become progressively challenging for the investor. A hike in the minimum ticket size and increasingly tedious account opening procedures are two examples.
b) A PMS product is also perceived to be an opaque one – though we can proudly say that we defy this perception by disclosing various key data points on our sponsor’s website [www.ppfas.com].
c) Tax treatment of capital gains in a PMS product has also been a point of contention, subject to various interpretations based on the nature and frequency of the transactions .
On the other hand, a mutual fund is a far more regulated and transparent investment vehicle as compared to a Portfolio Management Scheme. Unlike PMS schemes, a mutual fund scheme’s performance, portfolio etc. is tracked by independent research agencies on a regular basis. This helps an investor in making comparisons and allocating capital accordingly. It scores on the operational front too. For instance, each time a client opts for a PMS scheme he/she has to undergo
tedious and time-consuming Know-Your-Client (KYC) related formalities.
This can be obviated in case of a mutual fund, where one KYC / KRA number is valid across all mutual funds. An investor is also able to deploy smaller amounts of capital in a mutual fund scheme. This is especially helpful when they are testing the waters. This latitude is all the more useful, now that the minimum initial corpus for a PMS account has been raised from Rs. 5 lakhs to Rs. 25 lakhs.
For fund managers too, a mutual fund is operationally easier to manage as it does not call for segregation of individual accounts, separate order placement etc. Unlike a PMS scheme, a mutual fund scheme is treated as a pass-through vehicle, thereby making it a more tax-efficient vehicle for investors.
3. Can you share why you have come up with just a single equity fund? Won’t you come up with 5-10 funds ?
Yes. In an age of ‘the more the merrier’ we walk alone. Others may launch an array of equity schemes with narrowly focussed objectives, but we believe, this leads to needless duplication and confusion.
PPFAS Long Term Value Fund’s mandate permits it to invest in companies, unfettered by any self-imposed limitations with regard to market capitalisation or geography. We believe that if our investors’ objectives can be met through one scheme there is no need to launch a slew of them. Hence it will be our only offering in the equity segment.
4. What are the top 3 things which you feel will be different with PPFAS LTEF and other equity funds in market? What is the value proposition you are offering?
The top three differences between us and the others is -
- We will be the first mutual fund to disclose the holdings of key employees of PPFAS Mutual Fund in the scheme.
- As mentioned above, we will launch only one scheme in the equity segment.
- On our website (amc.ppfas.com) we have explicitly mentioned the kind of investors, we do not want. I do not know of any other mutual fund which actively discourages the wrong kind of investors from investing in its schemes.
Apart from these, there are a few more differences which have been outlined on our website
5. As It is a new entry in mutual funds, a lot of investors might want to wait and watch for the performance of your NFO. What do you have to say about it?
Sure… We are cognizant of that.
That is why we are not hard-selling our scheme through the mainstream media at this juncture. Also, that is why we have not approached the national distributors / banks. Only a few distributors (currently 20) who believe in our approach have signed up with us.
Many key investors in the PMS scheme of our Sponsor, have agreed to migrate to ‘PPFAS Long Term Value Fund.’ They will form the nucleus of our scheme. Besides these, we have received over 300 expressions of interest from new investors through our website and other sources. Some of them may invest either at the New Fund Offer stage or soon thereafter.
We envisage greater interest among the distributor community after a couple of years, once we have built a track record and are actively tracked by reputed agencies such as Morningstar and Value Research.
6. I am sure a lot of investors might want to invest through DIRECT route now. How can some one invest easily with PPFAS, because right now I suppose you do not have a lot of offices across India or in various cities?
We are actively promoting the benefits of investing through the Direct Plan, positioning it as a cost-effective mode of investment. Investors can choose between
The online option - via our website
The offline option - Investors can submit the duly filled forms either at our Corporate Office in Fort, Mumbai or at any of the offices of our registrar, CAMS, who will double up as Points of Collection. CAMS has a very good network of offices India-wide.
7. What is your outlook for next 10-20 yrs for equity markets? I am asking you this, because you have come up with a equity fund, saying that it’s a long term fund.
While our scheme stresses on the long-term it does not necessarily mean that we have any strong view on the state of the overall stock market. Our premise is that investment-worthy stocks will be available irrespective of index levels and we prefer to concentrate on that aspect, rather than crystal-gaze.
Having said that, we obviously believe that equities form an important constituent in the portfolios of most investors now and over the coming decades and as a corollary, you could infer that we are positive on the future prospects of equities in general.
8. Anything else you would like to tell our readers?
Just like the boilerplate which states ‘Read the offer document carefully before investing’ we urge investors to read the contents of our website carefully and then decide whether you would like to invest with us or not.
While we cannot guarantee you any returns owing to the volatility inherent in equities, we will manage your money prudently, based on the time-tested principles of value investing, and play a role in helping you achieve your long-term financial goals. We are here for the long-term and our journey is just beginning. You could join us if you believe in our method of money management.
Scheme Information Document – PPFAS Long Term Value Fund
Here is the Scheme Information document of PPFAS Long Term Value Fund attached below.
While there are tons of AMCs in India, most of them focus on too many funds. PPFAS mutual funds seem to be very focused on what they believe in and seem to be on the path to evolve as a fund house that’ll be known for value investing. In a recent interview with firstport, Mr. Parag Parikh is sharing how they are themselves going to put their own money into the fund, so that there is inherent accountability and committment.
About 29 years ago, I started off as a broker and we were the first brokers to have a research department. That was the competitive edge which I wanted to get the institutional business, because that was cornered by about 12-13 brokers. As far as broking was concerned, we always believed money management is a profession rather than a business. When it is a profession, you do what is good for the client. But when it turns into a business, you do what the business demands.
Unfortunately, in mutual funds today you have this mad craze for getting assets under management. You have marketing teams, distributors. You pay them anything to get the money. From our MF’s point of view, we were professionals and we will keep it that way and run the MF as professionals. That’s the idea.
Ultimately, when you invest in our fund, what are you looking at? Returns. That is where we want to be game-changers. Secondly, what is your commitment to a fund? Today, me, Rajeev (Thakkar, CEO of PPFAS AMC) and all our senior people are going to make our own equity investments through the fund. We have to believe in what we’re doing. Whatever equity investments we have in the market, we’d rather put that in the fund.
Are you going to invest in PPFAS mutual funds ? Anyone !