The Test-Cricket Investing of PPFAS | Neil Parikh & Rajeev Thakker | MF Chronicles

ELI5 / TLDR

PPFAS is the fund house that grew slowly and on purpose. The two men running it — Neil Parikh (the CEO) and Rajeev Thakker (the man who picks the stocks) — explain how they built one of India’s most respected mutual funds by doing boring things consistently for a decade and refusing to chase whatever was hot. Their guiding idea: investing is test cricket, not T20. The main job is to not lose your wicket; the runs come later. They also walk through demonetisation, Covid, the passive-vs-active debate, and why they would rather lose half their clients than do something stupid with their money.

The Full Story

The Swiss Army knife

Before PPFAS ran a mutual fund, it sold other people’s mutual funds. That turned out to be the most useful market research they could have done. Every fund company would show up with a fat brochure, and Parikh’s team would ask the same question — what makes this one different from the next one? — and never get a straight answer.

“The third scheme and they all look the same. They just sound different. But eventually everything is the same.”

So when they built their own product, they aimed for the opposite of confusion. One scheme that could do everything. Invest in India and abroad, hold cash when markets look expensive, take arbitrage positions, chase value wherever it sits. They called it a Swiss Army knife — one tool, many functions, so the ordinary investor doesn’t have to choose between fifty look-alike funds. The inspiration, oddly, came from watching Warren Buffett’s annual shareholder meeting and noticing a gap: nobody in India was communicating plainly about what they actually did with your money.

Test cricket, and the arithmetic of not losing

The whole conversation runs on a cricket metaphor, but the load-bearing one is test cricket — the long, patient format. The job is to protect your wicket, tire out the bowler, and put away the loose ball when it comes.

Why does not losing matter so much? Thakker lays out the arithmetic, which sounds obvious but trips up almost everyone. Imagine you put in 100. A 50% loss takes you to 50. To climb back to 100 from there, you don’t need a 50% gain — you need a 100% gain. Lose 90% and you’re at 10, and now you need a 900% return just to break even. Losses and gains are not symmetric. So if you take care of the downside, the market hands you the upside on its own schedule.

“We said we are in the test cricket version of the game. Someone wants to play twenty-twenty, good for them, it’s entertaining. We would rather play the long form.”

Six years of just surviving

The early years were not a growth story; they were a survival story. PPFAS had no bank parent, no corporate backing, no distribution network, no branches. Then two blows landed. The capital required to run a fund jumped from 10 crore to 50 crore right after they launched, forcing a very tight ship. And in 2015 the founder — Parag Parikh, Neil’s father — died.

“The first six years was about survival. It wasn’t about growth… keep doing the same boring things consistently well, and hopefully there’s light at the end of the tunnel.”

They hit 1,000 crore in assets only in 2018, six years after starting. Today they’re around 1.4 lakh crore. That gap is the compounding story in one line — slow, then sudden.

Why a punctured tyre is a buying opportunity

Thakker’s mental model for crises is a flat tyre. Demonetisation, the India-Pakistan and India-China tensions, Covid — these are acute shocks: severe but short-lived. When a tyre punctures, you don’t throw away the car. You fix it and drive on.

“Whenever there are these problems which have a three-month, six-month impact, which cause stock prices to fall twenty, thirty, forty percent — we love those kind of situations.”

Demonetisation, to them, was one step in a longer journey of India’s economy moving from informal (cash, undeclared) to formal (banked, taxed, on the books) — Aadhaar, GST, easier tax slabs, all part of the same arc. Nobody could predict how much money would flood in afterward, but the direction was clear.

Covid put the trend on steroids

When Covid hit, PPFAS did the un-fun thing: they ran their cash position down from 13% to almost nothing and told clients with spare capacity to invest. Be greedy when others are fearful. And they got lucky with what they already owned — the foreign stocks in the portfolio were an e-commerce player, streaming and music companies, digital advertising. With physical stores, concerts, and newspapers shut, all of that demand moved online.

“Covid just accelerated it. It put the trend on steroids.”

This is also their answer to “why bother with foreign stocks when India grows so fast?” The point isn’t extra return — it’s that India-specific shocks (a border tension, a demonetisation) don’t hit Apple or Amazon, so a slice of foreign holdings smooths out the ride.

The behaviour that hasn’t changed

Here Thakker is blunt and a little gloomy. Despite the famous “Mutual Funds Sahi Hai” campaign and millions of new investors, the average holding period for an equity fund is still under two years. Demat accounts went from 4 crore (March 2020) to roughly 20 crore. But these new investors have never lived through a sustained down market — Covid was a blip that recovered fast.

He points to the dark side of the boom: over a lakh crore in retail losses in the futures-and-options market, the get-rich-quick itch, same-day option expiries treated as a hobby. Real long-term money is coming in — pension and provident fund money flowing into equities — but the individual’s patience hasn’t grown. His one piece of advice for anyone in the market: turn off notifications on your phone. Cut the noise first.

Passive vs active, argued honestly

Asked about index funds, Thakker gives the bull case for passives himself before defending his own turf — which is unusually fair. The case for passive: in aggregate, active managers and passive investors own roughly the same basket, but active managers pay more in fees and taxes, so on average they earn less.

Then the cracks. You can legally front-run index funds: when the index changes are announced in advance, the rest of the market buys ahead of the forced passive buyers, who must transact at the worst moment by mandate. Passive funds also can’t buy IPOs or new companies — a stock has to get big and qualify before it enters the index — so markets that go heavily passive tend to starve their primary market. India’s vibrant IPO scene, he argues, partly depends on active investors still being around.

The trust machinery

PPFAS does a few deliberately awkward things. They run unitholder meetings (modelled on Buffett’s), and they invite the distributors too, not just investors. They pay every distributor the same commission — no special deals for big players — which annoyed some and delighted the small guys, who no longer had to wonder who was getting a better cut. The result: conversations with distributors stopped being about money and started being about the portfolio.

The pay-off shows in an odd statistic. About a quarter of their assets come through fintech apps, and 24% comes from beyond the top 30 cities — the highest such ratio in the whole industry — despite PPFAS having zero branches and not one person stationed in those towns. The phone screen replaced the salesman.

Boring on purpose

The closing philosophy is vintage value investing. They give no sales targets internally, to keep the culture collaborative rather than cutthroat. They refuse to launch narrow small-cap or mid-cap funds even though new investors crave aggressive products, because a small-cap-only fund forces you to buy at any valuation. And in two public interviews last year they said they’d rather underperform the index — or lose half their clients — than buy things that don’t make sense to them.

“The day [investing] turns exciting, you’re not investing, you are gambling your money.”

On gold, Thakker is consistent: it has no cash flow, so its future price is just whatever two people decide to transact at. They focus their energy on things that produce cash. On the question of whether markets are in a bubble — yes, in pockets (AI startups quoting at billions on day one make no sense to him) — but no, that’s not a reason to put everything under the mattress. Every bull market has frothy corners and attractively-valued ones at the same time; the job is to find the second kind. As long as he can find 25-30 companies worth owning, the macro can take care of itself.

Key Takeaways

The asymmetry of loss: a 50% loss needs a 100% gain to recover; a 90% loss needs 900%. Protecting the downside matters more than chasing the upside.
PPFAS runs essentially one equity strategy — a flexi-cap “Swiss Army knife” that can move across sectors, market caps, and geographies to chase value, rather than being boxed into one category.
They grew slowly on purpose: ~1,000 crore AUM in 2018 (six years in), ~1.4 lakh crore by 2025. The flexi-cap is now the largest in India.
Acute, short-lived shocks (demonetisation, Covid, border tensions) that knock prices down 20-40% are treated as buying opportunities — “a punctured tyre, not a totalled car.”
Foreign holdings exist mainly to reduce volatility from India-specific shocks, not to boost returns; historically Indian holdings beat the foreign ones except the last ~12 months (the Magnificent Seven run).
Despite the mutual-fund boom, average equity-fund holding period is still under two years; new investors (demat accounts went 4 crore → 20 crore since 2020) haven’t seen a sustained bear market.
F&O retail losses crossed a lakh crore — the boom has a speculative dark side running alongside genuine long-term flows (EPFO, NPS).
Passive funds can be legally front-run on index changes and can’t participate in IPOs; heavy passive adoption tends to weaken a country’s primary market.
PPFAS pays all distributors the same commission and invites them to unitholder meetings — a deliberate trust-building design.
~25% of AUM comes via fintech apps and 24% from beyond the top-30 cities (industry’s highest) — achieved with zero branches.
New launches planned: a “semi-passive” fund blending active and passive, and GIFT City global funds (now that the $7bn overseas-investment limit for mutual funds is hit, GIFT City is the workaround, with minimums down to $5,000-10,000).
Stock returns tend to lag GDP growth because companies issue fresh equity to fund growth, diluting per-share earnings.

Claude’s Take

This is a good interview wrapped in an exhausting cricket metaphor. Sachdeva stretches the test-cricket / powerplay / field-placement framing well past its breaking point, and the auto-generated transcript is a mess of false starts. But the two guests are the real thing, and Thakker in particular says several non-obvious things plainly.

The honesty is what lifts it. When asked whether the mutual-fund campaign changed investor behaviour, Thakker’s answer is “I don’t have too much good news to share” — holding periods haven’t budged. A lesser fund manager would have taken the easy PR win. Same with passives: he argues the bull case for the thing that threatens his business before he picks it apart. That’s a tell of someone who actually thinks rather than just sells.

The loss-asymmetry arithmetic and the flat-tyre model are genuinely useful mental furniture, even if neither is original to PPFAS (the math is Buffett’s, the temperament is classic value investing). What’s specific and credible here is the lived texture of running a small fund through a founder’s death, a regulatory capital hike, and a six-year wait for traction. The B30 and fintech statistics are the most surprising data point — a no-branch fund out-distributing SBI in small towns is a real story about how distribution has changed.

Marked down to 7 because it’s a relationship-friendly podcast, not a grilling — there’s no hard pushback on, say, what happens to that “sticky” investor base if performance lags for three years, or whether the single-strategy purity is partly a constraint dressed up as conviction. But for anyone wanting to understand the PPFAS philosophy from the people who run it, it’s clear and worth the time.

The Test-Cricket Investing of PPFAS | Neil Parikh & Rajeev Thakker | MF Chronicles | Vikaas M Sachdeva