The Test Cricket Investing Of Ppfas Neil Parikh Rajeev Thakker Mf Chronicles
read summary →TITLE: The Test-Cricket Investing of @ppfasltd | Neil Parikh & Rajeev Thakker | MF Chronicles CHANNEL: |Vikaas M Sachdeva DATE: 2026-02-06 ---TRANSCRIPT--- : You actually came right in the middle of this decade. : And you’ve been one of the : success stories of this decade : so far. : Real success doesn’t announce itself overnight. : It compounds quietly through : discipline, patience and earned : trust. : Neil Parekh and Rajeev Thakker from PPFAS Mutual Fund. : Voices behind one of India’s : most respected long term : investing journeys. : Join us on MF Chronicles. : They talked about Covid. : See the local markets. : Everybody knows everybody has a view on it. : But you were also investing into : global stocks because of the : situation. : Stock prices fell forty percent. : Most of us ran down our savings account. : FDS put all the money into the scheme. : Before the Covid struck, we had about thirteen percent cash that : we ran down to two or three percent whatever bare minimum we : could keep, and we communicated to clients, if you have : investment capacity, be greedy when others are fearful. : Foreign stocks. : Incidentally, the ones that we own were the biggest : beneficiaries of Covid OTT video consumption, music consumption. : You know, you said that if you’re in a forest and you see a : tiger, what can you do? : Whatever needs to be done will be done by the tiger. : I think that’s pretty apt in : terms of what happened in twenty : sixteen when demonetization was : announced. : Obviously in twenty fifteen, our founder passed away again. : That was a big jolt and we didn’t know how things were : going to pan out. : So I would say that the first : six years was about survival for : us. : It was that keep doing the same boring things consistently well, : and hopefully there is light at the end of the tunnel. : And what we set out to do was : get people who are sticky with : us sticky investors, sticky : distributors. : So whenever there are these problems, which I have a three : month, six month impact, which causes stock prices to fall : anywhere twenty percent, thirty percent, forty percent. : We love those kind of situations. : Please explain a little bit more. : Hello and welcome to another episode of MF Chronicles. : if 1995 to 2005 were the pre two thousand and five era was : basically an era where the seeds of the private sector mutual : fund industry were being sown. : Two thousand and five to twenty : fifteen was when regulation and : structure were coming into : place. : Twenty fifteen to twenty twenty five. : One would argue that this was the time when mutual funds : really came into their own. : You’re talking about significant : rise in AUM product categories, : which were doing well, started : really proliferating newer : mutual funds coming in the : mutual funds campaign making its : debut, and a host of other : things. : It’s indeed a pleasure to welcome the team from Parag : Parikh Financial Advisory Services mutual fund. : Did I get that right for you? : Parikh financial advisors. : Okay. : I will always go with Parag Parikh : Financial Advisory I’ve got : a strong emotional connect and : it’s a pleasure to welcome Mr. : Neil Parikh, the Chief Executive : officer, and Rajeev Thakker, : the chief investment officer. : They : are obviously known to all of you. I : think a lot of us have heard, seen, read them, read what they are : talking about. But : what I am going to talk to them today is how they have seen the : growth of the industry, especially in the last decade, through : their eyes. So : get ready for a host of anecdotes, ideas, insights as we progress : the conversation. Very : warm. Welcome : to the show. Thank : you, thank you, thank you so much. Okay, : so I was just talking about : the growth of the industry. : And : in a way, when I started looking at this period of twenty fifteen : to twenty five, while I talked about the positives, I think : there were a lot of roadblocks which came in. You : know, there was demonetization, : there was Covid, and : it’s not easy running an open : ended fund at that point of time. : Yeah. : Uh, : let’s let’s start in cricketing : parlance, since we just : won the World Cup, I’m just taking : that as a as the basis of this : discussion. Let’s : go with the power play. Okay. : Let’s : talk about the first few years : of existence when your form : came into play at the asset management : level. Obviously : the firm has a vintage going : back right up to nineteen seventy : nine. But : let’s talk about the asset management business. You : actually came right in the middle of this decade, and you’ve : been one of the success stories of this decade so far. When : you started off, Neal, uh, you : know, this was a decade which : came on the back of frenetic : growth and AUM being one : of the defining criterias of success. : And : here you were. You : said, I’m going to trade a less, : less trodden path, if you will. : What : was in your mind when you started calibrating the growth of : this company? You’re : talking about the setting up processes. And : more importantly, when you saw the landscape out there, what : are the few calls you took? It : would be nice to hear what strategy you employ. Yeah. : So : we started our mutual fund in, : uh, we started in twenty twelve : thirteen. So : it was two years before the decade we were talking about. But : let me just go two years before that and why we started, uh, : the, uh, mutual fund, you know, and this was on the back of : the financial crisis. One : of the things, uh, and, uh, global stocks had taken a beating, : and we wanted to participate in those stocks, you know, : because we thought that, uh, this gives a really mouthwatering : valuations for entry, and we wish we could participate : in that. Uh, : PMS would not let you participate in that, but a mutual : fund would give you that flexibility to invest abroad. That : was one of the reasons why we wanted to go there. Uh, : secondly is that, uh, you know, : we were also third party distributors : of mutual funds at that : point. Uh, : and, uh, at that point, uh, what : happened was that, uh, there : was no categorization of mutual : fund and no scheme categorization, : or you can only launch : one scheme in one category. : And : all of those things. It : was kind of a kind of a cowboy : kind of a way of going about : it, where anyone could just : launch any scheme and write any : title to that India shining or : any of those things, you know. : And : launches came and when we were third party distributors, uh, : the people from other mutual funds would come to us and say that, : okay, why don’t you distribute our product? So : we obviously wanted our clients to win or what is the best : allocation for a client. So : we would get down deep and those people just come with a really : fat, uh, fact sheet, uh, book, you know, and we’re like, what’s : the difference between this and the other thing? And : the third scheme and they all look the same. They : just sound different. But : eventually everything is the same. We : didn’t get a clear answer as such, : and we thought that communication : is a big gap that needed : to be solved coming down with : us, you know, and we said that : what would be a structure that : would be exciting for us to put : our own money, Me, employees and : a few clients that we had in PMS. : What : would be a great structure for that? You : know, because right now mutual funds had fifty hundred schemes : in their things. Like : it’s so confusing for us as practitioners. How : would a layperson even get there and make a wise decision about : where he should invest? We’re : like, let’s make it as simple as possible. Can : one scheme do everything that everyone is doing? So : we we thought of a Swiss Army knife. That : was the concept. A : Swiss Army knife is one device. Multifunctionality. : We’re : like, uh, can we devise a scheme : that will take care of everyone’s : need? Nobody : needs to make any choices. Yeah. : These : people will do everything. You : know, it can become a aggressive : hybrid by taking some cash : position. We : can invest across sectors, across geographies. Uh, : we could take arbitrage position. Do : special situations. Uh, : a whole lot, lot of stuff. So : we’re like, we don’t want to launch more schemes. One : of the things is like, let’s keep it as simple as possible. And : that’s how we went through it. Uh, : one of the inspiration was, uh, : the Warren Buffett’s, uh, annual : general meeting, and we took : inspiration from there and we’re : like, there is a clear gap in : communication. Um, : and if we can solve for that. And : people always wanted to know, : okay, what are these guys doing? : What : is the mutual fund it there was : not that much information at that : point. That : is right now currently there is pre I mean social media was : also not that that much. So : uh, these three or four things : uh, made us want to do this. : And : I think these are the reasons why I think people have seen : that consistency that we’ve been doing it with. And : I think today, I think these are : the same reasons why I think that : got us a bit of success right : now. It’s : amazing. You : know, uh, people talk about doing : market research before launching : anything. You : were actually doing it on the fly. You : were talking to customers, you : were understanding from them. : And : to distill that into such a simple : proposition, a Swiss army knife. : Amazing. : You : know, it will probably be a little bit of a surprise to you. Way : back in the day when we launched mutual funds in the nineties, : or the concept was the same fund launch. This : is, of course, not as refined : as what you were, because : the industry was very nascent. : But : somewhere along the line, I think, : like I mentioned, AUM took : precedence for the right reasons. : I’m : not I’m not trying to disparage : that, but to distill and : work on a simple thought, not : just in terms of a product, but : also in terms of communication. : Rajiv, : uh, you know, Paraguay also : used to, uh, for for the audience. : I : used to work with Parag Parikh Financial Advisory Services way back : in the day. So, : uh, I can talk like an insider at times. No : reference to what Sebi talks about. This : is a different type of insider. Uh, : Paraguay often used to talk about, : uh, making the middle class : rich, uh, through long term : investments. Okay. : Uh, : one was thinking of a product. It : should be simple, communicating about the simplicity : of the product. But : at the other end, you had you : probably had a segment of people : who, while they came in for : the long term because of the fact : that nerves were declared daily : did not think long term enough. : Okay, : I’ve talked to a lot of practitioners. They : said that we put in an exit load. Was : that also something which you : tried doing initially to control : investor behaviour, or was : there something else which you : did? So : we have exit loads. Uh, : initially exit loads were not that much, but we brought them : in, uh, somewhere when we saw that people are not staying the : course and this is not really a, uh, investment vehicle which : is suited for six months or one year kind of investments. So : the average investor stays with the equity mutual fund scheme : in the industry slightly less than two years. This : is the published data. Now : obviously some people averages hide a lot of things. So : some people would be staying very, very long whereas uh, other : people would uh reading very very quickly. So : from day one the one, the communication was that give us a minimum : of five years. Don’t : even invest with us if your horizon is less than that. So : to encourage that kind of behavior, : what we did is we put in : exit loads for the first two years. : So : at least once that two year period is done, that itch goes away : to do something. Initially, : if people see quick profits : or if there’s a small dip, : that urge to do something, is : there over a period of time people : forget about the investment : or then let it run its : course? Why : I asked you specifically about the investor behavior was also : because at times it affects your investing style. You : know you want them to stay for long term. You : want to build it up for long term. You : want things to compound. But : because sometimes investor behavior : can be a little unpredictable. : That : is one part of taking a few different : bets in your portfolio. : But : in your case, that’s why I started with investor behavior. That : is obviously not something which : you were too concerned about, : but in your case, I think the : industry was, uh, was was replete : with a lot of investing styles. : Uh, : although we didn’t call it at : that point of time, there was momentum. : There : was quality. Okay. : Uh, : and you were in a phase again to to talk about cricket. You : were at times letting the good balls go past the stumps just : because you knew that you were here for the long term. Okay? : Take : us through your mindset. You : know how you were, how you were : thinking, uh, building the portfolio, : building on your convictions. : What : was the thought process behind : building this entire thing? : So : continuing with the cricket analogy, : there are three formats now, : right? So : there’s the twenty twenty. Yeah, : there is the one day international : and there’s the test : cricket, which a lot of young : people may not be too familiar : with. Test : cricket is where the main job is to not lose the wicket. Uh, : tire out the bowler somewhere. A : loose ball will come. Yeah. : Hit : that out of the ground. Or : even taking a single or two runs is fine. So : why is. Not : losing the wicket or not losing money important. And : a lot of people have would have heard this phrase, but not really : understood it well. Uh, : it’s simple mathematics, but, : uh, people tend to ignore this. : So : Buffett has said this numerous times. Rule : number one is don’t lose money. Rule : number two is don’t forget rule number. Correct. : What : does it really mean? Equity : is a risk asset class. Sometimes : losses will come, which : he refers to as losses as losses. : They’re : quoted, not actual. Yeah. : So, : uh, if it’s just market sentiment, : then you can ignore it. : So : what happens is if you bought something for one hundred. A : fifty percent loss will take the price down to fifty. A : fifty percent gain will take it up to one fifty. Correct. : But : both are not equal. One : may think that a fifty percent : gain is equal to a fifty percent : loss. If : you have a fifty percent loss, : one hundred becomes fifty from : fifty. To : go back to your starting point. You : need one hundred percent return. Correct. : Correct. : If : you lose ninety percent of the money, if one hundred becomes : ten, correct, then you need a nine hundred percent return : to even break even. Correct. : So : if you are taking care of the downside, market will give you opportunities : for the upside. So, : uh, different people play different games. We : said we are in the test cricket version of the game. We : are. So : someone wants to play twenty twenty. Good : for them. It’s : entertaining. We : would rather play the long form of the game. I : think test cricket has also evolved. Uh, : people now want a result in the match, so your job becomes even : that much more difficult. Right. : You’re : still sticking to the pristine : old school thought process. : Whereas : even in test cricket, people are saying, why is the result : not coming in? But : thank you so much for sharing that. Neil, : I want to come back to you. Uh, : twenty sixteen uh, you are setting up this company. You : set up this entire, uh, thought process, you started investing, : and you’re looking at the investment landscape. Uh, : you know, I think sometime back : you give this analogy about the : tiger. You : know, you said that if you are in a forest and you see a tiger, : what can you do? Whatever : needs to be done will be done by the tiger. I : think that’s pretty apt in terms : of what happened in twenty sixteen : when demonetization was announced. : Okay. : And : you were right there. Uh, : fledgling AMC, what was your aim at that point of time? Twenty : sixteen would not be more than seven hundred. So : seven hundred crores, Okay. I : think the pressures are different for smaller agencies. The : pressures are different for larger AMCs. Now, : when you’re looking at the landscape out there. Okay. : One : is to to manage your own, uh, sort of thought process and building : the institution. What : did you see out there? And, : you know, from a vantage point of being an asset manager, what : was competition doing? You : know, how how were investors reacting? What : was your own thought process? Give : us some insight into that. I : think, uh, initially when we were, uh, when we launched and the : next two or three years for us, actually not more more than about : five years was something. And : we had we kind of knew that we : were a mutual fund, uh, without : any, uh, bank parentage or : corporate parentage or, uh, distribution : network or any of those : things. So : clearly we were here for the long game, like for five years, think : nothing might happen. And : hopefully if he and, you know, only after five years they have : your they give you rating rankings and uh, people usually track : okay, after five years and all that, you know. So : we’re like, okay, we were in our heads. We : were prepared that five years, : we’ll just have to build the : foundation. And : while we were doing that, obviously : a couple of things happened, : uh, that time which were : actually negative for our AMC. : Okay. : Uh, : one was, uh, we got in, uh, when : we got our license, uh, the network : criteria was ten crores to : launch to set up a mutual fund. : Correct. : When : we were immediately, I think six months or a year after we : got it, it was made to fifty crores and we had three years to get : to fifty crores, you know, so it was like running a really, really : tight ship. At : that point. We : closed down all our other businesses to concentrate only on : the AMC, you know. So : and whatever money we made, we : plugged it back in and, you know, : we didn’t spend on marketing : or any of those things which : we really still don’t do it. : But : anyway, it was honestly zero expenditure : which was not required. : Uh, : obviously in twenty fifteen our founder passed away. So : again, that was a big jolt and we didn’t know how things were : going to pan out. So : I would say that the first six years was about survival. It : wasn’t about growth, wasn’t about : looking at what someone what : is competition doing or what : what is somebody else doing for : for us, it was that keep doing : the same boring things consistently : well and hopefully there’s : light at the end of the tunnel. : And : uh, at some point that will happen : as long as we’re consistent. : Uh, : just don’t don’t do anything foolish, you know, do what we were : supposed to do and do what we set out to do, you know, and maybe, : uh, we thought it’ll take three or five years. Maybe : now it’ll take seven to eight years. You : know, you give away two or three years more because of all these : things that have happened. Uh, : and, uh, sure enough, I think we also at the right place at : the right time in terms of all the things that happened post : twenty sixteen, were very positive for the industry. And : obviously, uh, we made a good track record. And : kudos to Rajiv and his team for that. Uh, : Uh, again from performance basis, : from the communication base. : I : think people and what we set out : to do was, uh, get people who : are sticky with sticky, sticky : distributors and these people, : and our whole thing was that, : listen, it was long term equity : is long term, long term investing. : So : even the investors or the distributors we want, we wanted them : long term for a very sticky and for a very long term. So : we thought that even if there are few, they are sticky. They : will give us and we’ll slowly : grow this niche, you know, : and I think, uh, post twenty : eighteen nineteen, I mean, : post Covid is actually where : we saw some decent growth coming : in. So : it took us about eight years to : get to that point where we think : about what is competition doing : and what is anyone else doing. : I : think in the beginning it was just about survival. It’s : interesting you mentioned this : and, you know, this is this is : the part about Indian entrepreneurs. : I : was part of the mutual fund advisory : committee at that point of : time when this work from ten crores : to fifty crores and I was running : an AMC, which was also a small : AMC. I : was representing the small AMC fraternity. And : I could immediately empathize, but I guess, uh, what you : are talking about is a little deeper than what I could sense : at that point of time. And : like a true entrepreneur. You : said that I took some bets. I : prioritize things, and I waited it out sometimes for a small : AMC, or rather, most times for a small AMC. I : realized that the bet is in a growing industry. Do : you invest more to grow or you cut down everything, focus more : on bottom line, and wait for your time to come? It’s : never an easy call. It’s : never an easy call, you know? And : I think you rightly mentioned we all got lucky at some : point of time. But : at that point of time, when you’re in the thick of things, I think : the whole industry largely it was with smaller AMCs. I : think small and midsize. AMC : is not the size that we see today. In : fact, he mentioned that we got lucky. And : I just want to ask you the next question. Nobody : anticipated the flow of money : which would come in post demonetisation. : I : think largely people have forgotten that, uh, when you were : managing money a from your own point of view and b from an industry : point of view, do you think that did you think that at that : point of time, the flow of money, which is just gushing in, is : going to deepen the markets? Okay, : or is it going to distort? Because : honestly, I don’t think anybody : realized that whether this : is very long term money or not. : So : when you were looking at the landscape, do you think that it would : deepen the markets? It : would get more and more people, it would become more structural : and stable. Or : do you think that we are on the precipice of a distortion which : might be happening? Your : thoughts? So : firstly, whenever a thing happens : like demonetization, which : has a very, uh, acute in medical : terminology, very acute impact, : which is short lived but very : severe. Yes. : We : love those kind of events. Please : explain a little bit more. Sure. : So, : uh, demonetization will affect buying power for a quarter : or two quarters. So : obviously people will have to exchange their currency notes. And : if someone has undeclared wealth, then probably that will not : come back to the system. But : that in any way was not reflecting : in the formal economy. : So : let us say people have vehicles, personal vehicles. Let : us say you have a car or a two Wheeler. If : there’s a puncture in the tyre, : would you throw away the vehicle? : Answer : is not that’s an acute problem. Causes : you a lot of discomfort, but : it’s fixable down the road and : things go back to normal pretty : quickly. So : whenever there are these problems, which I have a three month, : six month impact, which causes stock prices to fall anywhere : twenty percent, thirty percent, forty percent. We : love those kind of situations because it’s the equivalent of people : throwing away the vehicle for a punctured tire. We : say we will wait it out, we will let things get fixed. And : then obviously the utility is much more. So : that was one thing that we saw about the demonetization. To : your question, did we see the size of flows? Answer : is no. No one can precisely calibrate how much money : will come or not come. But : this phrase informal to formal has been part of financial : media sell side research fund manager since a long : time, and this was one step in the entire journey. Uh, : Janardan Aadhar mobile. The : common KYC, uh demonetization, introduction of GST, : uh, increasing of the tax labs where people are encouraged to, : uh, disclose more income and pay a small rate at the early levels : of income. All : these have resulted in more and : more formalization of the whole : economy. So : we saw that as one step in the journey. Another : very unintended consequence : of demonetization that : to my mind, that was the first : thing in what I’m trying to : explain. Demonetization : was one GST introduction was the second one, uh, : India-Pakistan conflict, India-China border tensions. All : these were India specific events which don’t affect global markets : so much. So : this India plus global, the foreign : allocation which reduces the : portfolio volatility came to four : when these India specific events : happened. So : this question of why when India : has such a high growth country, : why do we even look at foreign : markets. Partly : what answered around these events, why geographical diversification : is important. Now, : I must confess, I was one of : the people questioning that, okay? : Because : to my mind, and you know, when you are, when you are seeing : the growth of India, you always tend to think as a practitioner : more as an investor, you know, why should I look : beyond India? India : growth rate? Uh, : and I think honestly, that is the time even I questioned like : most people did. But : the answers came in thick and fast. You : mentioned a few things which which worked for us. And : I just like to ask you, it’s like you were thinking pitch or pitch : them differently. You’re : not prepared for the pitch, right? So : what do you do? You : you look for some inspiration. You : look for some miracle. And : like Harmanpreet Kaur brought : on Shafali Verma, I think : one of the things which really : helped the industry to my mind : was the mutual fund campaign. : Yeah, : I think it was twenty sixteen. Yeah. : Twenty : sixteen. Yeah, : I remember that. I : was on the board and there was a huge discussion. Yeah, : because two basis points was a big amount. Okay. : And : the thought process was that why : should we not spend this on our : own? Why : should we look at it at an industry level? Yeah. : But : eventually, uh, thanks to a lot : of discussion, good sense prevailed. : To : my mind, that was a Shafali Verma. Uh, : sort of a masterstroke. Again, : you can think you were lucky : in hindsight, but from your : point of view, do you think that, : uh, this was a trigger which : actually streamlined the flows : coming in post-demonetisation. : Give : us some sense of what you have : seen in terms of the impact, : what you saw it then, and : how it has played out since then. : I : think, uh, what it did and again, : twenty sixteen we started. : But : the true effect came a couple : of years later, you know, two : or three years later, but it gave : it mainstream kind of visibility : with Dhoni, Sachin, Rohit : Sharma. Yeah. : You : couldn’t have celeb endorsing mutual funds, individual : mutual funds. But : when celebs are saying mutual funds and these are heroes : of India are people will take notice of that. And : it what it did it got visibility the curiosity or what is : mutual funds. Uh : okay. Let’s : see what what can what can happen there. Uh, : what other thing that happened at that point, which I think : was very important. And : again, in that time a lot of things happened, uh, which was very, : uh, good for the industry. I : think the SIP culture started today. Also, : when you meet people, they don’t know what mutual fund is. They : know what SIP is. So : they think SIP is a product, you know. So : that SIP culture started building : up at the same time when : mutual funds are again over the : last, what uh, other than Covid, : the little, uh, down market : and then it rebounding, people : have not really seen a really : a bear market or a place where : money has not been has been : lost or two or three year period : where they’ve not made money. : And : by that time things also started working in the favor. You : know, it was twenty, seventeen, eighteen, The Ilfs crisis : and all had happened. And : then again, things were moving pretty well up, you know. So : I think, uh, all these things, : just like the moon, stars : and the sun all aligned together. : And : it made it a very compelling, uh, product, uh, over : the next few years. And : when Covid hit, it was, I mean, uh, I want to say this, it was : obviously bad for a lot of people, for the industry. It : was amazing because people were sitting at home, didn’t know : what to do with the money, and a lot of that got channelized : into mutual funds and obviously also direct stocks and : stuff like that. But : it became extremely mainstream around that time. So : I think these two or three things : really at that period really : helped us just go to another : stratosphere. Interesting. : You : talked about Covid, and I’ll circle back to that later. But, : uh, you mentioned, uh, about the mutual funds campaign and : the sort of, uh, understanding of the investors which : started changing at that point of time. Uh, : Rajiv, when you were when this : whole mutual fund campaign started : up, you mentioned a few minutes : ago that the average stay : of an investor in your portfolios : or at an industry level : was two years, a few years before : there was an informal survey : which was done, which talked : about the fact that if an investor : comes in through the debt : markets, if he comes in through : an income fund, and later : on graduates towards hybrid : or equity, the average stay : could be as high as nine to ten : years. But : if somebody comes in in equity directly, that is when I think : the problem happens. And : that typically happens when somebody : comes in at the peak or close : to a prelude to a correction. : Now : post this mutual fund campaign. When : you look back, do you see the investor behavior having changed : the average tenure, having gone up? And : how has it helped you in terms : of are you as in you and your : fraternity, in terms of managing : money? How : has it helped or what insights can you share with us? Well, : I’m not I don’t have too much : good news to share here, unfortunately. : Uh, : okay. so : I don’t think there’s been at least the data that I am seeing. I : don’t see there’s meaningful change in the holding period of equity : mutual fund schemes. So : what has happened is you and I : are old enough to remember physical : share certificates by default. : Everyone : was a long term investor because if you took delivery : of shares and you sent it for transfer, it would take six : months till you got the shares in your name. The : signature mismatch? Yes. : And : if it came, it became a year. Yeah. : Today : in the T plus one settlement, you are free to sell after : two days. Mhm. : Uh, : transactions happen at a click of a button. So : at one end, while we are celebrating one point seven lakh crores : worth of capital raising through IPO markets, at the same time, : we have one point zero seven lakh crores worth of retail : losses in the Fno market and some of the real money gaming : People are pivoting to stock discounts, stock broking. So : they are effectively viewing these things as fungible. So : this whole thing of get rich quick or leverage or do uh, same day : option expiry, I don’t think we can conclusively say that investor : behavior has changed for good, especially in the capital : market, direct capital market related products. So : at the back end, a lot of good work is happening. EPFO : has started investing in equities. That’s : real long term money. A : lot of NPS money is coming in. That : is longer term money. But : this thing of giving your stocks : time to deliver returns or : giving your mutual funds fund schemes, : time to deliver return somewhere : that has become short term : oriented or remained short term : oriented. Okay. : I : don’t think the horizons are meaningfully increased. That’s : interesting because I would have thought that this is so : much of education. While : the number of new folios have come up and there are newer and : newer investors coming in. Uh, : what you’re saying is that an average equity investor, whether : it’s through a mutual fund or otherwise, will tend to, you : know, at times get distracted by the noise which is happening : and maybe react in terms of either stopping his sips : or pulling out money. So : let me give you a data point. Uh, : I think March twenty twenty, if I’m not mistaken, there were around : four crore demat accounts in the country. That : number is close to twenty crores now. Now : a lot of it could be duplicate accounts. So : or even in terms of unique mutual fund investors, there has been : a probably a fifty percent increase from pre-COVID to now. So : a lot of investors have come in in the last few years. These : people have not seen a sustained down market. So : people forget that in India, after : the Big Bang reforms of nineteen : ninety two under Mr. P.V. : Narasimha : Rao and Manmohan Singh industrial : licensing being abolished, : uh foreign institutional : investors being allowed : into India for the first time. : Uh, : all of that for eleven years, market went nowhere. Uh, : BSE Sensex was at four thousand two hundred. In : Harshad Mehta peak March of two thousand and three Sensex was : two eight five zero. So : this was a eleven year period. Uh, : even after the global financial crisis, markets took a while : to go back to the two thousand and seven peak. So : in the last five years people have : not seen a Neel referred to it. : People : have not seen a sustained down market. Uh, : Covid was a brief blip. And, : uh. like : twenty twenty still managed to close on a positive note, uh, because : of the sharp recovery. So : I’m not so sure that the end investors are coming in with the expectation : that, uh, there will be periods of zero return. There : could be periods of negative returns. There : is some element of chasing the : latest hot thing, uh, recently : chatter is there that, oh, : people do all this analysis and : all that, uh, men went and bought : stocks and mutual funds, whereas, : uh, the smart women of the : household just bought gold and : they are doing so much better. : So : now there was this thing that gold and silver are the best things : to hold. Rather : than buying equities one year of flat to negative returns chatter : has started. Yeah. : So : it’s interesting that you mentioned that. I : think we still do get carried away by a lot of noise. And, : uh, I tell most people who ask me one advice. What : should you do in the market? I : say turn off notifications on your mobile. That : is going to be the first thing to cut off noise. But : you mentioned a very interesting thing about SIPs, and : I’m just I’m just going to ask you the next question. Are : you still you call it sip, I call it sip. I : think it’s a generational sort of a thing. I : just can’t get myself to call it a sip. But, : uh, you’re right. It’s : become a new word in the lexicon : in terms of, uh, people’s : understanding. Uh, : this decade has actually seen : the growth of, uh, impersonal : distribution channels, : if you will, where there : is no human element involved. : Uh, : you’ve seen the growth of fintechs, uh, even erstwhile distribution : channels, which were talking about it, uh, talking : about mutual funds. There’s : a lot of, uh, digital servicing, uh, digital onboarding, : digital information, etcetera, etcetera, etcetera. Uh, : two questions. One : is how has this helped to grow the industry and how has it affected : investor behavior? If : you could give us some insight. I : think it’s been really, really helpful for, uh, mutual funds, smaller : mutual funds. Uh, : again, uh, guys like us, for example, you know, so I mentioned : earlier that we didn’t have any distribution network or, : uh, we didn’t have any branches or, uh, we had nothing. We : didn’t even have, uh, any backing : for corporate and stuff like : that. I : mean, the fintechs really helped us to, uh, go deep. I : mean, the fact that if you would : communicate well and your performance : was well, and like you : mentioned, it’s always about the : performance. So : if the performance is there, you would see a decent amount of money : coming in through that. And : I’m hoping I’m a little more optimistic that people are actually, : uh, doing some research and saying, okay, these guys : are reasonable. I : can put my money here, I can do a ten, fifteen, twenty year sip : with these guys, you know? So : I’m hoping that, uh, that is there. But : obviously, from a behavioral standpoint, uh, we don’t know how : these people are going to behave, to be very honest. These : are actually most of them are : people who’ve come in during the : two thousand at around Covid time. : And : it’s been five years where I’ve not seen a bear market. One : year we are seeing some flattish market, but we need to see : what happens six months, one year down the line. But : obviously the propensity to jump : from one fund to the other fund : because it gets flashed on your : screen that, oh, despite exit : load. I : mean, I don’t think they even know : sometimes that there are exit. : I : don’t think they read factsheets, most of them, but I’m : thinking there are both sides, both people. You : know, I think there are people, : uh, who are sitting in tier : two, tier three, tier four cities : who are really genuinely interested. : And : we’ve met people like this, uh, : younger generation, and they are : just very interested in this. : And : they have read so much and they are on top of things and they : are like, you know what? This : I want to do a ninety nine year sip with you. And : they’re doing that on the other side. There : are also bad apples, you know. Uh, : so I think the behavior is a bit mixed. What : it’s done for fund houses like us is that. And : I’ll just give you a data point here. Uh, : that, uh, one third of our AUM : total AUM comes from fintech plus : Ria. Okay, : okay. So : and fintech is about twenty three, twenty four percent, almost : twenty five percent. A : quarter of the AUM of ours comes from the fintechs. Now : the second data point is, out : of that one hundred or, uh, out : of our total AUM, twenty four : percent comes from B thirty cities. : Beyond : thirty cities, it’s up twenty : four point four two, if I’m : not mistaken, which is the highest : in the entire industry, more : than the ratio of SBI, which : you would think has deep down. : Yeah. : And : we don’t have we don’t have presence in one branch. We : don’t have a presence at all in any of the cities. Not : one person, not one branch, not : anyone trying to service these : guys. This : is just happening for a reason. I’m : optimistic that it’s for the good : reasons that they think that : we are reasonable people and : will manage their funds well. : And, : uh, you know, uh, they performed well and there’s some consistency : towards it. My : downside is protected and whatever else we kind of want to communicate, : I hope they’re hearing it somewhere and they’re investing : in that. So : I think it’s really helped made : a kind of a level playing field, : if you might, between, uh, : midsize small AMCs compared to : with the large AMCs, you know, : so I think that’s really helped : out at least guys like us. : It’s : very interesting. In : cricketing parlance, you could : probably say it’s unusual field : placements. Right. : So : this is completely changed. The : dynamics is what you’re saying. Yeah. : Uh : it’s nice it’s nice to actually see. And : uh, while you’re talking about not having a presence in some : of the branches, I think it’s worthwhile mentioning that, uh, : you and your teams have got the largest flexi cap fund in the : industry, so obviously somewhere things are getting flashed : in the right way. Uh, : you know, maybe a side question : is, at one point of time, : there was and still there is : Morning Star and Value research, : and they still publish data. : But : I guess these fintechs are now bringing it right down to your : mobile, and you are looking at them while you’re looking at other : things, which is what is inducing a change in behavior. Very : interesting. So : talking about unusual field placements and talking about the fact : that you’re actively managing an actively managed fund, : uh, which is one point four five lakh crores. This : would be about one point. I : mean, total AUM of all six schemes : are one point four three. : This : would be about one twenty. Okay, : so I’m a little I’m seeing lakh crore. And : that is one scheme which is the largest scheme. I : recently read that, uh, you know, : let me just rephrase my question. : Uh, : in this day and age, when you’re talking about passives, and : passives are really grown, okay, for an active fund manager, : you’re actually watching what’s happening out there : in terms of passives, in terms of target maturity funds. ET : cetera. ET : cetera. So : two parts to the question. Uh, : one is that, uh, is passives a : significant, uh, sort of a segment : at this point of time, uh, : which, eh, probably is helping : to build the entire equity : category, but is taking the : attention of people like you who : are managing actively managed : funds. And : B, is that, uh, in a country like : India, which is still growing : and price discovery is still : happening? Okay. : Uh, : what do you think is going to be the role of passives? And, : you know, maybe I’ll ask either of you a question whether you’re : getting into passives in the first place. But : the first part of the question : is your view on the growth : of passives and how it is sounding : to you like a active fund : manager? So : mathematically, let us say in this : entire room, half of the people : were active investors and the : remaining half of the investors : said, we will be passive : investors. And : these were the only investors : in the country At an aggregate : level, the portfolio of : active managers would be the same : as portfolio of the passive people : because, let us say, passive : people owned fifty percent : of SBI, fifty percent of TCS, : fifty percent of reliance, or : every listed company and active : guys would own the other fifty : would own the other fifty percent. : So : you may own reliance. I : may own HDFC, he may own TCS in different weightages, but at an : aggregate both segments will have the same portfolio. Active : guys will pay more fees and : will pay taxes on each turn, so : they will mathematically get a : lower return than the passive guys. : That’s : at the very, very aggregate broad level. That’s : the argument for passives. There : are arguments against passives. So : one is as per law, you can legally front run passive mutual funds : as per law you can legally front run passive mutual fund. Okay. : So : so NSC will issue a circular saying : with effect from such and such : date. This : is coming in. The : index will include these stocks : and it will exclude these stocks. : Yeah. : So : in half last half an hour of that : date the passive funds sell the : outgoing stocks and buy the incoming : stock. And : the entire market has front run those. So : not only for nifty but even MSCI or any index. The : changes are announced well in advance and the entire market has : front run obvious money left on the table. Passive : funds cannot take that money. So : if futures are quoting at a discount : to spot market, they cannot : because by mandate they are : forced. If : there’s a merger arbitrage, they cannot. So : there are some things which are : wrong with passive funds as well. : So : uh, the other thing for an economy at the national level, what : is the role of capital markets, equity markets, its capital : formation, channelizing savings of individuals to formation : of companies which can grow the economy, provide employment : to the masses. By : definition, a passive fund cannot invest in a new company or : cannot invest in an IPO. First, : the company has to get listed, have a market cap, meet the : exchange criteria or the index committee criteria, and only : down the road somewhere come into the index. So : in markets which have gone majorly : passive, the primary market : has had a severe downturn. : So : one of the reasons attributed to : a vibrant primary market in India : is the presence of actives. : So : both have their pluses and minuses. For : us, when we are obviously focused : on the active space, but on : the passive side, we are trying : to do it a bit differently. : We : are trying to combine the best : features of both passive and : active funds, and trying to create : a product architecture, so : that’s somewhere down the road. : Interesting. : Well, : you were talking about active in that argument. Our : common friend Praveen, who is : a very high octane passive fund : supporter. I’m : sure he would be listening to this podcast later on and making : notes and calling you and arguing with you. Well, : I have no argument. So : I gave the bull case right up front for passive. So : I’m a fan of passive funds as well, but they can be done better, : is my hypothesis. Most : people who defend passive are : not as diplomatic as you are. : So : so talking about active and passive, : I think, uh, the whole economy : went into passive during Covid. : You : talked about Covid some time ago. Uh, : I think it was, uh, it was something which entire generations : had not seen. So : there was no precursor, there was : no pretext, there was no playbook. : Uh, : you know, you don’t you didn’t really know. So : most people think that two thousand and eight was bad. You : do not know whether your company : will survive or not here. : You : don’t know whether you will survive or not. I : mean, it was that bad. Uh, : in that sort of a period, you : had people getting in aggressively : into equity, uh, the : formalization part of equity. : The : part of equity. Okay. : Did : that catch you by surprise? Did : that amaze you? What : were your thoughts, uh, when you were when you were looking : at an industry level? Uh, : what were some of the things which you think competition did, which : really augmented the entire growth of the industry? If : you could just share a few thoughts? Yeah. : I : think, uh, one of the main things : of Covid was that communication : became a lot better. : You : had no choice but to communicate : and communicate openly. : I : think you saw the on Twitter. Uh, : fund. Fund : houses came there, started uh, doing, uh, started, uh, answering : questions and queries and it became more open, more transparent, : I think got transparency in in the industry. It : helped in it massively helped customer service because everyone : honestly at home was a customer service support person. Interesting. : Like : from top to bottom, we all were kind of trying to solve queries : or whatever it is. You : know, people only had our number because we were all sitting : at home and he’s like, what happened to my this thing? And : we would try to figure it out. I : think that also, uh, led to, uh, : customer service becoming amazing. : And : one of the things was the fintechs, right at a click of a button, : you could Buy things now, you know. And : the onboarding was so easy and, : uh, that the behavior there was : that if onboarding is so easy : and some thing happened to my : portfolio, I want real time answers. : Don’t : tell me this one. It’s : this the registrar’s fault? This : one’s fault. I : want communication. So : people expected communication at : almost a real time kind of a thing. : Or : they wanted their queries solved on Twitter. They : would write to you and you need to do it. And : the bad part was that if you didn’t : write back then, people could : just write anything about you, : right? I : mean, it could lead to reputational : risk or, you know, it : was it was a headache that you : don’t want to take, you know, : so you had no choice but to : become really good customer service. : Uh, : people have transparent communication. Also, : it led to, uh, the tech experiences : or the, uh, investor experience : being extremely I think : over the next five years became : really great because we needed : to have our own onboarding. : Obviously, : there are people who come through distributors. People : who come direct are distributors : want to also now do onboarding : their corporates who want : to onboard and do liquid fund. : So : we needed a proper stack of that. You : know, the tech stack had to be really good. Uh, : a lot of effort, I think, of the industry went into how do we make : it as easy as possible? How : do you make onboarding easy? How : do we make the whole customer experience easy? And : with that, customer support also needed to grow. So : I think transparency, customer : support and uh, tech, you : know, the in-house tech really : all really took off in the : next after in the last five years : now. Very : interesting. I : think one manifestation of that has been the growth of a of a : tool like zoom. Nobody : had the Z of zoom before that. And : then now it has become everybody : says, let’s have a zoom : call. It’s : become almost like but Rajiv, : he talked about communication : and I’m just tempted : to think at that point of : time, if I were in your shoes, : what I what would I be talking : about? See : the local markets. Everybody : knows everybody has a view on. But : you are also investing into global stocks. Okay. : The : communication part of it, the : explanation part of it uh, the : justification, if you will, the : part of it and telling people : to stay the course would have : become even more difficult because, : uh, you know, that’s something : which most people would : not even have too much idea : about. So : how how did you and your peers who were managing global stocks, : uh, take this forward, talk to people. What : was the communication process which you had? Sure. : So : I’ll talk about the general communication : and then specifically : about the, uh, foreign : stocks. So : in the early days itself, uh, there was a realization that Covid : is bad for, uh, the health of the elderly people with comorbidities, : uh, and in very, very edge cases about, uh, it would : affect, uh, healthy young people, otherwise healthy young people, : or even middle aged people, elderly people in good health : would have, uh, symptoms of flu and, uh, other things, and : they would recover. This : was known even in March of twenty twenty. And, : uh, at that time itself, it was known that work is has started : on vaccines, and it was known that eventually everyone will : get it. And : once you have had it, it builds immunity for the next round, : even absent vaccines, if you have got it once and you have : recovered, then your risk of the second inflation is that much : lower, or at least the risk to life is that much lower. So : this straight away fitted into the acute impact impact that : we spoke about earlier where six month earning let’s say : could be terrible. Maybe : twelve month earning is terrible, but it’s like a flat tire : on your car. You : don’t throw away the car because of that. Because : of the situation, stock prices fell forty percent. Now, : one year earnings obviously does : not have a forty percent impact : on the discounted cash flow : or in the actual business value. : So : we said we communicated this to investors. We : acted accordingly. So : most of us, uh, ran down our savings account and put all the money : into the scheme. Uh, : before the Covid struck, we had about thirteen percent cash that : we ran down to, uh, two or three percent whatever bare minimum : we could keep. And : we communicated to clients, if you have investment capacity, put : in money. Now, : be greedy when others are fearful. To : quote Buffett. Foreign : stocks. Incidentally, : the ones that we owned : were the biggest beneficiaries : of Covid in terms of : price, in terms of earnings, in : terms of business, in terms of : business. So : one of the companies we owned was an e-commerce player. So : at a time when physical stores : are shut, one hundred percent : business goes to e-commerce. : These : were players in the streaming entertainment. Now : when sporting events, musical : concerts, movie halls are : shut. What : did people do? Massive : rise in OTT video consumption, : music consumption when : newspapers are not being printed. : When : outdoor hoardings are irrelevant, entire advertising move : to digital. So : the four companies that we owned : were right there to benefit : from the shift towards digital. : So : they were among the biggest beneficiaries of the. And : this would largely happen with most people who were managing : global money either directly or through fund of funds, : or was it something which was unique to you? So : it was so partly the portfolio : was structured in such a : way that the longer term trends : were anyway benefiting these : companies. But : Covid just accelerated the it put the trend on steroids. So : if someone was owning a global : airline or a bank, then obviously : there would be a adverse : impact. I : can’t help but smile while you were : talking, because I read an article : around that time in Bloomberg, : Newsweek, which talked : about the fact that lawyer’s : fees went through the roof : because divorce cases shot up. : Uh, : because you talked about communication. This : was communication for different type. The : husband and the wife were never in the same house, and suddenly : they are stuck together and they realize that he’s not the : same person. I : mean, it can go on and on. Uh, : I’m now coming to the final overs. Okay. : Uh, : and I’m taking this deep. I’m : not into pinch hitting in the : final couple of questions just : to wrap up this entire conversation. : Your : growth strategy has always been : to connect directly with investors, : and you’ve mentioned as : much. I’m : very tempted to ask you, uh, while you were doing this and direct : plans that come in and, you know, you were taking a lot of : unconventional bets. Uh, : how did this pan out in terms : of your, uh, relationship with : the distribution fertility advisor : fraternity? You : mentioned Arias and saying, let’s take our eye as a side. The : Mfds, uh, how was how was your relationship with them? How : did they take this fact that you : were talking to investors directly? : You : know, give us some insight into that. Yeah. : So : it took time to convince, uh, distributors, : uh, obviously, uh, people : who kind of little bit knew : us and who knew that my father, : the founder, Mr. Patrick. : They : kind of had read his books, some of them, and that’s why they : had started with us. I : mean, there was no real track record. I : mean, some people obviously knew about RPM’s, but generally, uh, : it was slow. The : first, like I said, the first : five, six, seven years was generally : slow with everything, uh, : in the in, in, in, in our mutual : fund. I : mean, we hit a thousand crore AUM only in twenty eighteen, six years : after we started twenty eighteen thousand crores. Twenty : twenty five. No, : I mean, yeah. One : forty one forty yeah. So : talk about compounding. Yeah, : exactly. So, : uh, yeah. So : it was really slow. Uh, : obviously, uh, distributors initially had questions that, uh, : no one’s doing a unit holders meet kind of a thing, and : I’m sure, I’m sure. Yeah. : I : think, uh, you guys should not do. And : the other thing we did, which was very controversial, uh, : at that point, and I believe you’re the only people still doing : it is that we we gave everyone one commission. We : didn’t have differentiated commission structures. Uh, : so, uh, that kind of didn’t sit right with some people, but some : people also loved it. The : smaller guys probably loved it that they’ve been, uh, that they : don’t have to look behind their backs and see that, oh, who’s : getting more? Who’s : getting less? It : helped our team internally when : they went to meet the distributor. : I : mean, this is over time that now nobody even asks us about commission : so we can talk about things that really matter. You : know, otherwise eighty percent of your time goes in negotiating, : uh, commissions and fees and all that. So : now people know that these guys are not going to give me anything : more, and everyone is at the same kind of, uh, level. Uh, : so initially so a data point, uh, again, twenty fifteen, : sixteen seventeen, you take any of those years, our uh, uh, : AUM through distributors where we pay a commission was about : eight percent. Ninety : two percent was kind of direct, : eight percent was, uh, distributors. : And : the aim was also small at that. It : was small today, distributors contribute : forty percent of our AUM, : so I don’t think it has affected : them. It : was all about us communicating with them. And : you know what? And : even in the unitholders meeting, : the distributors are also : invited. It’s : not like only the unit holders are invited. We : invite everybody, everyone who’s : invested with us and the distributors. : Please : come. Please : ask your question. This : is nothing more than just a session where, uh, you know, we build : trust two ways. We : set example. We : set expectations right between what we expect of you. And : you should hear from us what we expect, probably from the market : and what we think about different stocks or whatever that : are in the portfolio. Uh, : and that was about it. And : I think over time, people realized that this was great because : even, uh, if they and it was recorded all these events. So : even if the, uh, investor wanted to know something. They : could take a snippet of the unit holders meeting and say, okay, : this is what it is. You : know, uh, I think it’s helped : us overall with the distributors. : Uh, : and that shows today in the numbers, : I guess, you know, so interesting. : I : want to wrap up this thing by asking you a question, uh, again, : which has got two parts. So : with you, I don’t know why I tend to ask a little bit more than, : uh, this thing. The : first part is, uh, now the fact : that you cannot invest as much : money globally because of certain : restrictions, uh, you know, : from the regulators, from the : RBI, uh, your portfolio would : have a preponderance more of, : uh, Indian equity than global : equity. Uh, : do you think it is now? Uh, : just like any other fund. And : your competitive advantage in : terms of having overseas equity : has has probably gone down. : And : two is, uh, you know, he’s talked about investor behavior. He’s : talked about people coming and talking to you, Uh, at the agm’s, : a lot of positive vibes start coming in when the performance : is good. Now : that this is structurally changed, : which is not in your control, : but it has structurally changed. : And : God forbid, if something happens to the performance. Okay, : I’m being very candid with you here. Do : you think that the same investor : behavior because sometime : back you mentioned that investor : behavior is fickle, can be : fickle, would be fickle, right? : And : this is probably across years : of experience that you have. : So : what is your game plan in terms of, uh, managing this. Sure. : So : very, very interesting questions. And : probably I’ll take a bit of time, : uh, answering both these things. : So : a lot of people think that the : flexi cap fund has done well because : our foreign stocks did well. : Okay. : I : don’t have the number as on date, but sometime back when we had : done the numbers, both the foreign stocks and Indian stocks had : done better than our benchmark and the nifty fifty. So : our benchmark is NSC or nifty five hundred, and the second benchmark : is nifty fifty. So : both the segments, foreign as well : as Indian had done better than : the benchmarks individually. : But : among these two, the foreign and the Indian, barring the last three : or four years, typically Indian stocks have done better than : the foreign positions. So : it’s only of late. Where. : So : last one year where, uh, US market has done well and the Mag seven : of Nasdaq have done really well, but it’s mainly a last twelve : month phenomenon. And : this period of underperformance, it has come uh, : numerous times. So : I refer to the Covid period where the foreign stocks Benefited : a lot. So : twenty twenty and twenty one we benefited from that tailwind. Twenty : two was when actually those : companies were not doing well. : And : uh, we had a year where we were : marginally in the negative, somewhere : around two to five percent : negative on a twelve month : basis. And, : uh, we were not beating the index in that period. We : still did the AGM. A : few people were upset. We : explained, uh, our, uh, thing and the, uh, severe underperformance : actually came pretty early in my career. So, : uh, I started managing money professionally : in two thousand and : three. And, : uh, two thousand and seven was one of the worst years for me : in terms of performance versus the benchmark. So : in the portfolio management service that we ran, we were not buying : the real estate companies, the infrastructure companies, : the commodity companies, which were doing well in : two thousand and seven. But : in the two thousand and eight crash, we did not fall eighty, : ninety percent like some of those companies went bankrupt or : all the money was lost. Number : one, rule number two. Yes. : So : yeah, we have been through these cycles. Our : founder, Paraguay himself, went : through this cycle in the late : nineties. Uh, : he was not participating in some of the dot com companies and, : uh, things were so bad. He : said, let me take a sabbatical. Let : me just go to Harvard and do this new, uh, course that has come : out on behavioral finance. That’s : where he got introduced to : the new subject of behavioral finance. : And, : uh, he went deep into it and, uh, did some, uh, original research, : authored two books, uh, wrote articles, gave talks. We : have had these, uh, cycles numerous times. So, : uh, last year, in two different media interviews, uh, one : which Neil did, one which I did, we said we are okay to underperform : the index because we will not invest in things that : do not make sense to us. Again, : we said we would rather lose : half of our clients and half : of our AUM rather than lose clients : money by doing stupid things. : Interesting. : And : thank you for for sharing that candidly, because, uh, a note : to myself, I have to be part of your AGM. I : would love to hear that. Uh, : you know, during a client, this : thing, I think one of the the : learnings I get as, as, uh, as : a professional, as an industry : practitioner again and again : is to not think in months or : years and to think in decades. : I : think you were mentioning this sometime earlier. Right. : Uh, : which actually just puts things in perspective. The : closer you are to the mountain, : you don’t know how big it : is the moment you start stepping : back. I : think that was a very nuanced answer. Uh, : some of us would probably still want to have, uh, you know, : a high momentum strategy. But : some of us would then say, okay, I’m. I : will go more by comfort than conviction. So : thank you so much for sharing that. Uh, : before we wrap up, I think the : students here have been listening : very patiently, and I’m : sure that there would be a few : questions. There : are questions, right? Yeah. : Carrying : a great image of your late father. Uh, : sir. And : another question for you. You, : sir. Rajiv, : sir. Uh, : sir, gold and equity are meant to be, uh, move inversely, but : nowadays, both of them are touching their ethics. Uh, : so what are your thoughts on that? And : what are retail investors like : us should, uh, be doing in this? : I : just remember when I was on the flight back to the US after my : dad passed away and I was going there and all these things just : started going in my head. Okay, : this is what he used to say. This : is what he used to say. I : wrote down a few things that, okay, these are the things that he : really cares about. And : he would really want us to go. This : is what his vision was. And : I’m like, you know what? I’m : going to just I’m not going to try to reinvent the wheel. This : is what he wanted was going well. And : let’s just stick to this again, : a long term kind of a thinking. : I : mean, think in decades, don’t think : in months, years and all that, : you know, um, don’t work for : money. Make : your money work for you means keep investing and you give : that to other people. You : you impart that knowledge to other people, younger people, that, : okay, this is the way you’re supposed to do things. The : other thing is, I think that investments : are supposed to be boring. : The : day turns exciting. You’re : not investing, you are gambling your money. So : again, uh, holding your urges, : to delay instant gratification. : I : think it just created. It : was already there in some form. My : job was just to strengthen it, : to be very honest, you know, and : I already had all those, uh, pieces. : And : obviously the nothing happens without a great team. So : even when all this happened, our team stuck together. You : know, whoever was there and everyone helped each other. And : I think we all had a, uh, a very, uh, similar vision of where : we wanted to go. Everyone : thought alike in terms of alike in the sense that what we : need, what we need to do now, we had patience. That : was never a question, you know, about having patience. And : okay, we’ll think in terms of : five years, ten years kind of a : thing. And : everyone had a shared vision, uh, shared culture. Culture : was very important in an organization. It’s : a very collaborative culture. So : one of the things we do is that : we don’t give targets in our : organization, which is very, uh, : um, it’s I mean, in a financial : field, how do you not give : targets? because, : uh, everyone does give. So : we said we don’t want to give targets to people. Also, : it leads to a collaborative culture. Everyone’s : helping each other. There’s : no internal competition or politics. You : know, I mean, politics are there obviously. Sometimes : you can’t say no to that, : but competition becomes as less : as possible and people help each : other out and that actually gets : the whole organization growth : going. You : know, so I think these are few : things that actually helped us. : So : historically, it’s managed to keep : its purchasing power intact, : but it has had decades of : zero or negative returns as well. : So : gold is a very, very, uh, difficult : asset to assign a value : to. And : I’ll tell you why. Whether : it’s gold, silver, platinum, Bitcoin, uh, piece of art : like Mona Lisa. See, : these assets don’t have any inherent cash flow. Uh, : five years from now, what will be the price depends on what : two individuals will. decide : in what price they will transact at. So : as investors, we focus our energies : on things with cash flows. : Uh, : whether it be equity, whether : it be bond rates, inverts, : aircraft leases, whatever : warehouses, if there’s an : asset and there’s an inherent cash : flow, you can make projections. : Is : this providing a good or a service : to someone and can you monetize : that? Um, : of course, gold has been part : of people’s asset allocations : historically in India, : but we don’t have any, uh, : specific view on the asset class. : Uh, : as such, China is buying gold, : other countries are piling up. : Gold : dollar has lost ten percent of its value. Uh, : Warren Buffett’s Berkshire Hathaway has, uh, you know, uh, in : twenty twenty two, it had a cash pile of one hundred fifty billion : dollars versus now it has three fifty billion dollars of : cash pile. So : do you think, you know, there is : a bubble or, you know, uh, a markets : global markets might correct, : uh, in the near future, near : future. And, : uh, do you think India will have a ripple effect of that in India : as well as globally? Absolutely. : There : are some areas where I can’t make sense. Why : is this company, uh, valued at so much so internationally? Uh, : let’s say a few AI researchers, : uh, from the big AI companies, : they quit their jobs and : they start a new company immediately. : That : company starts quoting at billions : of dollars of market cap. : Does : it make sense? To : me? The : answer is no. Does it mean that you sell everything and put money : under the mattress? Again, : the answer is no. So in every, : uh, or almost every bull market, : there are pockets of excesses. : There : are pockets of, uh, attractive valuations. So : if we look at the past markets, late nineties, there was : this dotcom boom. At : that time, whatever was called : old economy was actually attractively : valued. So : you could buy consumer good companies, : you could buy, uh, banks, : uh, could buy paint companies : or pharma companies or anything : and make decent amount of : money. But : if you bought the overvalued dotcoms, then you ended up losing : a lot of money. Fast : forward to, uh, seven years, year two thousand to two thousand : and seven. What : was in bubble in two thousand was actually attractively : valued in two thousand and seven. So : the uh, Indian IT services companies, : for example, which were : extremely overvalued in two thousand, : were actually attractive : in two thousand and seven : when the bubble was in real : estate, infra and commodity companies. : So : again, you could have bought consumer : good companies, pharma companies : and those kind of names. : Twenty : seventeen was a frenzy in small : cap stocks, whereas larger companies : were reasonably valued. : So : you have to find pockets of opportunities : and you have to stay : away from, uh, things that are, : uh, frothy, uh, such as the mutual : fund operates in very less : variety of the funds in equity : segments. And : there are new investors entering : the market, uh, who are more : attracted towards the aggressive : funds. So, : uh, has the company any further : plans to launch newer nfos, : uh, in the midcap and smallcap : segment? For : us, there’s like one strategy, one equity strategy that : we like. And : I said it in the interview that a kind of a Swiss Army knife, : kind of a concept where we like diversified fund, you know, : where, uh, the fund manager has a lot of flexibility to : do or go where value is. You : know, we don’t want to be tied : down by, oh, you’re a small cap. : You : can only do small cap, you know, because we are people who chase : value as such, you know, and there are times when there’s no : value in small caps or very little value in small cap, and the : value will be in large cap. So : we want a fund that can move between : these sectors, you know, and : just because something is uh, : and when you, when you, when you : run a diversified fund, if anything : is valuable in the, in the : market, you can buy it in that : fund only you can have higher. : So : there are times when we’ve got : a very high percentage of large : cap stocks, and midcap and smallcap : will be less because we thought : that. We : think that they’re not. They’re : highly valued. At : other times, we can change that allocation and make large cap : and small cap much bigger and small cap and mid cap, much larger : and large cap, much less, you know, so we can have that flexibility : of keep doing those things in one fund. If : you’re only a small cap, fund it. I : mean, you have to invest at any given valuation, you know, and : which might not make sense. So : it’s just not our strategy to launch something narrow. We : want it as wide as possible. Um, : a fund launches as such. So : again, we keep saying that the only reason we will launch funds : is on three occasions. One : is, uh, if we can simplify the : category, if we can bring some : simplification, uh, in the category. : Second, : if we can get some differentiation in the category. So : when we launched our flexi cap : fund, uh, in twenty twelve, there : was nobody doing a sixty five, : thirty five, uh, Indian overseas. : You : know, so that got some differentiation. That : was fun. Uh, : and thirdly is if we are excited to put our own money in it, : you know, if we are only not excited to put our own money in it, : it’s we can’t I can’t meaningfully go out and tell people : to put in my fund. You : know, so, uh, so we have, uh, and we spoke about we have one : fun launch, uh, that we are going to plan, and that is somewhere : in, uh, what we call a semi passive category. I : mean, it’s a semi passive fund, uh, which will take, uh, the : best of passive and active and uh, we see that there’s no one : doing it right now. And, : uh, so we are waiting for a license to, uh, our approval to come : for that, and we’ll probably do that. So : that’s the only thing that’s there. The : other interesting thing that we’re : launching, gift City funds and : gift City is important because : today people cannot invest : globally through a mutual fund : route because the seven billion : dollar limit has been hit. : And : we can’t remit more money there : through the gift city route. : You : can do the foreign allocation : now, and you can launch : retail funds as low as five : thousand or ten thousand dollars. : Before, : it used to be seventy five thousand to one lakh, fifty thousand : used to be the minimum. Now : that’s come down to five thousand, ten thousand. So : that makes it very makes it like : a mutual fund kind of a structure. : So : we’re excited about the global : funds that we launch from there. : So : these are the two things that will be coming out with, uh, my question : is to Rajeev Thakur, sir, um, in your last year’s, uh, : yearly message to your investors, uh, you had mentioned quite : a few things you had mentioned about, uh, your worries : about small cap. Uh, : but there’s one interesting thing that you also mentioned. You : said it is not necessary that GDP performance is mirrored by : the stock markets. And : you said that if India’s nominal : GDP is twelve to thirteen : percent, then it is not possible : for your industry to deliver : the same results over time. : So : my question to you is, um, and what we are seeing currently is : also, uh, I mean, you predicted it, right, that there are : people who are saying that the equity market is saturated, it : is not giving much returns. So : my question to you is, what is : the future of Indian equity markets : henceforth? If, : uh, is it saturated, what kind : of returns will it generate or : Your perspective, your analysis. : So : there’s a small leakage, uh, between : a country’s GDP growth rate : and the stock market returns. : Stock : market returns typically tend to be somewhat lower than the : country’s GDP growth rate. Uh, : reason is to, uh, for the share : price to increase, the earnings : per share have to increase. : But : for the earnings for the earnings to increase, many a times : the companies have to issue fresh capital. So : if your profit has grown by twenty percent and your equity base : has grown by ten percent, then EPs growth may only be around : ten percent. Uh, : it may not be twenty percent. So : there is a small leakage on account : of, uh, fresh equity issuance. : So, : uh, many a times the GDP growth does not translate into profitability : for shareholders. So : again, rather than worrying too much about overall macro. Is : there one particular company or : one sector where you think it’s : available at this market cap? : I : see good prospects. This : company has a good management team. They : have the execution capability. Balance : sheet is strong enough. There’s : not too much competition. They : have pricing power. Valuations : are reasonable. Go : and buy that. Uh, : so as a fund manager, as an as an equity research house, we may : not have a view on each and every listed company out there. As : long as we are able to find twenty five, thirty companies to invest : in, we should be fine. What : an amazing discussion this was. We’re : talking about seeing the industry : through the lens of two stalwarts : from financial advisory : services for mutual fund. : I : keep jumbling around the names, but this is what it is. Uh, : like they say, you know, you can : break records and the scoreboard : will keep showing records : and they’ll keep showing the : runs. But : the truth of the matter is you : need to stay at the crease, you : need to show discipline, and you : need to have the patience to accumulate. : And : that, I think, is the basic message which is coming across for : all investors. We : started with nineteen ninety five. We : talked about it through the decades, but I think this core message : has not changed. Like : Rajiv pointed out, and Neil was : emphasizing that the nature of : the game, like in cricket, has : changed. You : move from test cricket to one : day to T20, but what really matters : is how much patience do you : have in occupying the crease and : playing the shots when it really : matters? Thank : you for being such patient listeners. Thank : you so much for your time and I look forward to hosting you : hosting the next session of AMF Chronicles very soon. Thank : you very much.