You must have heard the name of Parag Parikh, the veteran who has spend decades in the Indian stock markets. He runs PPFAS (Parag Parikh Financial advisory services) . They have been running PMS scheme for quite a while now, since 1996!. They have been practicing value investing from decades and now they have decided to enter the mutual fund space, not just as another also ran, but with a very clear focus. They want value investing to be the prime focus of investing in equities and have come up with “PPFAS Long Term Value Fund”. SEBI has cleared it and it will launch by next month!

Here are few questions I asked Rajeev Thakkar (he has been managing the PMS for PPFAS since 2003).

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.

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.

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.

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.

Apart from these, there are a few more differences which have been outlined on our website

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.

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.

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

OR

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.

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.

Conclusion