New entrant

In an annual review on fund families, we spoke to mutual fund honchos to get their views on some of the pressing issues facing the industry. This is what Parag Parikh, the Chairman and CEO of PPFAS Asset Management Company had to say:

What factors would increase the appetite for investing in mutual funds beyond the top 15 cities?
Historically, equities and non-government guaranteed debt products have not been popular beyond the top 15 cities, due to a variety reasons. Firstly they are deemed as complex and difficult to understand and many times youngsters are instructed by the elders not to invest in such products. This carries on from one generation to the next. Unlike gold or real estate, one has to undertake onerous compliance-related procedures as a prelude to investing in them. I also think the high rate of return earned on g guaranteed-products has proved to be a formidable hurdle rate.

While efforts are now being undertaken to spread the word, it may be a while before investors in these cities wholeheartedly embrace mutual funds. However, in the case of our mutual fund at least, we are seeing an increasing number of investors from outside the top 15, from parts of Southern and Western India. This may be due to greater pervasiveness of the English language and the consequent familiarity with the internet in those areas.

Have the direct plans seen greater retail participation?
Nearly 97 per cent of our assets are through the 'Direct Plan'. In the case of other mutual funds, while the overall contribution of 'Direct Plans' may be small, owing to the legacy Assets Under management (AUM), they should contribute a growing share of incremental AUM from this calendar year onwards. While investors could invest directly earlier too, the launch of separate 'Direct Plans' with lower expense ratios from January 1, 2013, means that they will be rewarded for choosing this route rather than rely on a distributor.

What investor education initiatives has your AMC taken?
Since our scheme's inception in May 2013, our Sponsor PPFAS has undertaken a series of presentations in Mumbai relating to a variety of topics pertaining to investing. Each of these has addressed groups of 30-odd individuals. We have also identified a few Tier I and Tier II cities which we will cover over the remainder of this Financial Year. The Knowledge Centre on our website has a blog (Titled 'The Turtle Speaks') devoted to mutual funds. As our CEO, Parag Parikh, is an authority on behavioural finance, he has his own blog titled 'Parag's Views' on our website. Other than that, we also contribute regularly in the mass media.

What's the road ahead for your AMC?
As committed by us, we will not launch any equity scheme other than our current one, PPFAS Long Term Value Fund. We believe that the current scheme has enough flexibility to invest across a variety of asset classes, and a profusion of equity schemes will only serve to confuse investors. However, we may launch a liquid / debt scheme, going ahead.

We will continue to position our scheme as one which is meant for investors with a minimum horizon of five years, and also empanel only those distributors who are interested in communicating this to their clients.

We do not believe spreading our marketing budget too thin over various media. Hence we will continue to focus on the internet for lead-generation and the and social media for engagement. Our off-line activities will centre around investor-education seminars spread across the country. We could list our units on the stock exchanges too, in the future.

Brief us about your personal investment philosophy?
After having dabbled in various methods of investing during the initial phase of my career, (some of which were actually speculation disguised as investment) I have come round to believe that 'investing for the long-term' is the only mode which is suitable to my temperament. All good things take time to fructify, and hastening the process will be counterproductive. While I strongly believe that equities are superior to other assets, as a means of generating superior post-tax and post-inflation returns, I stay away from complex equity / structured products, and usually invest only in sectors and stocks that I understand.

Also, as the Chief Executive Officer of PPFAS Mutual Fund, I have communicated to my team, the overarching credo that fund management is a profession and not merely a business and that is why we must never lose sight of our fiduciary duty to our clients. Hence, collectively, we shun adventurism, and stick to the straight and narrow path. In other words, PPFAS Mutual Fund too adheres to the same timeless and inviolable principles of investing that I personally believe in. Also, my long tenure in the stock market has convinced me that a good investor often has to go beyond the numbers, as investing is as much an art as it is a science. That is why I am a student as well as a keen proponent of the field of behavioral finance, This has been extended to PPFAS Mutual Fund too where key elements of behavioral finance concepts are embedded into the investment process.