Value investor Parag Parikh dies in a car crash in US

Mumbai: Parag Parikh, chief executive officer of PPFAS Asset Management Pvt. Ltd, died in a car crash in the US on 3 May. He was one of India’s best known value investors and an authority on behavioural finance. He was at Omaha, Nebraska, to attend Warren Buffett’s talk as part of Berkshire Hathaway Inc.’s 2015 annual meeting.

Parikh is survived by his wife (who was also in the same car and who was in a critical condition but is now improving) and two sons, Neil and Sahil. It was an irony that Parikh breathed his last in a town where Buffet, who is known to be the world’s leading authority on value investing, was born in, and still lives, works and holds his annual conference that’s attended by hundreds of followers worldwide.

PPFAS AMC, India’s youngest fund house, was launched by Parikh in 2013. Parikh aimed to be different. PPFAS launched only one scheme, PPFAS Long Term Value Fund (PLTV). Two years down the line, it still remains the only scheme in its stable, even as the rest of the mutual fund (MF) industry has had gazillions of new launches in the past year. As on March 2015, PPFAS’s average assets under management (AUM) was 575 crore.

Parikh’s succession plan is yet unknown but some say that his elder son Neil would take charge of the sponsor company, and Rajeev Thakkar, the chief investment officer and PLTV’s fund manager, would take charge of the fund house. Thakkar was driving the car, in which Parikh and his wife were riding, when it crashed.

Parikh was never fazed by competition. Perhaps, that’s because he started off on a small but ready-made platform. Parikh had an existing portfolio management service (PMS) scheme till about 2012 when he decided to start a fund house and transferred approximately 600 of his clients with a combined corpus of about 350 crore to the new MF scheme. At that time, the Securities and Exchange Board of India (Sebi) had raised the minimum investment in a PMS from 5 lakh to 25 lakh. He was always critical of fund houses paying to distributors through the nose and then bleeding. “He ran a very frugal outfit and didn’t have a huge distribution cost. He refused to pay big commissions. Though he had a small AUM, he was a happy man and didn’t do anything unethical,” says Sanjay Bakshi, professor of behavioural finance and business valuation at Management Development Institute, Gurgaon, and a close friend of Parikh.

Parikh may have been frugal but he had a heart. In around 1993-94 when Parikh was still in the stock broking business, one of his junior employees hesitatingly walked into his office and wondered if he could borrow about 2.5 lakh from the firm. He had to buy a house worth 4.5 lakh and had managed to get a housing loan of about 2 lakh. The balance was the shortfall he needed to borrow but wasn’t sure if he needed the money then and there, since he was hesitant to borrow. Parikh wouldn’t hear another word. He immediately issued a cheque of 2.5 lakh. The employee bought the house and repaid the money to Parikh in six months. His name is Vikaas M. Sachdeva; today he heads Edelweiss Asset Management Co. Ltd. “I had shares but they were yet to be transferred to my name as in those days there were physical share certificates and share transfer used to take about 3-4 months. I’ll never forget his gesture,” says Sachdeva.

Apart from heading PPFAS, he also made sure he invested his own money in the scheme. Though Sebi made it a rule later that sponsors must invest a certain sum of their own money in a scheme, Parikh started this practice at the time of the launch of his fund house itself. “It is not only the employees who invest, but also me, the directors, the fund managers and the trustees. There is no rule or compulsion to invest. But how can we ask others to invest when we ourselves have not invested?” he had told Mint in an interview in January 2014.

Apart from charting a different course from most others, Parikh will also be missed by investors and the industry alike for his frank views.

Over the years, Parikh appeared to have followed his heart and started and closed down many businesses before he found his calling in the MF industry.

When he first wanted to get into some sort of manufacturing, Chandrakant Sampat, a pioneer of value investing in India and known to be Parikh’s guide, persuaded him to get into stock markets. From being a broker, to being one of the first such to start research, to dabbling in merchant banking, to starting a portfolio management services business and then finally a mutual fund, Parikh was ruthless in decision making and didn’t hesitate to close down businesses that he felt had outlived its time and move on.