Financial services players who offer equity broking and portfolio management services are increasingly exploring the mutual fund space. Motilal Oswal, for instance, just launched an actively managed fund.
The latest entrant is Parag Parikh Financial Advisory Services (PPFAS), which has a long track record in portfolio management services. PPFAS is launching its 'Long Term Value Fund'.
The fund's investments in Indian equities would be to the tune of 65 per cent of the portfolio, with the rest being invested in international equity and/or debt.
The scheme emphasises on two important aspects of investing - a value focus and a long-term perspective.
PPFAS is targeting those interested in staying invested for a period of at least five years, for meaningful capital appreciation. Also, its focus seems to be on value investing and traditional parameters such as price-earnings multiple, return on capital, cash flows and debt equity ratio, among others, to identify stocks. In other words, 'flavour of the month' or momentum stocks and sectors may not find a place in the portfolio unless valuations are compelling.
There are many advantages to the fund's intended investing style.
Remaining firmly anchored to value means that there is greater scope for capital appreciation over the long term of five - seven years, though it may mean missing out on some short rallies.
PPFAS Long Term Value does not have any specific bias towards stocks based on their market capitalisation and is likely to be a multi-cap fund. This could help the fund rove across the market for suitable choices, widening its universe.
The scheme would stop accepting lump-sum investments when it feels that the markets have become overheated, though it will continue to accept investments through the SIP (systematic investment plan) route.
Another attractive aspect of the scheme is that it would not pay its distributors any upfront commission, but only trail fees.
Interestingly, for a fund that seeks to keep its investors hooked for the long term, it does not intend to charge exit loads across any timeframe. The AMC has indicated that its senior management team would invest a 'substantial' portion of their personal investible surplus in the fund.
THE INTERNATIONAL PORTION
The fund will also invest in international equity, which can be as high as 35 per cent of the portfolio. This will help in portfolio diversification.
Templeton India Equity Income has a similar mandate that enables it to invest locally and in other emerging markets. It has delivered quite well over the past five years.
With returns of 7.3 per cent annually, it has leveraged well its substantial experience in investing in emerging markets.
Of course, PPFAS' track record in overseas investing is untested and hence may be a tad risky.
But in recent times, Birla Sun Life International Equity, a fund that invests entirely overseas, has done quite well without any entrenched experience in investing overseas. This would be encouraging for the likes of PPFAS. The fund may also invest up to 35 per cent in debt.
But 65 per cent of investments would be in Indian equities so that it gets tax exemption on long-term capital gains. It remains to be seen how the value focus, alongside international diversification, pays off for the fund.
The original article could be seen here.