"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...!!!

Heads I win, Tails you lose theory of Mutual Funds

"..India's top asset management companies (AMCs) have continued to remain profitable, nomatter whether mutual fund investors made money or not in the tough market conditions. Rather, top players have posted growth in their profitability during financial year 2011-12..." 

I was suspecting this all along and exactly the reason why I hardly ever invest in mutual funds.  To those who solicited my custom (especially the executives at ICICI and HDFC Mutual Funds whom I had to sadly turn down each time they cold call me) I pop the question "will you charge me even if  my portfolio created by you wilts under water...?"  Their reply has always been in the affirmative and that was something that I could never digest. This spurred me on to quit my job and start my own investment management business  with a spunky slogan "...We wouldn't charge you unless we help make enough for yourself..."   I can proudly claim that I'd been keeping up that promise.

All my clients will swear by that, something that helps me effortlessly wean away clients that got creamed by portfolio managers and mutual funds and sincerely hope they keep going down that one way street so that my business is in tact, ethically miles ahead of them...!!!

On to the worm now

This was pure music....

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Real estate, after the meltdown, was my favorite. DLF to be precise. Don't think I did big bang research that made it quite a find. Just a wistful hunch when I saw the stock languishing at Rs.300 levels. Now I read about the Mutual Funds newfound love for all things realty. Ha!

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The MFs exposure to realty rose from Rs 1.24 bn in March 2009 to Rs 1.71 bn around December 2008 to nearly Rs 11.13 bn by the end of Q1-FY09. By July 09, it rose to Rs.14.21 bn according to this news report in BS.

Nice to feel like an early bird... On to the worm now !!!

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Mutual Funds and art of wealth destruction

Equity mutual funds (EMF) raise funds from public when stock markets are upbeat. So why are they coming now?

I did a quick check on the cash position of a broad spectrum of funds. They have all liquidated recently and have suffered severe hemorrhage in the their NAVs. Most funds are quoting at a discount of over 35% from peaks. They all have pressed sales while markets sneezed. Reasons could be either redemption pressures or fund manager’s paranoia. Either way, it bodes ill for investors in these funds. These are the same funds now coming out with NFO, especially at a time when collections from NFOs have whittled down to 10% of their offer size.

Their intention is to average out their holdings or to buy new stocks that come cheap. Cheap as in fall from irrational peaks; not cheap as in price below intrinsic value - because in these times of global uncertainties, who can predict future earnings? All they do in those glitzy commercials about their investment skills is nothing but pulling a charade. What lies concealed is the brutal fact that these guys that man the funds are no pros. They are as gullible as you and me or worse. Yes, they sit in front of monitors all day and get paid fabulously for making more mistakes than you and I put together. If they make money, it's purely because a good tide in the market lifting all boats (read stocks). What they do is just play fast and loose with other people’s money. So a `hit’ just means lost commissions for them; no mortal fear of loss of capital or financial ruin that we investors may envision. It pulls the essential caution element out of their actions.

Saving money is hard. Investing it is harder. Trusting it with impulsive fakers is scary. Give them their place in hell.

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