PPFAS Long Term Value Fund Investors should consider PLTFV as a viable long-term equity investment option

WHAT IS IT: It is the first scheme being launched from a new mutual fund, PPFAS MF , whose sponsor is Parag Parikh Financial Advisory Services. PPFAS Long Term Value Fund (PLTVF) will be an open-ended equity scheme with a stated emphatic focus on value investing philosophy. PPFAS MF claims this will be the only equity scheme it will ever offer to investors.

NFO PERIOD: The scheme will remain open for subscription from May 13 to May 25, with minimum application amount of Rs 1,000.

ASSET ALLOCATION: Anywhere between 65 per cent and 100 per cent of PLTVF's corpus will be invested in Indian equities, while 0-35 per cent can be invested in foreign equities. The fund can also invest up to 35 per cent in debt or money market instruments.

OBJECTIVE: PLTVF aims to generate long-term capital growth but from an actively-traded equities portfolio.

The scheme offer document states it will buy equities trading at a discount to in trinsic value and will in vest in value stocks with a minimum investment OTHER horizon of five years.

FEATURES: The scheme will be benchmarked to CNX 500 Index that comprises all large and mid-cap stocks.

PLTVF offers only the growth option, although the MF's trustees reserves a right to declare dividends.

UNIQUE PRACTICES: PPFAS MF claims to be the only mutual fund to follow multiple practices. These include value investing, which it feels does not please everyone.

Other practices include focus on being asset managers and not asset gatherers, launching only equity scheme (PLTVF), MF promoters investing a sizeable portion of their investible surplus in PLTVF and disclosing this on its website, and not charging any exit load.

The fund's claims of uniqueness need to be taken with a pinch of salt, going by elements seen in PLTFV's offer document. The fact that it will be actively managing a long-term horizon portfolio of value stocks is a paradox of sorts. Excluding compulsions emanating from redemptions, the MF will sell a stock from PLTFV's portfolio if a change in fundamental factors affected the company or the entire market results in anticipated price appreciation not being achieved. Secondly, if value investing is the driving force, then why has the scheme given itself a leeway to trade in equity futures and options to hedge or undertake any other Sebi-permitted strategy. Given the speculative nature and short-term liquidity concentration of equity F&O positions, PPFAS MF's value investing drum beat comes across as a bit jarring. Despite these factors, investors should consider PLTFV as a viable long-term equity investment option.

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