- The fund is managed by those who have been mentored by a well respected value investor, i.e. Parag Parikh. So, as far as the management team is concerned, one can stay rest assured of their caliber and integrity.
- It has been highlighted all over the fund’s website (link), that this scheme is suitable for investors who have investment horizon of minimum 5 years. We really liked this because when you are investing in accordance with value investing principles, you should be ready to wait and have patience. And 5 years give fund managers a decent time period to take rational calls regarding their decisions and not worry about pumping up NAVs on daily or weekly basis.
- A section titled ‘We are different’ says that our investment choices are not dictated by glamorous 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 stray too far from it. This shows that fund is going to stick with time tested philosophy and is not trying to please anyone else.
- The fund managers have decided to bar lumpsum investments during frothy times, i.e., when markets are overvalued. This clearly shows that the fund does not just aim to increase its AUM. It wants to make sure that people do not invest a lot when markets are going higher and higher. They want investors to be fearful when others are greedy.
- The scheme now allows an investment in SIP mode for a minimum value of Rs 1000 per month. This has been reduced from an initial figure of Rs 5000, which would have acted as a deterrent for small investors.
- A small 3 member team would be managing the fund and hence, decision making would be quicker and rationale. There is no cumbersome hierarchy like a lot of other fund houses where analysts would be ‘forced’ to come up with investment ideas on a regular basis, irrespective of the fact that whether the markets are overvalued or undervalued.
- The fund does not have a ‘dividend payout or reinvestment’ option. It is a value fund and hence, there is just one ‘growth’ option. You need to give time to your money to grow. And that is what the fund is trying to achieve with this.
- In Letter from the Chairman, Mr Parikh urges investors to consider the suitability of this scheme with their financial needs, goals, risk appetite and patience before investing. Now this is something which I have not seen anywhere else. Almost all fund managers’ main aim is to increase their AUM and returns they give to shareholders. Nothing wrong with it. But here is one person who, from the onset, is cautioning investors to first see if the scheme matches with an investor’s personality or not.
- Scheme would invest a minimum of 65% in Indian stocks. Rest 35% would be invested in debt, money market instruments & foreign equities. Though diversification in important, we are not very sure as to how the foreign equities part would be managed considering the (little) experience that fund management team has in its dealings with foreign equities.
- The site mentions that a part of the net assets may be invested in the Collateralised Borrowing & Lending Obligations (CBLO). Value investing and CBLO?? We are not very sure about this.
Hopefully, these are not financial weapons of mass destruction (as told by Warren Buffett).
What Should You Do?