The passing of Shri.Parag Parikh, one of the finest investors and investment professionals of our times stunned the value investing community in India. Paragbhai, as he was affectionately called, was deeply admired by the value investing community for many reasons. Being an astute value investor was definitely a strong reason. But, there were other reasons beyond just his accomplishments as an investor. Firstly, he was much more than an investor. He worked with unmatched zeal to promote value investing at a time when few had even heard of the discipline. He was a mentor to so many young investors, a teacher to many through his writings on behavioural finance and a role model in keeping the highest professional values and ethics. He carried his achievements lightly, talked about his past learnings with utmost humility and made every person who met him carry meaningful insights about life in investing.He was the most gentle teacher and would always be ready to travel to speak to our investors. TIA had the privilege of hearing Paragbhai several times and he would always come from Mumbai on his own and generously support our efforts to educate our investors. I am sharing a few things that I observed.
Parag's sense of integrity and ethics is well known in the investing community. He was a man who took tough decisions even when there was no systemic need to do so. The reason was that he felt strongly about the need to do so. He shut both his lucrative stockbroking business and later his PMS business when he started a mutual fund. The reason - he believed that there should not be conflict of interest. This was at a time when most of his peers had operations in all three businesses and the system allowed them to do so. Parag felt that he should not be in all three as there could be potential conflict. So, he stuck to just one business- mutual funds.
His entry into mutual funds was hardly easy. The regulations to raise the capital adequacy only made things more difficult for smaller & newer players. He remarked jokingly that the new regulation made him a poor allocator of capital. He did not flinch to speak the truth and that is something unusual in an industry that thinks one thing and is too fearful to say it. Talking about the mutual funds business , he said " this is a knowledge business. You don't need too much capital. By raising the capital adequacy, we are making it a capital intensive business. Those with the requisite knowledge and integrity may never be able to put together Rs.50 crores. Is that really good for the investor? Are we not closing the doors to the smartest minds to come into this business?" This was when he was able to comfortably comply with the new regulations. He was able to think beyond himself and talk like a statesman rather than a businessman. He did this with a rare candour that never hurt anyone and yet did not flinch in saying what he intended to.
Parag's views on mutual funds paying dividends is another vignette of his brutally honest personality. He was against the practise of mutual funds paying out dividends. He stated upfront that his funds will never pay a dividend. If any other fund manager would do such a thing at his fund launch, that would become nightmare for marketing the fund to investors? It was unthinkable for investors to accept a fund that would not give a dividend. "How can a fund refuse dividends to its investors ?" Parag had a simple answer. " You are giving me money to manage. If you want some money out of it, you are free to take it. An investor should decide for himself. The fund should not give investors money and work against the principle of compounding." Parag was clear that genuine long term investors may not need the money most of the time and when they need it, they are free to take as much as they decide out of the fund. And, that was how he ran his fund.
His contribution to the value investing community was immense. He was accessible, helpful and kind to so many budding investors. He gave encouragement, ideas and moral support in the phase of life when a budding investor was building his self-belief. Parag was a master in teaching people to learn and grow. The glowing tributes by accomplished value investors and thought leaders to Parag recognises his contribution to building a community. First, he helped so many young aspirants to evolve as value investors. Then, he put together a community through his annual event Octoberquest. It was a one day conference he personally hosted. He carefully chose the speakers, the invitees and even the menu for the lunch. He loved every moment of that day and made sure he spoke personally to every participant at the meeting. The meeting worked to a clear well planned agenda, the confirmations had to be done well in advance. He was absolutely punctual in starting the proceedings ( an unusual trait in Mumbai). He always was looking to make the event better, more focussed and useful to those coming in with great expectations. At the last meeting in October, he was telling me after the meeting " We must have more interactions . We must change the format from individual speakers and have a panel.You should participate in making a different Octoberquest in 2015". Any other host will want to hear you tell the nicest things about an event he so graciously hosted. But, that was Parag Parikh. The man had a plan to make everything better. The almighty had made other plans to take him to a better place.