Parag Parikh, the veteran stock picker, believes in practicing what he preaches. In a confidence boosting measure, he and the other top brass of the PPFAS Mutual Fund have invested large sums in the Long-term Value Fund.
Parag Parikh’s PPFAS Mutual Fund has been started at a rather inopportune time. The stock markets are in the grip of a vicious Bear market and the common man has no appetite for stocks. Mutual Fund redemptions are at an all-time high. It is a tough environment to be in.
Of course, the good thing is that stock prices are low and you can pick up top-quality companies at bargain prices.
But you must first have the money to buy the stocks. And that is where the problem is.
Moneycontrol.com reported that PPFAS Mutual Fund’s equity diversified scheme, Long Term Value Fund, had collected only Rs. 64 crore in the initial subscription period. A chunk of this collection probably came from Parag Parikh and the other top brass of the Mutual fund. The other staff members have also pitched in with their contributions to the Fund.
Details of Holding by Directors of the sponsor company
| Name | Designation | Number of units held |
|---|---|---|
| Parag Parikh | Chairman and CEO | 71,30,000.00 |
| Rajeev Thakkar | Director and CIO | 22,80,000.00 |
| Neil Parikh | Associate Director | 8,50,000.00 |
| Kamlesh Somani | Independent Director | 50,000.00 |
The problem is that the AMC/ sponsor can collect only up to 2.5% of the net assets of the Fund. So, if your AUM is, say, Rs. 100 crore, the sponsor cannot collect more than Rs. 2.5 crore as its fees from which it has to meet all expenses such as the fund manager(s) salary, staff salary, office rent etc, etc. If your AUM is not high, you need to run a tight ship to be able to break even.
I feel that the one thing that would have dissuaded the common man from investing in the PPFAS Mutual Fund is the stern disclaimer that “Investors should note that this Scheme is suitable for investors who have investment horizon of minimum 5 years“. While this is applauded by the intelligentsia and the elite as an enlightened step, the truth is that it diminishes the enthusiasm of the common man.
I personally was put off by the disclaimer. Also, the other thing that would have weighed with the investor is the below-average performance of the PPFAS Cognito PMS.
I feel that the better way to market the PPFAS Mutual Fund would have been to highlight a few multibagger stocks that Parag Parikh would have picked up in his long and illustrious career and to tom-tom that as the USP of the PPFAS Mutual Fund. Then, the common man would have made a bee-line for the Fund and come in droves in the hope that he will also get multibagger returns from Parag Parikh’s stock picking skills.
Basant Maheshwari of theequitydesk.com used this strategy of highlighting his multibagger stock picks when he was marketing the Basant Top 10 Equity recommendation service. The other Mutual Funds also do this.
Anyway, now the most important issue that everybody wants to know is what stocks has Parag Parikh picked up for the PPFAS Mutual Fund. Has he identified any top-quality potential multibaggers? What sectors is he bullish on? FMCG/ Pharma or the beaten down Infra/ Capital Goods/ PSU Banks? What about the consumption theme? Does he have a concentrated portfolio or a diversified one? Also, has he deployed all of the funds or is he waiting for a further correction?
We’ll know the answers to these questions when the first fact sheet of the PPFAS Mutual Fund is released in mid-July 2013.
Till then, watch this space!
The original article could be seen here.