I’ve tried to list here the best Value-investing themed mutual funds in India. There aren’t many, actually – and while I’ve excluded a few from the table below, I’ve written my thoughts on why they didn’t quite make the cut – to me.
There are many excellent PMS options in India. But, if you prefer not to set aside 25L-50L at one go, then the mutual fund options below (PPFAS and the MOSt Focused funds from Motilal Oswal) offer a fantastic opportunity to participate in the phenomenal, and inevitable India growth story.
I have recommended these funds to my near & dear ones. The key is to commit to set aside a fixed amount every month from one’s salary and make sure that a mechanism is in place so you are continuously buying, whether the market is going up or down. You can find innumerable studies on the web supporting why this is such a reasonable and successful way of investing.
* The data below was as of Aug’16. If you feel I have missed any fund which you think ought to be here, please write in & let me know.. .thanks !
- Parag Parikh Financial Advisory Services – is a highly regarded fund following a conservative value investing approach. This is a highly transparent, honest & ethical group that was being headed by a famous and well respected gentleman Parag Parikh, who unfortunately passed away in 2015. It is now being managed principally by his son & by Rajeev Thakkar.
- PPFAS has been in the investment business for two decades, and ran a PMS (closed to new clients) until they decided to simplify and make a single offering to prospective clients – one long-term value investing fund. PPFAS does not, like other AMCs, run a dozen+ funds with portfolio managers having to oversee multiple funds.
- Maximum alignment of interests – the Fund Manager Rajeev Thakkar has invested 7 Cr alongside fund investors, and the AMC board another 9.6 Crores, giving a total of 16.6 Crores. Thus (16.6/664) = 2.5% of the fund’s AUM is aligned with investors. Only one other mutual fund in India comes even close to this level of commitment, and that’s the one below. [ source | PDF ]
The PPFAS fund has returned ~20% CAGR since inception (~3Y ago) & has one of the lowest turnover rates in the industry. In practice, they are even closer to the “buy right sit tight” philosophy adopted by Motilal Oswal funds. More important than these absolute returns is the quality of the management. I’ve read a lot of what they’ve written (they have an excellent site with a ton of educational info for new investors) I’ve heard Thakkar’s talks and Q&As on Youtube and that’s what gives me the sense that this is an excellent fund to be continuously (regularly) investing one’s excess savings into.
Two words that come to mind in regards to PPFAS : prudence and integrity.
Motilal Oswal’s Focused Multicap 35 fund
I actually came across this fund and this company only last year (late 2015) when I was reading Chris Mayer’s “100 Baggers: Stocks That Return 100-to-1 and How To Find Them” (written with US-listed firms as examples). Chris referenced a very interesting study by this company Motilal Oswal on 100-baggers in the Indian context, so I ended up researching their background.
Two brilliant CAs Raamdeo Agrawal & Motilal Oswal used their savings & borrowed money from friends/family to create a brokerage firm at a near ‘perfect’ time in the ’90s. This story and their investment philosophy is covered in this interview (video) . Alternatively, this article in Forbes gives a good sense of the kind of management this fund represents [ PDF ]
One of the real treasures on their site is their multi-year in-depth study of wealth-creating companies in India, titled “Wealth Creation Study“. No other firm has made such a systematic annual study of India’s most consistent wealth-creators for the past 20+ years – and made their findings public. Each of these annual studies builds on the learnings from the prior review. Agrawal and Oswal are amongst India’s finest value investors, and they’ve distilled the key ideas of Value Investing, what has worked and what hasn’t into a framework for the Indian context – QGLP.
A few years ago they launched mutual fund offerings that are concentrated, low-turnover, “buy right & just hold tight” type investments that are geared towards sustainable wealth creation via India’s robust equity markets. This mutual fund is their flagship offering. What really sets this apart from all other mutual funds in India, is the degree to which Interests are aligned. The firm’s two founders – Agrawal & Oswal have their entire proprietary money invested alongside this mutual fund (see the Forbes article above).
** Oct 18, 2017 update ** About a year after I put this page up, the famous US-based value investor Mohnish Pabrai in an interview with the Economics Times gave a big thumbs-up to the MOSWL Multicap 35 fund. The key takeaway for you, as a reader or someone looking for a mutual fund to invest in, is how important this principle of alignment of interests is.
“I have no stock position in Motilal and certainly I am not getting compensated in anyway. There are two things unusual about them – one is that they do not put out a lot of mutual fund products. They only have half a dozen products. Second, they are only in equities and so they are very focussed.
Third, they eat their own cooking and they eat their own cooking in two ways — Raamdeo Agrawal himself is worth like Rs 1300 crore or something. Every penny of that is in one of his mutual funds that anyone else can invest in. The second is that the company takes its net profit and re-invests it back into their own funds. Out of thousands of mutual fund companies around the world, I do not know very many that do that. In fact I do not know any that focus on 100% re-investment. So, they have some unusual DNA. I have nothing to gain or lose whether you go with them or do not go with them but I think out of the many that I have looked at, they are one of the higher quality players.
Which are some of the schemes from the house that you really like?
I do not know exactly what the name is Focused 35 or Focused 50, but it is one that has Raamdeo himself as one-fourth of the fund. I think they have got about billion dollars or so in that.”
Based on what I’ve read (please feel free to correct me if I’m wrong), I’m not seeing the kind of alignment of interests on the other funds as one can see on the two funds above. So while the funds and managers may be good, I personally would prefer not to allocate monies to them. Please feel free to study these at your convenience and come to your own conclusions.
ICICI Value Discovery Fund
Quantum Long-Term Equity fund
IDFC Premier Equity Fund
Birla Sun Life Pure Value Fund
L&T India Value Fund