Your fund house has been witnessing healthy growth in the last one year. What are the three things that have contributed to this growth?
We have been following our investment discipline, process and philosophy for more than 20 years - earlier as a PMS and now as a mutual fund. So, the conviction and confidence in our investment approach has always been high. Fund management consistency and discipline is extremely important to take decisive actions on the portfolio.
Secondly, we do not force ourselves to invest if opportunities are not available. We’d rather remain in cash and wait for opportunities and right valuations. This helped when the market fell sharply and we could deploy our cash at some good valuations.
Finally, the fund has a go-anywhere approach to investing. We can invest up to 35% of the portfolio in overseas securities. The wide mandate and our investments in some truly innovative and growing companies has also helped in fund performance.
The world is changing post pandemic. What changes you have made to reset your business to the new realities?
Companies will have to leverage technology to grow business. This was true pre-COVID also. Our focus has always been on enhancing the digital experience and the pandemic has just quickened the process to improve our online experience with a lot more features and a seamless on-boarding process. A lot of our attention is on this area.
We will rethink the amount of travel we do. Or the need to have physical meetings if the distance is long. This period has taught us that virtual meetings can happen smoothly and effectively. This can save a lot of time and resources for the organization.
The other change I envisage is flexibility of work schedule for employees. The pandemic has showed us that work can go on smoothly from home as long as there is proper security and adequate technology at their disposal. So some form of a hybrid model could work in the near future till things get to complete normalcy.
Having said that, we are also currently in the midst of physical branch expansion in different geographies, as we believe that it is still going to be important to have a physical presence and ‘feet-on-street’ for effective servicing of partners and investors.
How do you plan to increase the number of individual MFDs working with you?
Our goal has always been to work with like-minded MFD’s. We want to create a community of like-minded partners and investors who believe and trust our process. So, the focus is not necessarily on quantity, but rather quality of our relationships. We are a niche fund house and the plan is to keep growing the niche with the right partners. The aim is to create trust, visibility and communicate our fund features and thought process as clearly to our partners. We want to give MFDs the best experience and service possible.
Competing on commercials is not an option for a fund house like ours so we need to attract partners through our performance, transparent communication, service quality and a focussed product offering.
Your fund house started with just one scheme and now you offer three schemes. Can we expect more offerings from PPFAS MF in the future?
Yes. We are in the process of launching our debt offering. This will be in the conservative hybrid category.
Your fund house conducts AGMs every year. What is the rationale for this?
Managing investor behaviour is absolutely crucial to building an investor base that trusts and believes in you. These investors will stick with you for the long term and not be too perturbed if there is sometimes underperformance in the short term. For this, there must be complete transparency in communication and honesty in action. One of the things we do in this regard is to have an annual general meeting (AGM) for our unit holders and partners. Here we put ourselves up for the scrutiny of our investors. They are free to ask us any question they might have. For us, it is an opportunity to communicate freely with our investors and let them know our thought process and thinking on various issues. I believe this has helped create a two-way trust factor, which makes our bond stronger.
What is the unique proposition that your fund house offers to distributors?
We have a focussed approach to investing. We clearly define and communicate our thought process to partners. This ensures we are on the same page and expectations are matched. The AGM and other mediums of communication help in managing expectations of partners.
We also have an extremely focussed product offering of 3 schemes currently. This ensures partners are not confused with selection of schemes from multiple products where most do not really add value to the end customer. We are viewed as a speciality store, rather than as a supermarket. So partners know exactly the type of experience they will get from us. We also invest our own money in our schemes, which gives confidence to partners to invest along with us.
We also follow a policy of, 'One commission structure for all our Partners'. Many distributors consider this to be unique and are happy that we do not discriminate and distinguish between partners based on AUM.
This vivid demonstration of our desire to treat all partners equally, helps us attract the right, like-minded partners who genuinely believe in our fund management style and process.
Why should distributors recommend Parag Parikh Flexi Cap Fund and Parag Parikh Tax Saver Fund?
In my experience, the most important characteristics that partners look for is consistency in approach and transparency in communication. Along with these, if the performance is also satisfactory then distributors will be willing to partner with you. Thus, I believe as we get more visibility, more and more distributors will get convinced to distribute our products.
Mutual funds have grown at a phenomenal pace in the last five years. Where do you see the industry in the next five years?
I believe the future for our industry is extremely bright. We are just scratching the surface. We are still in the early stages of growth as genuine interest in mutual funds has only blossomed over the last few years – especially post demonetization – spurred by the poor returns from real estate and the move towards financialisation of savings. This trend will continue and pick-up pace. The penetration into mutual funds is around 10% in India whereas the world average is more than 60%. The potential for growth is immense.
