A few days ago I had spoken about the ‘Honest truth’ – Ajit Dayal (who runs a mutual fund and a big mutual fund distribution business) is the author. He has recently written about the ET discussion on mutual funds. He sounds a little sore about not being called to the summit. Surprising, because the media makes its money from Advertising. It is surprising that non advertisers are not invited – LOL.

Ajit Dayal’s fund does not pay the distributors, but pays the others in the chain, I presume. The fund manager gets a salary. The R&T agent (if any) must be paid. The ‘sales staff’ must be paid….only the distributor is not. Does it mean the final customer (unit holder) gets the ‘cheapest’ fund. NO. The answer is no. The asset management charges (on the aum) is one of the highest in the industry – 2.49 vs. 2.5 allowed by SEBI. The fact that Quantum does not pay commission is not being translated into lesser charges for the end customer!

The end subscriber needs a good index fund with low asset management charges – say 0.009% per annum. Is it feasible to charge so low? Of course it is possible. If all of us come together to form a ABC C0-operative Mutual fund co. (or what is called a mutual mutual company!!) – if you think the charges are high, buy the shares of the fund. If you think the amc charges are low, invest in the fund!

Till we do not do something like this, we need to keep looking for good well managed funds whose managers make money when you and I as unit holders make money. Seeing the quality of fund managers, the rush to build ‘aum’, the nfo sharks, ….you need to be lucky if you are not dripping in red.

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  1. I have been an investor with Quantum & would side with them. The expense ratio for Equity Fund is still high because their AUM is still low. Their logic of no-distributors is sound, we are yet to see the results if AUM goes up.
    In case of their Liquid fund, they have maintained expense ratio of 0.45%, despite a low AUM. On the other hand, the mammoth HDFC Cash Mgmt Savings has slowly increased the expense ratio from 0.35% to 0.65% in the last 2 years – while their asset site is at least 100 times more than Quantum Liquid Fund. In my 3 year interaction as fund investor, I would rate their integrity is impeccable.
    Also, their Equity Fund is the only one till date to use Total Return Index as the benchmark – why don’t the other Fund managers use the same for their funds???

  2. Hi,

    I am a quantum investor. Its simple logic that if I invest 100rs. all the 100 gets invested while in other funds 97.5 gets invested. With all other parameters remain the same, the fund will yeild better returns than the fund with entry load. The fund corpus is very small, for sure I beleive that when the corpus increase to a substantial value the expense ratio will be down. It should also be noted that there portfolio churning is very minimal and they remained fully invested throughout the down and up cycle. Trust this fund it will deliver in long term.


  3. What a joke – on the performance side where are they? Secondly to avoid entry load all i need to do is to go TO ANY FUND HOUSE – and invest. Big well performing funds with much lower amc charges are available – 1.75%, 1.5% equity funds are available. What really hurts an investor is the asset management charges, not the load. And at Rs. 20 crores aum you cannot even think of getting a fund manager worth his salt. Surely the NPS with a max of 50% equity and 50% debt will outperform Q funds – any takers for a wager?

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