How PPFAS’s Raunak Onkar makes his investments

“It was a generous offer considering that it came right after the financial crisis,” said Onkar, recalling that he was paid ₹8,000 per month as stipend. Onkar, who has since moved up the corporate ladder, is now a co-fund manager and heads the research team at PPFAS Mutual Fund.

The pandemic was a blessing in disguise for both PPFAS and Onkar. Assets managed by their flagship PPFAS flexi cap fund skyrocketed from a mere ₹3,500 crore to about ₹40,000 crore. During this time, Onkar’s annual remuneration also more than doubled.

“I recently bought a new house but I consider that more of a liability. And a huge chunk of my portfolio is in illiquid assets and I want to hold on to it,” says Onkar in an interaction with Mint for the Guru Portfolio series. In this series, leaders in the financial services industry share how they manage their own money.

Edited excerpts from the interview:

How is your portfolio divided?

The house I live in is my only real estate portfolio. I recently bought a new house but I consider that more of a liability. That’s because I pay interest every month on the home loan. As for financial assets, roughly 90% of it is made of equities and the rest is allocated towards debt instruments.

Of the total equity portion, 75% is in private unlisted shares of PPFAS that I got through the employee stock option plan. The rest of it is in the PPFAS flexi cap and the tax saver fund. I don’t invest directly in stocks as we are discouraged from investing in individual stocks.

The remaining 10% debt allocation is split between employee provident fund, public provident fund, our conservative hybrid fund, and our liquid fund. I also have some allocation to liquid funds managed by other asset management companies. That’s because we are not allowed to exit frequently from our own funds.

Why do you have a huge exposure to illiquid shares?

It’s a departure from regular thinking about investing. All my life, I’ve been thinking about investing in liquid financial assets which I can buy and sell on a whim. But, yes, now a huge chunk of my portfolio is in illiquid assets.

I want to hold on to it because it’s been there for a long time now. I think it has good potential. My needs can be managed easily using other assets. I don’t need to worry too much about illiquidity. It’s not like I’m drowning in debt.

Where did you pick up your money management skills?

This goes a little back to before I started working or even before I was in college. And this exposure did not come from my family as nobody talked about money then. It all started with a book Rich Dad Poor Dad that I read in 11th standard. That book taught me the difference between how a salaried person and a business owner think about money. It created a whole new perception in my mind.

Then, when I was doing second year B.Sc, I read a newspaper article on Warren Buffett surpassing Microsoft’s Bill Gates to become the richest person. Everyone knew Bill Gates but I had no idea who Buffett was. So I did an online search for Buffett on Yahoo and Nebraska Furniture came up in the results. I wondered for a while how a furniture guy could become so rich. I did some research and then figured out that Nebraska Furniture was just one of the companies that Buffett owned and his job was to invest in various other companies. The very idea of how someone could get so rich by investing in stocks fascinated me. I read Buffett’s annual letters to shareholders and decided that I wanted to do something in the investment field. It seemed far more interesting than the placement offer I had after graduation.

What percentage of your salary do you save and invest?

When I first started working, I would save roughly 30% of my earnings. At that time, my salary was quite low. I used to stay with my parents and tried to save whatever I could. When I first joined as an intern, I used to get ₹8,000 per month. The company tripled my salary when I joined as an analyst. The amount was low but you have to recall that this was just after the financial crises and I had no prior experience. Getting a job itself was a big deal back then. Eventually, the amount I saved went up as my earnings also increased. I currently save and invest more than 50% of my salary.

Did you ever consider renting a house instead of buying one?

When I moved out of my parent’s house, I rented an apartment for more than a year so that I could get used to the neighbourhood where I live currently. After that, I started looking for a place nearby to buy. I financed a part of the purchase with a housing loan.

Also, rent is a component of where you stay in Mumbai. If I wanted to stay close to the office, I would have had to spend a lot of money and I thought that wasn’t worth it.

What’s your emergency corpus?

It’s about a year-and-a -half worth of expenses and that’s a generous limit. Generally, I aim to keep aside one year’s worth of expenses. Six months is the extra cushion that I have. This is deployed in liquid and arbitrage funds.

What are some big money mistakes that you have made?

For the debt part of my portfolio, I used to park money in fixed deposits. I think I should have explored the debt mutual fund side a little more. This is for the sheer tax advantage that debt mutual funds had over fixed deposits then. Now the tax treatment is equal but I think I could have saved a lot by investing there earlier.

But again, in the early days, it did not even make sense to put much money in debt. Initially, I had a higher allocation to debt as I used to follow the 100 minus age rule. (As per this rule, you allocate funds that are equal to 100 minus your age to equity and the rest to debt). At one point, I realized this did not make any sense and decided to put more into equity.

What about foreign stocks?

My investment in foreign stocks is through PPFAS flexi cap fund. The current Reserve Bank of India limit for investment in foreign securities has not been revised so we can’t put more into foreign stocks. In our flexi cap fund, we have a 17% allocation in foreign stocks as of now. We aim to put 30% in international stocks.

Your salary increased exponentially after the covid pandemic as assets under management (AUM) of PPFAS jumped more than 10 times. What has changed since?

The only additional expense that has come to my life is the home loan EMI which is thrice the rent I used to pay before. I purchased the house in 2021 just when the second wave of the pandemic was slowing. I also learned to drive, so I bought a Tata Tiago too. Those are the two new expenses, otherwise, everything is the same. I don’t enjoy spending. Though I can do that, I don’t want to fill up my home with unnecessary stuff.

What does your retirement kitty look like?

I don’t have any number yet. My needs are specific and even if I apply modest inflation on top of that, I still have enough savings to manage it. This includes my family’s medical and term insurance expenses.

Updated: 22 Aug 2023, 10:28 PM IST