Parag Parikh Financial Advisory Services Mutual Fund held the first ever Annual General Meeting of mutual fund unit-holders at Chennai on November 8. It was an interesting and lively meeting with a mix of investors from different age groups and economic strata turning up in good numbers, to attend.
“We wanted to be open to investor scrutiny once a year. A mutual fund belongs to the investors who have put money in it. The Asset Management Company is just the custodian of this money. The industry often seems to forget this”, said Mr Parikh when asked why he was holding this AGM. Apart from Chennai, he plans to hold AGMs in Bengaluru and Mumbai.
The fund house, which now has assets of ₹501 crore under its sole scheme- Parag Parikh Long Term Value Fund, has about 2800 investors. “The largest number of individual investors are from Chennai. That's why we decided to kick off from this city”, Mr Parikh explained.
Mr Parikh made several points in the AGM in his characteristic blunt style. He forcefully stated that there are no plans to expand the basket of schemes. “Most fund houses keep launching new schemes with new themes - mid-cap funds, closed end funds, infrastructure funds. We see no reason to launch any other scheme because our Long Term Value Fund can do everything - invest in any sector, go overseas, take cash or debt calls, hedge risk.” New schemes in other houses may be designed by the marketing teams, but in PPFAS it was the fund managers who designed the product, he stated.
Two, there are also no plans to declare dividends. “Dividends are unethical. They give you the impression that you are getting something extra from the fund. But you are not. The dividend is just your returns being given back to you”, he explained. He said people who wanted dividends were free to redeem units at any time.
Three, he reiterated that the fund did not plan to have a large sales team or use aggressive distribution tactics. “We don't want to sell the fund. We want investors to buy it”, he said.
An informal chat with investors who attended the AGM showed that most of them had invested in the fund not because their advisors recommended it, but based on word-of-mouth from their friends. Many were impressed by the fact that Mr Parikh and the entire staff of the fund house had also invested their personal money in the fund. PPFAS Mutual Fund currently has 45 people working for it and each of them, including staffers such as secretaries, have their 'skin in the game'.
With its 35 per cent exposure to foreign stocks, PPFAS Long Term Value Fund has delivered a 39.5 per cent return in the last one year. Many investors were cognizant of the fact that the fund has not matched the returns of the top funds in the mid and small-cap category. But they said they were quite happy to stay on.
“Yes, it is true that this fund hasn't done as well as Birla Pure Value or ICICI Pru Value Discovery. But they have said clearly that this is for long term investors. So I am prepared to wait it out”, said a middle aged gentleman who owns a large portfolio of equity funds. He has invested in the fund because he was impressed by Mr Parikh's personal reputation and the fund's transparent approach.
After the presentations by Mr Parikh and the fund manager Mr Rajiv Thakkar, investors grilled them for over an hour, raising questions about the portfolio choices and how the fund selected stocks. “We are very happy with the response we got. The questions showed that our investors do have a truly long-term orientation”, Mr Parikh said as he prepared to leave the city.