I presume all of you have heard of Motleyfool.com – an internationally renowned website. I have some association with them…so to that extent i could be biased, but yes, it is a great site.

Here is a mail I received from their Mutual fund division..and I do not think I will ever receive from an Indian fund…read on..slightly edited to make it a little smaller.

They Laughed When We Launched a Mutual Fund… But guess who’s laughing now?

Our shareholders! (shareholders means UNIT HOLDERS) 

Dear Fellow Investor, When we launched our first mutual fund a veteran MarketWatch columnist, grumbled.

Motley Fool Independence Fund Performance and Fees as of June 30, 2012

Independence Fund Cumulative Total Return Since Inception (June 16, 2009) Fund: 53.81%

MSCI World Index: 39.61%

Annualized Total Return Since Inception Fund: 15.22%                 MSCI World Index: 11.61%

1 Year Total Return Fund: -1.06%                                                             MSCI World Index: -4.42%

A high rating does not assure favorable performance, in fact the fund experienced negative returns for the for the 1-year period.

Expense Ratio Gross (as stated in the prospectus 02/29/2012): 1.58%* Net: 1.49%*¹ * The Fund’s net expense ratios reflect fee waivers and expense reimbursements by the investment adviser. The Adviser has contractually agreed to pay, waive or absorb a portion of the Independence Fund’s expenses through the end of February 2013, or such later date as may be determined by the Independence Fund and the Adviser. The Fund’s performance would have been lower if the waivers/ reimbursements had not been in effect. ¹

The Independence Fund Net Expense Ratio includes a monthly performance adjustment of 0.14% (as of July 1, 2012). The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. A redemption fee of 2.00% of the then-current value of shares redeemed is imposed on redemptions of shares made within 90 days of purchase, subject to certain exceptions.

Unlike a mutual fund, the performance of a market index is not affected by fees, expenses, and taxes. “An investor who takes a chance on the brand new Motley Fool Independence Fund before it proves that it can deliver on the big talk of its founders would be making the ‘Stupid Investment of the Week.'”  Yet thousands of your fellow investors still entrusted us with almost $100 million that first year alone. We’re grateful that they did. And I imagine they’re glad they did too… Motley Fool Independence Fund has earned them 54% since inception, beating its benchmark, the MSCI World Index, by 14 percentage points.

And what’s more — Motley Fool Independence Fund received a Five Star overall rating from Morningstar, based on performance and risk calculations. How we’ll be investing differently since we received a Five Star rating… While our team certainly respects Morningstar — a little outside validation never hurt anyone, of course — it’s never been our goal to win industry praise.

Instead, we strive to achieve long-term capital appreciation for shareholders. And I think you’ll agree we’ve been successful so far… achieving annualized returns of 15.2%! That’s almost 4 percentage points more than the MSCI World Index. And though we can’t guarantee that the Independence Fund will continue to perform so well, we do believe this performance was no accident… Instead, we’d humbly suggest that our relentless value focus, combined with our contrarian, outsider’s perspective and disciplined approach had more than a little to do with it. Not to mention our ability to “go anywhere” in the world in search of the very best opportunities, regardless of market cap, industry, or geographical location. It’s a strategy that’s practically custom-made for today’s globalized, crisis-driven market. And that’s why that, since we have received a Five Star rating… we’re not going to do a single thing differently. 

A different kind of mutual fund company Motley Fool Funds is not your typical mutual fund company. Our entire staff occupies just one unassuming corner of the first floor of the old Time-Life building in Alexandria, Virginia — a world away from the massive Wall Street banks and huge financial-services conglomerates whose skyscrapers you see advertised on TV. We don’t have a bustling trading desk, or a seat on the exchange. Nor do we hobnob with investment bankers or hedge-funders. Frankly, we’re small. And we keep things simple. So be aware… Being rated Five Stars is great. But it’s not our focus. When you invest with us at Motley Fool Funds, you are investing in partnership with a small, dedicated team of stock analysts and a value-obsessed manager whose sole mission in life is to dig up the market’s hidden opportunities. In other words, the kind of investment opportunities that we’re convinced can help YOU build your wealth and get you securely on the road to reaching your long-term financial goals.

And then there’s the advantages of “going anywhere” Some mutual funds focus on small companies. Others invest in mega caps… domestic growth stocks… or overseas opportunities. You might presume their managers — the good ones at least — have a wealth of specialized knowledge about their niche. We think that’s fine — for them.

But we opted for a different approach for you at Motley Fool Independence Fund. Our investing team has no specific mandate. Instead, the Independence Fund is a “go anywhere” fund. We might simultaneously be evaluating the world’s largest technology company and a small, promising retail company from Malaysia…  Among other things, this “go anywhere” ability allows us to avoid asset classes and regions that we think are overheated. It also allows us to zero in on what we believe are the very best opportunities across the full market-cap spectrum and all over the globe. In other words, times of great uncertainty and volatility — such as those we see today — are a sort of market nirvana for us. In no small part, that’s because companies we know and admire suddenly drop to prices we believe to be significantly below their fair market values. Our investing process is grounded in the belief that, eventually, the market wakes up to true value. That ownership in the world’s very best companies offers shareholders like you a genuine opportunity to increase your long-term wealth. Our award-winning fund manager Bill Mann, Motley Fool Funds portfolio manager For years, he was among the most widely followed of all of The Motley Fool’s independent stock analysts.  Bill Mann is  a dedicated stock analyst with years of business and investing experience.  There’s another way Motley Fool Independence Fund is a little bit different from your typical mutual fund… For starters, Motley Fool Independence Fund is a no-load fund. That means you never pay an up-front sales charge or commission to invest with us. And did we mention that we get paid for beating the market? If we don’t outperform our benchmark, we make less. That’s because we’ve opted for an unusual compensation model that allows our fees to increase or decrease depending on the fund’s performance. In the industry, this is called a ‘fulcrum fee’ structure. You can learn more about how it works by reading the fund prospectus.  This unusual component of our fee structure gives us the incentive to earn the highest possible return relative to the market, not merely pump up the fund’s assets the way most other funds do. Just as important, our award-winning portfolio manager, Bill Mann, is a meaningful shareholder in the fund… So he’s investing right along with you. So you see, our interests really are aligned with yours, in more ways than one. Here are a few more features and benefits you can always count on receiving from Motley Fool Funds… Unwavering temperament:

Because investing for your future is a marathon, not a sprint, we don’t try to time the ups and downs of the market.

We don’t get rattled in rocky waters… or chase the latest Wall Street fad.

We invest your money with confidence — comfortable in the knowledge that if we’ve done our homework and bought great companies at good prices, the market may eventually see it our way.

Frank, friendly communications: We don’t hide from you if things get tough. We’ll talk to you frankly, in plain English, like a trusted partner.

At Motley Fool Funds, we hope you’ll look forward to hearing from us — as we will certainly look forward to hearing from you. Fair, performance-based fees: At Motley Fool Funds, we have a financial incentive to help you do better than the market. We’ve chosen a compensation model that allows our management fees to increase or decrease depending on the performance of the fund. In other words, our interests are aligned with yours. 

 A word about risk… Of course, all investments come with risks. We don’t promise that you’ll make money with the fund. Over any given time period, no matter how hard or how long the fund’s investment advisor works, the value of the fund could go down, and you could lose money, including principal. We endeavor to find companies that are both great businesses and great investments, but there can be no guarantee that we will succeed.

And because the fund is free to invest in companies of any size around the world, at times we may be heavily invested in small-cap stocks and foreign securities, each of which presents extra risk. Small-cap stocks tend to be more volatile and less liquid than their large-cap counterparts. Fluctuations in currency exchange rates can cause losses when investing in foreign securities, with emerging markets presenting additional risks of illiquidity, political instability, and lax regulation. We strongly encourage you to read more about the fund’s strategies and risks in the prospectus. Motley Fool Independence Fund seeks to achieve long-term capital appreciation by investing primarily in common stocks and equity-related securities. The fund is not for everyone. If you’re seeking something other than long-term capital appreciation — for example, current income to live on — or if you’re not comfortable with the risks, or if you expect to need your money back soon, this is not the fund for you. Are you ready to invest? Hold on! Don’t send us a penny unless… As a member of The Motley Fool community, you know the routine. At Motley Fool Independence Fund, we’re looking for patient, long-term investors. Shareholders whose investing temperament matches our own. Frankly, we’d rather not take on investors who are tempted to pull out when stocks temporarily go on sale — in other words, precisely when WE are most eager to go shopping for bargains. Plus, unlike what we believe many other mutual funds are doing, we intend to be long-term, buy-and-hold investors. And not just because it makes life easier for our management team. We firmly believe — and the vast preponderance of evidence shows — that attempts at market timing put YOU at a grave disadvantage and greatly reduce your chance of outperforming the market over the long term. For this reason, and to keep the fund’s expenses low, we discourage small accounts and short-term trading by assessing a $24 annual fee on accounts of less than $10,000 in value, as well as a 2% redemption fee on shares redeemed within 90 days of purchase. (The redemption fee is paid directly to the fund and is designed to offset brokerage commissions, market impact, and other costs associated with short-term trading of fund shares.)  

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  1. There is one mutual fund in India which writes frank emails like Motley Fool. Performance has been good too, may be not as stellar as Motley Fool.
    Let me not name the fund, lest I be accused of something bad. However you can guess the name. Can’t you?

  2. Subraji, I think some of the Indian investors received information along the similar lines from Quantum mutual fund. But most of them choose to ignore due to their prejudices. Some of them even ridicule.

  3. A fund house has to have a long track record before one can comment about the performance. Just to criticise a fund house it is possible to take a period of poor performance. Exactly in the same manner it may be possible over a shorter period of time. Need longer history.

    Sadly, unlike a Term insurance, poor fund management can completely off set all the advantages of low charges. I have a ULIP with 0.8% amc charges. After the person at the top changed, the management has been so poor that I am seeing huge, huge under-performance.

  4. quantum is good. the fund manager ,ajit dayal is a buddy of bill bonner who writes at dailyreckoning.com and runs agora financial. i tend to agree with him on 99% of the things.

  5. Quantum advisors (sponsor of Quantum AMC) has fairly long term track record in managing money for FII’s in indian market. In 12-years since inception they delivered 18.03% CAGR (net of 1%AMC and 20% profit sharing fees) when compared to 14.43% CAGR from BSE TRI index (in INR) – http://www.qasl.com/Equity.html… I think 12 years would be longer term period enough to judge the fund management ability of a team.

  6. I partially agree with Subra’s comments – a bad change of a fund manager can create havoc. It is like having been in the hands of Fidelity for 4 years..now LnT which is struggling (as of now based on reported news only) to get a decent fund manager.

    Even assuming Q is a good and brilliantly managed fund the business model looks shaky. Because a dedicated India fund is still with them, the costs are being shared. If Q had to take all the expenses based on this pidly aum that they have….it would be bleeding…badly..

  7. Thanks to all commets that helped to take note of this fund house its values and performance. No wonder nobody promotes it, not even the “regulators” fail/ bother to mention it. this risk is there to see in its growth and profitability but just to share solidarity with its position on values you believe, one should share their risk too. SIP on its way hoping for the best… 🙂

  8. Hello Subra,

    Can you pls. have an article as to how (and if) Indians can invest in the foreign stock exchanges.


  9. QLTEF is a consistent and persistent performer and no one can ignore the benchmark beating performance for a period of 6 years barring 2007 (crazy bull market valuations).

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