This past May, Parag Parikh Long Term Value Fund completed 3 years. Overall, we are happy with the performance and the response that the fund has generated. But only looking at returns in isolation is not prudent. We need to look at the risk adjusted returns. On that parameter, I think we have done a wonderful job. (Please see the Fund Factsheet for Quantitative Indicators and Returns.)
Over the last 3 years, we have been getting a lot of feedback and suggestions from clients, employees and other market participants regarding certain particulars of the fund. I thought it would be a good time to communicate our stance for a few of those points.
Net Worth Criteria
As most of you'll will be aware that SEBI has increased the Net Worth criteria for Mutual Funds from ₹ 10 crores to ₹ 50 crores. We have until May 2017 to reach that number. I am happy to inform you that we will be reaching that mark by December 2016 itself. We have done this through the organic route by internal accruals and the promoters pumping in some capital.
Direct Plan Expense Ratio
One of the recurring feedbacks we got was that the Direct Plan Expense Ratio of the scheme is on the higher side. With all professions/business ventures, as scale grows costs automatically come down. Also, with the Net worth Criteria mentioned above, it did not provide us any leeway to change the expense structure. As we stand, with our Assets Under Management (AUM) of ₹ 648.30 crores (as on June 30th, 2016), the Direct Plan expense ratio is 2% + Service Tax (ST). Going forward, as the AUM increases we will reduce the expense ratio. The reduction in expense ratio will be on the total corpus, and not just on the incremental flows.The planned schedule for that is:
Dear fellow investors,
It is said that tough times are the litmus test of character. If that is so, the current investment environment must surely be testing the character of equity investors worldwide. While good times lull oneself into believing that one is a genius, difficult times make us feel like we are failures. However, both these extremes do not depict an accurate picture.
From February 2014 to March 2015 (Colloquially known as the 'Narendra Modi Rally'), making money through equities seemed like the easiest thing in the world. Then onwards, gradually, it appears that making money in anything but equities is easy. As often happens, perceptions change faster than the underlying reality.
Seemingly paradoxical factors like slowing global growth in one area & rising interest rates in another, falling commodity prices in some countries & falling unemployment in others are going head-to-head with the usual suspects such as entrenched geo-political tensions, rising political queasiness, lack of reforms on the domestic front, etc.
All these are causing considerable disquiet among some of you. We are being asked questions like...”Do you think we will see a reprise of 2008?”, “At what level will we bottom out?”, “Is the India story over?”, etc.
We do not profess to know the answers to all your questions. We do not really know where the bottom is or when the market will make a new high. Similarly, we cannot 'confidently' say that interest rates in the USA will keep rising or that rates in India will keep falling or where oil / the Indian rupee is headed.
However, we do know certain things:
History has consistently proven that equities are the best asset class to beat inflation over long holding periods.
Purchasing stocks / equity funds during times of pain, is more rewarding than purchasing them when the atmosphere is cheery. The best time to buy is when you are fearful and least feel like buying. Ask yourself : Are you feeling that way right now?
When in doubt, investing through a Systematic Investment Plan (SIP) is the best approach. It instills discipline and de-links the emotional element from the act of investing.
I suggest you refer to the section 'Investment Lessons' on our website for evidence of these three assertions.
At PPFAS Mutual Fund, we have resolved not to be perturbed by the mood-swings around us. We were neither euphoric in early 2015, nor despondent today. This, despite us having our skin in the game by holding nearly 12% of Parag Parikh Long Term Value Fund's corpus.
However, such impassivity should not be mistaken for apathy or ignorance. Our investment team is willing and able to respond appropriately to various evolving scenarios. While we do not ignore macro-trends, our unwavering focus remains on choosing good businesses at sensible valuations and holding on to them across business cycles.
Our Founder, Mr. Parag Parikh is never far from our hearts. It will be worthwhile to recount some of his teachings during these turbulent times:
“Nothing is permanent. Good times will be followed by bad times...and vice versa. Maintain your equanimity in all circumstances.”
“The Law Of the Farm will always reign supreme. You cannot sow something today and reap tomorrow. Just like every seed has to pass through several phases before maturing, so do your investments.”
“Success in investing is as much dependent on patience and diligence, as it is on competence.”
When it comes to forecasting... “Your guess is as good as mine”.
Dear fellow investors,
Let me first introduce myself to you. My name is Neil Parag Parikh and I have recently taken over as CEO of PPFAS Mutual Fund, after the untimely passing away of my father, Mr. Parag Parikh.
I have been associated with the organisation for over 11 years now, in various capacities. I promise to uphold the high standards and strong values that we have set ourselves. The vision and dream that my father had for our Fund has now become a purpose and promise to him. I am extremely confident and motivated that we will exceed all his expectations, even as we abide by the values and investment philosophy so cherished by him.
I want to reassure all of you that my family and I are fully committed to achieving our mission of being regarded as the most preferred Indian equity mutual fund in the years to come.
While a lot has changed over the past month... at the same time, nothing has changed. Our prudent approach to managing your money, our personalised touch, and our commitment to you remains as steadfast as ever.
Our investment team remains the same. Rajeev Thakkar continues to manage our fund along with a strong research team. There are no major shifts in the organization structure and we continue to manage your money prudently following the value investing philosophy.
Mr. Aalok Mehta Shah and his team continue to manage relationships for clients and distributors. They will be delighted to answer your investment related queries.
Please do not hesitate to contact us on firstname.lastname@example.org in case you have any queries or concerns about the road ahead. We will be delighted to redress them. We are always open to suggestions and feedback.
You are the owners of this fund and we will put ourselves up for scrutiny. Continuing with that tradition, we will be having our Annual General Meeting (AGM) in Mumbai, Bangalore and Chennai in the months of October/ November 2015. The details will be mailed closer to the dates.
I sign off by sincerely thanking you from the bottom of my heart for standing by us during these trying times. It is you who have given us the strength to be resilient. I can promise you that the faith and trust shown by you will be vindicated.
Once again, the entire team at PPFAS Mutual Fund is more determined than ever, to fulfil our collective vision of being viewed as the most preferred Indian equity mutual fund.
Chairman and CEO