Parag Parikh to focus only on equity diversified fund, shut PMS

PPFAS Asset Management Private Limited (PPFAS AMC), the wholly owned subsidiary of Parag Parikh Financial Advisory Services recently received Securities & Exchange Board of India (Sebi) approval to launch its flagship scheme, PPFAS Long Term Value Fund, which will be a diversified equity fund without any sectoral or market-cap bias.

The new fund offer is slated to open on May 13 and will close on May 21, 2013.

The scheme will refrain from investing in equities if there are no good opportunity and may even stop fresh investment if the size of the fund grows manifold. “The scheme will invest 65 to 100% of its holding in Indian equities and up to 35% cold be invested in liquid instruments or foreign equities,” says Rajeev Thakkar, CEO and director of  PPFAS AMC.

To be able to sell their conviction in the scheme both Thakkar and PPFAS chairman, Parag Parikh, say they will invest their personal savings in the maiden scheme. This would be avoid conflict of interest with investors.

However, he does not feel that the fund is targeted towards a high risk-taking investor. “Investment in foreign equities will eliminate the own country-risk that restricts returns, it helps diversify the holding and take exposure to under represented Indian companies through their parent firms especially in the upstream oil and pharmaceutical space. This helps lower the risk of investment,” explains Thakkar.

The company does not plan to launch any other type of equity scheme, at least in the next 2-3 years, especially sectoral themes.

Parikh says the company has informed its existing investor of the new fund and 400-450 of 650 clients is ready to invest. The transition can take six to 12 months, though. Given that most of the client are a part of the company's portfolio management scheme (PMS), they ought to have a high risk appetite. Foreign equities is not for conservative investors.

The fund's target investor is one who understand equity investment and can stay invested for the long term, say five years or more. “We warns investors with lower investment horizon of lesser returns,” says Thakkar.

After Sebi's Alternate Investment Funds guidelines last year, which capped minimum investment limit for PMS at Rs 25 lakh, PPFAS' PMS business (with around Rs 350 crore under management) hardly added any new clients. Plus there are many more operational requirement also now like stricter Know-Your-Customer, power of attorney, custodial agreement and brokerage pact. The company plans to wrap-up the PMS business to focus on mutual funds only, also to avoid conflict of interest between customers.