Letter from Neil Parag Parikh

Dear Investors,

Greetings!

Let me begin by thanking you for your continued faith and support in the three schemes of PPFAS Mutual Fund.

As you are all aware, we are in the middle of a global pandemic and the most important thing is the health of our loved ones and us. I truly do hope this letter finds you well.

Unfortunately, this year it will not be possible to have an in person Unit-holders Meet. We will, however, have an online meeting on October 24th . We hope to make this event as engaging and helpful as the previous ones.

Over the last year, our fund has seen good growth in terms of number of investors and consequently the Assets Under Management (AUM). As such, we thought it is a good time to reiterate a few points as a precursor to the actual meeting.

• We are guided by the 'Law of the Farm' principle. One cannot sow a seed today and reap the benefits tomorrow. The seed must go through various seasons and regular nurturing before it starts bearing fruits. As in farming, investment success comes from regular discipline, effort and a long term outlook. Having a minimum of 5 years investment horizon for equity funds is advisable.
• Our Equity Funds endeavour to provide positive inflation-adjusted returns and at the same time protect the capital from permanent loss by ensuring adequate margin of safety while constructing our portfolio. Our goal is to optimize returns for the long term, rather than maximize returns for the short term. We have and will continue to maintain our investment discipline and philosophy and avoid chasing market fancies. We will continue to stay away from businesses we do not understand and promoters we do not have confidence in.
• Being co-investors with you, we are more concerned/ obsessed with growth of the Net Asset Value (NAV) of our schemes rather than the AUM of the schemes. As such, all decisions that we make, will be with us- the unit-holders in mind.

A few other points/questions -
As your fund (PPLTEF) has seen good growth recently, are you geared to handle higher inflows?

Handling higher flows is not a concern right now and I do not think it will be a concern in the near future. We are still a relatively small fund so there is a long runway ahead in terms of taking in more flows and allocating meaningfully to the ideas we choose. Also the fund is a multi-cap fund that has a mandate to invest in overseas stocks. These are typically large global companies that we invest in, so fund size and absorbing flows will not be an issue for quite some time.

Will you be launching any new schemes?
At this moment there are no plans to launch any new schemes. We will be motivated to launch a new scheme only if we can add value to the end investor, if we can provide some differentiation to the existing category and if we are excited to invest our own money in such a scheme. That said, we realize that there could be a need for low risk debt fund from our fund house. As we feel comfortable, we could launch such a scheme in the future.

What about passive/ index funds? They have started to gain traction in India..
We will stick to being active managers as we believe we are still in a nascent stage of our markets and there is enough opportunity to outperform the indices over a longer term. Also, there is really no way we can differentiate or add value to our investors by mimicking the index.

From a purely economics point, one needs a very large AUM just to break even as it is a low cost structure. I do not think we will suddenly get tens of thousands of crores inflow by launching a passive fund.

Expansion Plans?
Currently we have physical offices in Mumbai, Bangalore, Delhi and Pune. We had plans to open branches in Chennai, Hyderabad, Kolkata and Ahmedabad this year. Obviously due to the pandemic those plans have been delayed until things normalize.

Digital Initiatives?
The lockdown has made it abundantly clear that digital is the way forward. Having a superior online experience was always a high priority for us. This has only reinforced that we have to continuously keep improving and enhancing our digital capability. We will be adding new features to PPFAS SelfInvest app and will continue our efforts to make the online experience as seamless as possible. We have also started working on a separate Distributor App as we realize this is a need for our partners. We will continuously seek feedback from our investors and partners on ways to improve and simplify the investment journey.

What are your plans with regards to the new SEBI circular on multi-cap schemes?
As of writing this, AMFI has sent their representation to SEBI and we are awaiting clarification from SEBI. So it is a wait and watch approach and nothing needs to be done until we have complete clarity going forward. I appeal to our unit holders to not worry and to not take unnecessary actions on your investments. As we run very few schemes, we always have the opportunity to reclassify to a different category without changing the basic structure of our scheme, in case the circular stands as is

I look forward to virtually meeting you all on the 24th of October.

Warm regards,

Neil Parag Parikh
Chairman and CEO
October 2020