Scared of expectations and aspirations, not large AUM: Rajeev Thakkar of PPFAS Mutual Fund

I am not scared of AUM or underperformance. However, I am scared of investors’ expectations and aspirations, said Rajeev Thakkar, CIO and Equity Fund Manager, PPFAS Mutual Fund. Thakkar was speaking at the 10th Unitholders’ Meeting held in Mumbai.

He explained that many mutual fund investors, and to an extent PPFAS investors, had unrealistic expectations and it worries him. Some investors complain that we are not offering high returns like some other fund or similar returns like small and mid cap funds, Thakkar said. He said such investors are bound to be disappointed because there could be volatility, flat or negative returns in future. He quoted Charlie Munger who said the secret of happiness is having no expectations.

Thakkar responded to the most asked question from investors regarding the ballooning Assets Under Management or AUM of Parag Parikh Flexi Cap Fund.

Parag Parikh Flexi Cap Fund has an AUM of Rs 44,037.87 crore as on October 2023. (Source: ACE MF)

Thakkar joked that when he got to know that most investors had questions regarding AUM he looked at the latest AUM figure to see what happened overnight. Thakkar joked that he thought PPFAS Mutual Fund crossed the AUM of SBI Mutual Fund, the largest fund house in the country.

We are somehow special because we have been facing this question even when we had AUM of Rs 800 crore. At that time the question was about whether the fund house would stop accepting money once it reaches Rs 2,000 AUM, Thakkar said.He said one has to see the AUM number in context. The mutual fund industry manages 4 crore unique investors in a country of 1.4 billion people. Thakkar read out the mission statement of the fund house which is to create returns through prudent management. He quoted the founder of the fund house Parag Parikh who used to say they are in the business of creating HNIs. Thakkar said we are just starting on financialization and there are many companies that are yet to tap the market.

He said equities do not guarantee returns and the returns bounce around a lot. He asked investors to not align to very high return predictions by the so-called experts. If you get into equities with a one year outlook, you make 5% return, he said.

He then proceeded to the burning question that once you have become big what will happen to the fund. We are roughly 1% of mutual funds, 1.4% of active equity funds, Thakkar said. We have been repeating that what matters is how much money the fund house manages, not at the scheme level. No company can invest more than 10% of the outstanding shares of a company. If a fund house breaches the limit, it will have to stop accepting money unless there is change in regulations.

He also asked investors not to believe investing in small and mid cap funds is the sure shot way of making money.