Prashant Jain, the celebrated fund manager who quit HDFC AMC last year to start his own investment firm, is said to have received the go-ahead from the capital market regulator to launch his maiden scheme, which has almost $1 billion committed.
Jain’s 3P India Equity Fund has the structure of an alternative investment fund and will invest mainly in large-, mid- and small-cap stocks. The starting amount was said to be Rs 5,000 crore to Rs 7,000 crore.
“Commitments so far total close to a billion dollars, but some of it may come in a staggered manner, depending on the market situation,” a person familiar with the matter said.
Apart from Jain’s reputation as a patient investor with a value bias focussed on long-term compounding returns, the distinguishing factor in this scheme is its high-ticket size, low-cost, and 100 percent skin in the game. Unlike other portfolio management services or AIFs, the fund will target only wealthy customers, with the minimum investment set at Rs 10 crore.
The expense rate for direct plans are 70, 60 and 50 basis points for Rs 10-25 crore, Rs 25-100 crore and upwards of Rs 100 crore, respectively. There is no limit on the total amount that can be invested. Regular plans cost 120, 100 and 70 basis points, respectively, for the same slabs.
Little marketing
Most portfolio managers charge a 1 percent fee for investments through the ‘direct’ route, the lowest being Abakkus, which charges 80 basis points. Regular plans charge 1.5 percent to 2.5 percent. Jain’s expense ratio would be the lowest.
A key feature of the fund is the promise of full alignment with the interest of clients, where the investment management team will invest a significant part of their savings in the fund itself. The team is committed to not investing in stocks directly.
Jain’s fund will remain low key, with very little marketing. Most of the commitments are from Jain’s personal relationships built over the years with high net worth and ultra-high net worth individuals, and family offices, although the funds are and will be sold through distributors too. The strategy is to raise Rs 100 crore from 100 clients, which could result in assets of Rs 10,000 crore.
Jain was one of the longest-serving mutual fund managers in India, having managed a single fund for 28 years. The oldest mutual fund scheme managed by Jain, the HDFC Balanced Advantage Fund, which commanded a corpus of Rs 43,000 crore at the time of his exit, clocked a return of almost 18 percent per annum since its launch in February 1994. The HDFC Flexi-cap Fund and HDFC Top 100 delivered returns over 18 percent per annum since they started in January 1995 and October 1996, respectively.
Still, after clocking one of the most spectacular fund performances in the first two decades of Indian mutual fund history, averaging a 28 percent annualised return on his equity and balanced schemes, Jain’s returns took a beating since 2015 after he took aggressive exposure to public sector banks. That call proved to be wrong in hindsight as the bad asset problem in Indian banking extended for far too long. Fund schemes managed by him which echoed his value bias, with overweight in public sector enterprises, saw value destruction.
The performance appeared to take a toll on Jain, although he remained steadfast in his approach.
“There is a very thin line between being early and being wrong, and I have learnt it the hard way many times over,” Jain said in an interview with this author in 2021. But Jain doubled down on some of his high-conviction bets, enduring the prolonged pain period, and his funds returned to top the charts when “value trade” came back into vogue after the pandemic. At the time of his exit, his corpus burgeoned to over Rs 1 lakh crore, making him the largest equity fund manager in the country.
Last year, Jain founded his investment fund christened 3P Investment Managers. The three Ps stand for prudence, patience and performance. Jain holds an engineering degree from the Indian Institute of Technology Kanpur and an MBA from the Indian Institute of Management Bangalore.
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