By replacing Parag Parikh as Chairman and CEO of PPFAS Mutual Fund, Neil Parikh has big shoes to fill. Here he assures investors that it is business as usual and speaks on why his equity fund is a winning proposition.
A criticism against your fund - PPFAS Long Term Value Fund, is that one questions the analysis of global stocks done by your team. Can you comment on that?
Our analysts look at sectors. So if they are looking at the FMCG sector – they will look at FMCG stocks in India and abroad. Getting information on a company’s financials in this day and age is not difficult and is easily accessible. In fact, there is no dearth of information.
But one can invest in a value fund and have a separate global allocation. For example, a global fund from JP Morgan or DSP BlackRock will have experts across the globe managing it. So how would your fund stand out?
Those would be fund of funds or feeder funds. For one, the expense ratio would be much higher.
Secondly, such funds will be taxed as debt funds. Since our cap on global stocks is 35%, we qualify as an equity fund which is beneficial under the Indian tax laws.
Worth mentioning is that we hedge the currency and so take no currency risks. On that currency hedge we are making 6% right now. Add 1.5% dividend yield and you get a good tax-free return there itself on the international portfolio.
Also, this fund caters to the investor in every way. The global allocation acts as a balancer. Over the past month or so, when the Indian stock market has been volatile, this fund has held strong.
In this fund we look for opportunities across sectors, across market caps and across geographies. It is exactly what a mutual fund must do – offer convenience to the investor and not confuse the investor with multiple products. This fund does not tie up the fund manager’s hand. If we see great value in Indian stocks, we can go up to 100% in Indian equity, though our foreign stock exposure is capped at 35%. At one time the fund may have a mid-cap bent, another time a large-cap bent. This is a go-anywhere fund – a very fluid and flexible model. So an investor in this fund gets a holistic deal.
Investors are concerned about the absence of Parag Parikh in the investment process. Can you throw some light on that?
Rajeev Thakkar has been the chief investment officer and always has been functioning in that role. All the buy and sell calls are his final call.
While Parag Parikh did give his suggestions and issues are debated in office with the entire team, Rajeev was given full control of the portfolio as CIO. Nothing has changed on that front.
Parag Parikh operated as the CEO and I have replaced him. Fund management was Rajeev’s domain. Nothing has changed on that front.
Can you briefly tell us about your stock selection process?
We are value investors who are focused on bottom-up stock picking. Every stock we pick we look at the long term, after all you are buying a business not a stock.
Naturally, credible management is the key. Management that is honest, displays integrity and looks at the interest of minority shareholders.
We also look at the growth prospects of the business.
The moat around the company.
We prefer low debt companies and those that are cash rich so that we can benefit by way of dividends.
Finally, it has to be available at an attractive price, so valuation matters.
We will stick to a maximum of 30 stocks. Over-diversification defeats the purpose after all to make a profit you need to have a meaningful allocation to the stock.