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
11 thoughts on “Best Value Investing Mutual Funds India”
Thank you for this article.
Do these funds still hold good as they are dated 2016?
Hi Rahul, yes still holds true..
If fund managers not invested personal money in funds they are managing professionally, doesn’t it also means fund’s objective might not match their personal risk profile and expectations. What do you think?
sure, this may be true of the (mutual) fund manager – and valid from his point of view. We, as investors, or future-investors have to see this matter from our point of view – and my take on this is that alignment of interests is a must, i.e non-negotiable. I would want the fund manager to act as if s/he were managing his own money. When this is absent, he ends up managing “OPM” – Other People’s Money, which psychologically is handled very differently.
The Fund size of MOST Focused 35 is 13K crore. Is it a concern?
Can you please share other Value funds if you find any where the Fund manager invested in the same fund.
Not really a concern.
Look at the Quantum fund.
Had been invested in idfc prem equity since 2007, gave good returns. But as of late the returns have not been impressive especially 2015-18 period.This lull also coincides with the exit of fund manager Kenneth Angrade in 2015, I guess.
Should I switch my fund from prem equity to MO or PPFAS.
First, congrats for having been in equities since 2007 – a good decade+ innings to start with.
I would not switch to chase returns. See https://valueinvestingfundsindia.wordpress.com/how-to-manage-your-return-expectations/
The reason for switching to a new fund must be clear in your mind, because it is always possible that when you jump ship, the old ship runs faster. See https://twitter.com/rajeevthakkar/status/1011412449826926593?s=21
This is unfortunately the agony & pain of most retail investors.
Consider the issues plaguing most MFs in India : https://valueinvestingfundsindia.wordpress.com/issues-with-mutual-funds-in-india/
I only list here two MFs (PPFAS & MO-35) which I think meet various criteria – skin-in-the-game, first & foremost. I think this alignment of interests helps build trust and conviction. I’m willing to be there on the journey if even the Fund Mgr has to take the hardships along the way.
Rest left to you
I started SIP IN MOST -35 from Feb-18, but The performance is not satisfactory and fall is quite steep when compared to other multicap funds. Is a bloated AUM THE cause for food performance besides market fall.
1) please see “how to manage your return expectations” https://valueinvestingfundsindia.wordpress.com/how-to-manage-your-return-expectations/
2) Keep a long, long time horizon. If you expected your fund to start “performing” the moment you started investing in it, or only decline in-line with other funds and no more, you are probably not thinking of investing correctly. Equities is a LONGER, not shorter duration asset class than even real estate. Continue your SIPs & see after a few years.