Money
How an MF honcho invests his money
Summary
- Two-thirds of his equity portfolio is in PPFAS shares, rest in its equity mutual fund schemes
PPFAS Mutual Fund (MF) is a firm believer in skin in the game—the fund house regularly discloses how much of its AUM is held by ‘insiders’. It’s no surprise then that Rajeev Thakkar, CIO and director, PPFAS MF, extends this philosophy to his personal investments too.
PPFAS exposure dominates
Around 82% of Thakkar’s portfolio is in equity—one-third of this is invested in PPFAS MF equity schemes and the rest in unlisted shares of Parag Parikh Financial Advisory Services, the sponsor company of PPFAS MF. The latter has been structured as 9-10-year ESOPs (employee stock ownership plan) making it more long-term in nature rather than a get-rich-quick scheme. Mint spoke with Thakkar as part of our annual series on the personal finance journey of financial services industry leaders.
When asked about the highly-concentrated equity portfolio, Thakkar said people who have an entrepreneurial approach to life land up being concentrated in that particular field. He drives his point with an example. “Right now, most of Warren Buffett’s net worth is in the Berkshire Hathaway stock. So why is that not as risky as it seems? The company is not leveraged, so it’s not like it borrows a lot of money, and in a downturn, may have a problem. In case of PPFAS, the net worth is invested in a diversified set of companies. We own around 30 companies via mutual funds, so it’s not as risky as it sounds".
International equity accounts for 25% of Thakkar’s total equity exposure. Within Indian equity, large caps account for 85% and the remaining 15% is split between mid and small cap stocks. This makes his portfolio very similar to the Indian market itself!
Not much outside equity
To Thakkar, real estate and gold are meant for consumption, not investment. The house that he lives in constitutes his real estate exposure (13%) and the only gold (1%) he holds is in the form of jewellery. Debt investments – spread across EPF, NPS, liquid funds, bank fixed deposits and some in Parag Parikh Conservative Hybrid Fund – constitute only 4% of his portfolio. Direct real estate as an investment suffers from illiquidity, high transaction costs in terms of stamp duty, and indivisibility, and in case of residential realty, from low yields, according to Thakkar. He says real estate investment trusts, or REITs, can be a better option for a layman.
Interestingly, Thakkar wishes he had been more equity heavy in his younger days. While venturing into equity investing early on in life is one thing that has worked out well for Thakkar, he feels his equity-debt mix in his mid-20s and early 30s was overly conservative for someone that young. Today, it’s quite the opposite—with 82% of his portfolio in equity. He clarifies that such a portfolio may appear equity-heavy for someone nearing 50, but, if you have visibility on meeting your expenses—by making small withdrawals of 2-3% from your equity investments or via passive income such as dividends—then you don’t need a large debt allocation.
He considers the money parked in liquid funds and bank fixed deposits amounting to two years’ worth of expenses as emergency money. “In case of a big market crash such as the covid crash, I bring that down to six months of expenditure and invest some of it tactically in equities," says Thakkar.
Family and more
Thakkar’s wife, too, works as a finance professional but decisions on where to invest are largely left to him. Thakkar has spent a few decades in the equity market. He graduated in 1992 – a period marked by the Harshad Mehta bull run and economic liberalization – when pursuing a career in the financial markets seemed the most obvious thing to do.
