Comments on: Conversation between an asset manager and his regulator

By: Jatin

Jatin — Mon, 23 Jul 2012 10:26:39 +0000

Hi,
Can you pls provide link to Anniruddh & Balakrishna’ s blog mentioned in the comment.
Txs.

By: subra

subra — Mon, 23 Jul 2012 06:31:18 +0000

my argument is basic. Why replace a simple charge based on the effort of bringing money – to a far more complicated charge? and why should the amc decide how much to pass on to the distributor?

distributors saying “now we hope amcs pay us more” is like like a driver telling the maid “I know that boss’s salary went up in April, so our incomes will go up”.

Opaqueness, be damned.

By: Balaji

Balaji — Mon, 23 Jul 2012 04:52:44 +0000

There are still options like Quantum AMC, a direct-to-investor AMC, that have wonderfully performing funds like Quantum Long Term Equity Fund, that have given great returns over 5 years or more and are rated 5-star for very long time. And, their AMC charges (Expense Ratio) has been 1.5% for years now and recently it has gone down to 1.25% as there is no distributor dependency and need to pay hefty trail commission y-on-y.

By: Siddhant

Siddhant — Mon, 23 Jul 2012 03:35:35 +0000

Hello Subra Sir,

This is very disturbing, you have been a fantastic sane voice in all this consumerist bullshit happening around.
is it possible to start a campaign where we can send postcards to SEBI about customers non satisfaction with this rule….

You think this will help?

surprisingly there is no consumer association for mutual funds which is very odd.

By: MangoMan

MangoMan — Sun, 22 Jul 2012 15:26:58 +0000

Gentlemen,

Please help me to clear one doubt. Could one of the possible fallout’s of this fungibility clause be that, the days of MF scheme’s having expense ratio lesser than the upper limit allowed could come to an end?
Regards

By: Muthu

Muthu — Sun, 22 Jul 2012 11:11:55 +0000

Out of 41 equity oriented funds in existence for the last 10 years, only 4 have given less than 15% annualized returns. The remaining 37 have given over 15% returns.

The 4 funds belong to LIC & JM. Even there the returns are superior to FDs & PPF!

Increase in expense ratio would affect investors but how fungibility within the expense ratio structure would impact them? Kindly explain.

(Data source: Valueresearch, as on 30th June’12).

By: subra

subra — Sun, 22 Jul 2012 10:52:57 +0000

love to see 15% pre expense return in a mf without a super high standard deviation. Anyway Innumeracy helps. Also this is a fictitious talk between an amc and his regulator. Nothing to do with India. Generic.

By: subra

subra — Sun, 22 Jul 2012 10:50:22 +0000

sorry Muthu take it as 15% return and 2.90% amc it WILL LOOK WORSE.

if u have not seen fungibiity, i can assure you the MEDIA will NOT. Fungibility is worse than increasing the amc charges.

best of luck…

By: Muthu

Muthu — Sun, 22 Jul 2012 10:40:37 +0000

I was not well and caught up with last few days postings day.

You have used 8% returns and 3% expense ratio in illustration. Obviously the returns would look poorer if expense ratio is taken as 40% of the returns.

In Mutual Fund Insight’s current issue, the illustration is given for 15% returns over a 10 year period for an investment of Rs.1 lakh. The return at current expense ratio would be Rs.3.38 lakh and with the proposed expense ration would be Rs.3.22 lakhs. Difference of 4.7% and not 40% as mentioned above.

Everyone including you have been saying that SEBI has killed mutual fund industry as there is no incentive for some one to sell MF. When I wrote a comment earlier, why not 1% commission is enough for the distributors, you mentioned that in Mumbai some one with even Rs.75 crore corpus cannot survive @ 1% commission.

No move is perfect and anything can be criticized. So what is the solution then? Only by trail and error, an optimum balance for clients, fund houses and distributors can be reached.

By: Ashish

Ashish — Sun, 22 Jul 2012 07:12:29 +0000

disclaimer was too good.