Thursday, July 26, 2012

"Not my fault, everyone else and his uncle's...!"

Here's what Sandesh Kirkire, CEO, Kotak Mutual Fund says defending underperformance of Mutual Funds as an asset class -

"Mutual funds are ultimately alpha players. My estimate is that almost two-thirds of the schemes (by way of assets) would have outperformed their respective benchmarks over the medium to long term. This is not bad when you compare it with the developed economies."

This is more or less the refrain of most Mutual Fund managers.  They blame everything but the quality of their own stock selection or fund management skills.  Even now they are not conceding their investment skills are as bad as any direct equity investor or worse, and blame it on everything else. The investors in their funds remember very well the loud declarations made by them regarding their investment prowess.  But when their Systematic Investment Plans (SIP) succeed only in systematic destruction of investor wealth, they shamelessly resort to semantics as the first line of their defense instead of candidly admitting their incompetence as the reason behind their inability to ringfence their fund portfolios from the vagaries of the market by "highly skilled strategic intervention" they advertised in their promos and commercials, not so long ago - which the lay investor believed and invested.

To me, the real road test for veracity of any fund manager's claim will come when they loudly advertise across media, with the same intensity as on the launch of new fund offerings, asking investors to *exit from their investments* [also cut down on SIP subscription] when markets enter a bubble zone and to *restart SIPs* after the bubble collapse.  But they invariably do the opposite so that they can sell their funds at the highest NAVs to pocket higher commissions based on larger corpus size.

If serious fund management has to happen, AMCs should benchmark fund managers compensation 100% to Alpha returns.  Then it'll be fun to invest because the casualness or the indifference with which they play with OPM (other people's money ) will end and they will be more sensitive to the investor pain before they bullshit over the media...!!!

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