The latest entrant to the world of mutual funds, PPFAS will launch the New Fund Offer (NFO) for their “Long Term Value Fund” during the first quarter of 2013-14. Interestingly they will launch just one scheme.
The PPFAS AMC website makes a bold statement on their USP, how they are different, which gives some compelling reasons.
What stood out for me is that PPFAS is very particular about selecting customers. They don’t want you as a customer if you:
- Track mutual fund Net Asset Values everyday.
- To you, the term ‘Long Term” is merely a year or two.
- You believe that investing should be ‘exciting’
- You fear, rather than welcome, stock market volatility
- You believe you have the ability to time the market
- You are impressed by fund managers who profess to be magicians
- You prefer complex mutual fund products to simple ones.
- You depend on periodic income in the form of mutual fund dividends
Lights!: Looking for a true long term investor
PPFAS is emphatic that the scheme is only suitable for ‘true’ long term investors. The reason PPFAS is so particular about selecting the right customers for their product is not hard to find.
PPFAS believes that to be successful in investing one must invest when others are fearful and divest when others are greedy. And since PPFAS Fund would be an open ended scheme, its ability to invest during bear markets will depend on the behaviour of investors. If investors desert PPFAS when prices are low, it will naturally constrain their ability to make investments when valuations are alluring.
Having put through the prospective investors through a sieve, the kind of investor that PPFAS is looking for is as under:
- Who knows the perils involved in instant gratification
- For whom the term ‘long term’ means a minimum period of five years.
- Who gets excited rather than repelled, when stock prices and valuations are low.
- For whom purchasing a stock is no different from purchasing a business.
Camera: The PPFAS Process
Here’s what PPFAS mentions on its website: We will follow a simple (though not simplistic) investment process. As we will not pay mere lip service to value investing, it may mean that often we will be purchasing businesses which are going through a painful phase and are therefore unloved. Each of them will blossom at different points and that is why, there may be extended periods when you may feel that ‘nothing is happening’. While some may regard us as boring, we are adamant that we will never sacrifice prudence for the sake of providing excitement.
Also, the fund managers will attempt to profit from various cognitive and emotional biases displayed by companies and market participants. In other words, along with the dissection of financial statements, there will also be an overlay of the study of human emotions.
Also, having strong conviction in the principle of compounding, we will offer our investors only the ‘Growth Option” and not the ‘Dividend Option’.
Being an equity mutual fund scheme, we cannot guarantee any returns. However, what we can assure you is that we will manage your money prudently in order to help you get closer to achieving your long-term financial goals.
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