Parag Parikh Financial Advisory Services intends to give deep fee discounts to investors in its equity scheme to be launched in January.
At a time mutual fund companies are striving to extract every penny from the investor, Parag Parikh Financial Advisory Services Asset Management, the newest asset manager in the country, intends to give deep fee discounts to investors in its equity scheme to be launched in January.
PPFAS Asset Management, which received Sebi approval to begin its mutual fund business early this week, intends to charge only 2 per cent as asset management fees from investors. Sebi rules mandate that equity schemes with assets below 100 crore can charge 2.5 per cent as asset management fees, an additional 30 basis points (0.3 percentage) if they mobilise funds from cities beyond the top 15 and an extra 20 basis points (0.2 percentage) if there are redemptions from the fund.
"We will charge only 2 per cent as asset management fees from investors. That was what we charged our PMS investors also," said Parag Parikh, chairman of the eponymous asset management firm.
Contrary to industry practice, PPFAS Asset Management intends to launch only one equity fund. The fund house does not have immediate plans to launch debt funds targeting institutional investors."
"We will have only one equity fund... In fact, we intend to manage only one fund for a few years," said Rajeev Thakkar, chief executive officer of PPFAS Asset Management. In normal course, newly-established fund houses launch short-term debt funds before moving on to equity, sectoral, multi-asset and thematic funds. Fund houses with two to three years of track record may have around four to six debt funds and two to three equity funds.
"We are not here to bundle assets... Our focus at no point will be sales and marketing. We'll focus only on investments," said Parikh. The fund house intends to convert its existing portfolio management scheme (PMS) investors into its upcoming equity scheme. Parag Parikh Financial Advisory Services, the parent firm, manages PMS assets worth 350 crore, the company officials said.
"We'll try to convert our existing PMS investors to mutual funds. This is one reason why we are not charging more than 2 per cent as fees from investors," Parikh said.
The proposed equity fund - to be launched in January - will have provisions to hold up to 35 per cent cash. The portfolio - comprising about 30 stocks - will take liberal cash calls if there are not many investment opportunities in the market. The fund house also proposes to attach a 'subscription closure period' during which time investors will not be allowed to invest in the fund.
"Subscription closure period will kick in only when we feel the market is trading in an over-heated zone. This clause will bar fresh inflows into the fund," Thakkar said.
According to Parikh, PPFAS Asset Management will not forge exclusive tie-ups with distributors. Barring annual trail, the fund house will not pay upfront or after-sales commission to fund distributors.
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