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The Case of a Bold & Beautiful Mutual Fund

The Case of a Bold & Beautiful Mutual Fund


New Age (Non-UTI private sector) Mutual Fund industry in India is more than 25 years old. The industry is generally measured in the growth in its AUM.  AUM of mutual funds industry in India has grown from a meagre INR 65 Crores to INR 841300 Crores in the last 25 years. When the business propositions or market presentations of the fund houses are analysed over this period, we can deduce – (1) that mutual funds primarily relied on the past performance against the benchmark as the key selling point; (2) that NFOs (New Fund Offers) were promoted aggressively to increase share of wallet of retail investors with each fund house; (3) that theme-based funds were launched and promoted with attractive storylines; and (4) that corporate and individual agents were heavily trained and incentivised to push specific funds. Other than these the other routes used to promote mutual funds were through investor education series and seminars, whitelisting of funds through personal finance magazines & websites and of course, digital presence through social media.
A noteworthy observation in the marketing efforts of fund houses as above is that almost every fund house had the same approach. There was no singular fund house that disrupted the flow and attempted a differentiator. May be it was due to the fact that mutual funds were meant to be diversified and hence, from no individual investor a fund house could expect 100% of his allocation to the latter. Given such an ecosystem, what approach can give a new entrant into the industry a kick-start? Does it really pay to focus on traditional marketing model of ‘segmenting, targeting & positioning’? Can there be a disruptive strategy one could adapt at this juncture, when there are more than 40 active fund houses in the market offering more than 2000 mutual fund schemes? It is in this context, this article aims to present the case of a new fund house PPFAS Mutual Fundthat entered the industry in 2011 and launched their first and only fund – PPFAS Long Term Value Fund in 2013.


Promoted by the Parag Parikh family (who have been running a boutique investment advisory firm since 1992, targeting primarily the HNWI investors) PPFAS Mutual Fund claims its mission is ‘to help clients achieve their long-term financial goals through prudent fund management’. The fund is run by the fund management team comprising of three managers, each looking after one segment of investing – equity, debt and foreign equity.  The AUM of the fund is close to touching INR 600 Crores as on Feb 2016, while NAV has grown to INR 15.65 between May-2013 to Feb-2016. The fund’s sectoral exposure is skewed towards Internet & Technology, Banks and Auto Ancillaries. The fund has generated a CAGR of 17% since its inception. The fund claims to invest based on value-investing philosophy following a bottom-up approach, i.e., to focus on individual stocks instead of funnelling down from the macro-economic indicators. In addition to regular opportunistic investing, fund also attempts to make money through certain arbitrage opportunities in the market. Exposure to foreign equities through overseas securities, IDRs and ADRs is an ad-valorem feature of the fund.


Whether it’s a conscious strategy or an internalised philosophy, the fund house glaringly differentiates itself from its peers through its ‘prudent’ approach in managing the fund. And even with a little research into the fund’s factsheet and the website, one can see that there does exist a differentiated approach to everything about this company.
*      Being bold enough to communicate what’s rational: A snap from the company’s website in figure below gives the summary of all its differentiating factors. The very aspect that, monotony of communication by a typical mutual fund is broken, in itself establishes this brand at a different level.
*      We do not aim to please everyone: The fund managers say – “Our investment choices are not dictated by glamourous factors, such as momentum, technical analysis, algorithms etc. We prefer to stick to age-old metrics like cash flow, low debt etc., while constructing the portfolio. This is our circle of

competence and we will never stay too far from it.” Any security analyst would agree that what works for stock in the long-run is its intrinsic parameters and operational performance and the temporal trends, (aka momentum) are meant for speculators.

*      We do not have a
‘Sales Team’”:
 Following a relationship manager approach, rather than a sales approach and suggesting that an investor’s subscription to the fund is the just the beginning of there RMs’ job and not the end, is in itself is a differentiator. Usually, mutual fund houses will have business development executives, who would go all out to meet various IFAs, and corporate agents to push for their fund. In this case, PPFAS stands a little apart. This is also beneficial to the fund house in two other ways: One, it ensures a long-term loyalty of the investor with the fund house; Two, this increases the share of wallet of the investor with the fund house.
*      We strive to educate you before you invest”: Investor education initiatives by mutual fund houses so far, have generally been made at a mass level, and in a way to generate an inroad into the investors’ places. Whereas, dedicated investor education before every client signs up, is clearly the most rational thing to do. This establishes a common understanding between the investors’ expectations and fund’s deliverables. This is the most important trait for any mutual fund, to avoid redemptions during bear runs (panic selling) and thus hurting even those who wish to stay.
*      “We see ourselves as asset managers and not asset gatherers”:

A direct hit on aggressive promotion of mutual funds by other fund  houses through heavily incentivized agency model, PPFAS clearly claims increase in AUM through performance of the invested corpus, instead of increasing the corpus size by fresh inflow.

*      We will launch only one equity scheme”: Whereas fund houses generally have 50 funds (on an average) spread across different themes, PPFAS dares to have only one fund and keeps the liberty to allocate between different asset classes, themes and investing styles within the fund. That is advantageous for the investor as he need not worry about the asset allocation.
*      We hav
e a stake in our scheme’s success”:
Inspired by the Hammurabi Code, close to 13% of the fund’s AUM is held by ”Insiders”  (Sponsor Company, Directors, Key Employees and other stakeholders). This “SKIN IN THE GAME” strategy is bound to gain the confidence of investors in a sweep. This can turn out to be the USP of the fund, as no other fund house has known to have followed such an approach.
*      We will not accept money when valuations are exorbitant”: Rationality states that if there is no opportunity in the market, there is no point accepting fresh inflows into the fund. Accepting lump-sum investments during such times and keeping them in cash, would disadvantage the existing investors’ corpus. There were fund managers like Kenneth Andrade of IDFC Mutual Fund, who use to subtly follow this mechanism, keeping this as a policy framework is a great take-home for the investor.
*      Unitholders’ Meet: Conducting an AGM of unitholders’ creates a kind of confidence in investors. The fact that fund management team meets the investor in itself is a great comfort for a layman investor. This also gives a feeling that fund management team is proactive in its communication and accountable in its execution.
*      Tortoise’ as a Brand Element: The brand logo contains a tortoise as an element. It is meant to signify longevity, timing, and timelessness of investment principles.          
In conclusion, PPFAS may be just a mutual fund, not too differentiated in its product. But, it’s for sure differentiates itself with its value-driven rationalist philosophy. With increased visibility and consistent delivery of promises, as above, PPFAS can be a trendsetter in the mutual fund industry. The case of PPFAS will be a treat for an academician, as it emphasizes the substance over style.


KPMG. (2014). Indian Mutual Fund Industry: Distribution Continuum: Key to Success. KPMG and CII.
Kumar, K. K., & Rakesh, H. (2015). Do Fund Characteristics Determine Fund Performance? Empirical Evidence from Indian Equity Mutual Funds. International Journal in Management and Social Science, 3(1), 250-264.
We Are Different. (2016, March 15). Retrieved from PPFAS Mutual Fund: