Last Updated on March 9, 2019
A discussion about the investment strategy and performance of PPFAS Long Term Value Fund. The fund was launched in May 2013 when PFFAS decided to shut down its PMS and urged its clients to shift to their lone mutual fund.
Disclaimer: I am an NFO investor in the fund. I choose this because I was looking for a mid-cap fund and exposure to international stocks. Personally, I am quite happy with the performance.
Investment Philosophy: To invest in value stocks. That is solid businesses with long-term potential but available at a price lower than its intrinsic value. The fund makes it clear that 5 years is the minimum period that it would refer to as long-term and expects its investors to share such a view.
Asset Allocation:
Indian equity: 65% to 100%
International equity: 0% to 35%
Cash/Debt: 0% to 35%
Equity can refer to stocks or arbitrage positions.
Risk management: One of the unique aspects of the fund is its focus on risk management – in general, or due to the kind of investments that it makes. For example, because of its exposure to international stocks, currency risk and external interest rate risk arise. The fund uses derivatives to hedge such risks (more about this in a separate post).
Market-cap: The fund has no restrictions and can find ‘value’ across market caps. However, it does have a mid-cap,small-cap tilt most of the time.
Portfolio: I do not look at the portfolio of a fund, nor am I competent to talk about the choices the fund manager has made.
Expense Ratio: One of the biggest drawbacks of the fund is its high expense of the direct plan ~ 1% more than a fund with similar AUM. This is a big put off for potential new direct investors.
Although PPFAS has a distributor plan, it is like Quantum large a direct AMC. Much of its direct AUM is from its PMS clients and its own “skin in the game”. Also to the best of my knowledge, it is the only AMC with a distributor plan that interacts ‘directly’ with its investors via a unitholders meet. The point is, direct clients are key for its growth and reducing the expense ratio would be a big step towards this.
Benchmark: The fund is benchmarked to the CNX 500. This is an extremely easy index for a fund manager to beat! Moreover considering the freedom the fund has to invest, I believe it is an inappropriate benchmark. An R-squared value of 0.51 shows that there is a poor correlation between the returns of the fund and returns of the benchmark.
Absolute Volatility: The active risk management shows in the standard deviation of monthly returns calculated over 3 years. According to VR, it has 3rd lowest standard deviation. The standard deviation is a measure of how much each monthly return deviates from the average monthly return. Since it is not strictly valid, think of it as no more than a crude measure.
Relative Volatility: The volatility of the fund relative to its benchmark is measured by a metric known as beta. PPFAS LTVF has the lowest beta in the category. This is probably because it does not track the benchmark closely!
Performance: As an investor, I first worry about how well the fund has done in my portfolio. The answer is quite well. More details on how I analyse this can be found here: How to review a mutual fund portfolio
Next, I have to consider benchmark outperformance. For this fund, finding an appropriate benchmark itself is a challenge.
A few days ago, I had asked Would you invest in such a mutual fund?
I had not mentioned the fund/index in that post. It is PPFAS LTVF versus a Nifty Next 50 index fund. The actual question was, “What are you paying the fund manager for? Outperformance in terms of return or risk-adjusted return?
Over 3 years, although PPFAS LTVF is less volatile, the index fund has beat PPFAS. The ulcer index (a measure of downside risk) is much lower for PPFAS LTVF consistently. This is again proof of the active risk management strategy the fund uses.
Only those investors who are comfortable with this investment philosophy should consider this fund.
Peer Comparison: The mutual fund screener says that the fund has consistently beat the category median (which divides the category into two). This is relevant only for new investors and not existing investors like me.
Conclusion: If you don’t mind the high expense ratio, want the international equity exposure, value risk management, can take a long-term view and not worry about short-term downs (or ups), prefer steady performance over spectacular, this fund is suitable for you.
Other fund reviews: Check out my other fund reviews
Mutual Fund Performance Review: SBI Blue Chip Fund
Mutual Fund Performance Review: Quantum Long Term Equity Fund
Mutual Fund Performance Review: IDFC Premier Equity
Mutual Fund Performance Review: HDFC Equity Fund
We now publish both equity fund and debt fund (+ hybrid fund) screeners each month!
Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video! ⇐ More than 415 investors and advisors use this!
Unlock the secrets of successful financial advisors and entrepreneurs with our new course!
My new book for kids: “Chinchu gets a superpower!” is now available!


Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Join our courses in exclusive Facebook Groups!
- 550+ members are now part of our new course: How to get people to pay for your skills! (watch 1st lecture for free). Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show how to achieve by showcasing your skills and building a community that trusts you and pays you!
- Goal-based portfolio management! Join 2220+ members and get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment of Rs. 3000 only. No recurring fees! Life-long access to videos (10+ hours content) in an exclusive Facebook Group! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author

About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing

Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want

Your Ultimate Guide to Travel

Free android apps
- All calculators from our book, “You can be Rich Too” are now available on Google Play!
- Install the Financial Freedom App! (Google Play Store)
- Install Freefincal Retirement Planner App! (Google Play Store)
- Find out if you have enough to say "goodbye" to your employer (Google Play Store)