Rajeev Thakkar, CIO, PPFAS

The Rs 1,800-crore AUM fund Parag Parikh Long Term Equity Fund (PPLTEF), the local scheme with a global focus, has exited its position in technology giant International Business Machines Corp (IBM). This marks an end to the fund’s holding since November 2013.

It was in November 2013 Parag Parikh Long Term Equity Fund first entered IBM shares through a 1.98% net asset allocation. By 2013 end, the fund’s exposure went up to 4.12%. By March 2019, the stake was back to 2.74%. Since investors in PPLTEF look for capital investment and returns in rupee terms, PPLTEF also looks at delivering in rupee terms. PPLTEF hedges most of the currency exposure using currency futures.

And in April 2019, the fund completely exited IBM stock.

Giving reasons behind the sell call on IBM, Parag Parikh Long Term Equity Fund said the cloud and AI businesses have been witnessing rapid growth for the industry, but IBM has not meaningfully delivered over the past few years. Also shifting goal posts in financial reporting by IBM have made evaluation difficult. “We see better opportunities elsewhere and have exited the position,” the fund says.

Additional read: ‘A fund should outperform over a cycle and not each year. Investing is a marathon and not a 100-meter dash’: Rajeev Thakkar, PPFAS MF

About three weeks ago, International Business Machines Corp reported a bigger-than-expected drop in first-quarter revenue, hurt by tapering demand for its mainframe computers and a stronger dollar. The technology giant’s revenue at all its main business units except cloud, which has been the centrepiece of its turnaround strategy, missed expectations. IBM’s cloud and cognitive segment, which includes analytics, cybersecurity, and artificial intelligence, fell.

Parag Parikh Long Term Equity Fund invests in foreign equity securities, apart from domestic equities. An average of 65% of its corpus is usually invested in listed Indian equities, in order to benefit from the favourable capital gains tax treatment accorded to such schemes.

The domestic portion of the scheme is managed by Rajeev Thakkar (in the picture above), while Raunak Onkar manages the foreign investment component.

At present, the fund’s top allocation is in Alphabet Inc (Google Class C) at 10.08%, followed by HDFC Bank Ltd at 8.50% and Bajaj Holdings & Investment Ltd at 6.25%. “We have about 21.84% in cash holdings, debt & money market instruments and arbitrage positions which can be deployed in long term investments at appropriate levels,” the fund says.

Additional read: Why PPFAS Mutual Fund bought the ‘expensive’ Amazon.com stock

Author
Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on contact@rupeeiq.com