What were your key learnings from your dad?
Two things come to mind immediately.
- Do not chase market fancies and current fads. When you chase a market fancy, you pay a fancy price and when that fancy ends, you are left with a fancy loss only. Some examples of this are the IT boom in 2000/2001 and real-estate, power and infra stocks in 2007/08. So avoid sectors and stocks which are too much in the news or ones that everyone is talking about. They are likely to be expensive and high PE stocks which will not have much upside but the downside risk will be very high.
- The Law of the Farm - You cannot sow something today and reap the benefits tomorrow. Just like a seed goes through various seasons and time to become a full grown tree bearing fruits, so do your investments. There can be no short cuts to this universal principle.
Is it difficult to fill in your dad’s shoes?
I don’t think me or anyone else can fill his shoes. His personality is unmatched. What he understood and did exceedingly well over the past three decades is to instil a healthy culture, create a value system and an investment philosophy at PPFAS which will take it to new heights even if he is not present. Even though a lot has changed in the last 10 months (with his passing away), nothing has changed in terms of the value systems and the philosophy that we follow here. It is deeply entrenched in the firm's DNA. In fact, the culture in the office has got better and tighter as he was a mentor and father figure to everyone at the firm. It is a personal loss for everyone at the firm and they are more motivated than ever to make his dream come true - which is to make PPFAS Long Term Value Fund the most preferred equity fund in India. Our collective team effort will get us there.
You have been associated with PPFAS since a long time. How have you seen the company evolve?
The company has transformed itself from a brokerage house to an AMC. The broking business was our bread and butter but our passion was always money management. We started our PMS in 1996. As a natural progression, we converted to an AMC in 2013. We have also closed down all our other services like broking, debt market operations and DP to concentrate on our passion. We did this to have greater focus on what we value the most and also there are no conflicts of interest when it comes to fund management.
In addition, there was a gradual transformation from a family office to a more corporate and organized structure today.
Tell us more about your financial opportunities forums. What message do you spread in these events?
The Financial Opportunities Forum (FOF) is held once a month. Anyone who is interested in the financial markets is welcome to join by paying a subscription fee. In these meetings, we talk about an interesting topic followed by dinner and discussion. The topics range from current events to discussing a company or sector, or anything interesting related to the capital markets. We are trying to build a community where people can come and share their ideas and meet likeminded people. We also record these presentations and put it up on our YouTube channel for those who could not attend and those who are interested in the topic. We do not market or talk about our fund in these events as it is purely a knowledge sharing platform.
Are you planning to launch any new funds, especially on the fixed income side?
No. Equities is our passion and we will stick to it. I do not see us launching any fixed income schemes. We will think about launching an ELSS or some equivalent of that in the near future once we reach a critical mass. The PPFAS Long Term Value Fund is a ‘go anywhere’ value fund. We can invest across geographies, sectors and market caps. So wherever we find value we can invest within this one scheme. I do not see the need to launch multiple schemes and confuse investors further. This is a one stop shop for your equity investment needs if you believe in value investing and have at least a five year investment horizon.
Very few fund managers in India identify themselves with a particular style (growth, value, contrarian etc.). How do you ensure that you stick to your value investing principle?
Again it comes down to culture. The emphasis on selecting quality businesses and good promoters has been ingrained in the organization over the years by Mr. Parag Parikh and Mr. Chandrakant Sampat (Mr. Parikh's mentor) over the years. At the same time, care is to be taken so as to not overpay for businesses.
Our approach to value investing is more Munger/Buffett like rather than pure Benjamin Graham. We like to buy quality at a discount rather than go for absolutely cheap stuff. We compare this to buying a five star meal at Udipi prices rather than just looking for street food.
Have you invested your money in PPFAS Long Term Value Fund?
I am glad you asked this. This is a going to be a very important aspect for investors to choose funds. Most of my family and my money is invested in PPFAS MF. In addition, our fund manager and CIO also has majority of his wealth invested in the scheme. The sponsor, directors, trustees and employees of the firm have also invested in the scheme. They did it because they believe in what we are trying to accomplish, even though it is not mandatory for them to do so. This was very heartening to see. Today, the ‘insiders’ of the firm hold almost 13% of the units of PPFAS Long Term Value Fund.
We go a step ahead by disclosing all our holdings in the fund on our website and update it every month. Thus, anyone can see who has bought more units or who has redeemed. This gives immense confidence to investors and distributors alike. I cannot tell you to invest in my scheme if I haven’t. We were the first MF to have our ‘skin in the game’ and this will be a big game changer in the MF industry going forward.
How many investors do you have currently?
We currently have close to 7,000 investors in the fund.
How do you plan to expand your distribution footprint?
We are strengthening our distribution team so we can reach out to more IFAs. We want to partner with likeminded distributors who share the same philosophy and long term thinking. For that, we reach out to them individually and explain exactly what we are trying to do in the fund and our investment philosophy.
We also tell them the kind of investors we are looking for. This process is slow but we are comfortable with it. We would rather have one right investor than 10 wrong ones. We do not spend a lot on marketing and sales so it is necessary that we reach out to them personally.
Also, we are the only MF that has an AGM for unit holders and distributors in Mumbai, Bangalore and Chennai. In these AGMs, we put ourselves up for scrutiny and answer all questions. The fund manager answers all questions regarding the portfolio and the rationale for investments. This has gone down really well for all as it increases loyalty and transparency between distributors, investors and us.
What are your views on SEBI’s requirement to have a new worth of Rs. 50 crore? Does it help investors?
I believe innovation in the market will come from smaller players as they will need to create a niche for themselves and differentiate themselves from the competition. In the end, investors will benefit from unique products. Today, most big fund houses have similar schemes to each other with only the change in nomenclature. The investor is just choosing the same types of schemes from different fund houses. So I am not in favor of the Rs. 50 crore net worth. We were lucky to be the last fund house to get our license when the net worth was Rs. 10 crore. In a way, the change to Rs. 50 crore has created a barrier to entry for other smaller funds and has automatically given us an advantage. But I am still of the view that the increase of net worth to Rs. 50 crore is not good for the entire industry, especially for investors.
What is your roadmap for PPFAS MF for the next two years?
The plan is not to do too much and keep it simple and continue to do things we are good at. Equity will remain the focus and I do not see us launching new schemes. We will concentrate on performance and reaching out to likeminded investors and distributors. We have identified certain geographies/cities where we are strong and have partners and investors who have warmly welcomed us. We will concentrate our marketing efforts in these areas.
Over time, we will expand our reach to include more places. We will use the common sense approach to money management and will not participate in the madness that goes on in the market place. For example, the mad race for AUM that everyone wants to be a part of. If we just concentrate on our fund performance and get the right people to invest with us, I know over the long term our fund will grow by leaps and bounds with fantastic returns.
