Srikanth Meenakshi of Funds India and the new author Ranjan Verma are having a Great Debate on Mutual funds vs ULIPs, and I have read both their posts.
R V is an ex LIC person so to the extent that he believes that ULIPs are better, and LIC ulips are best is a fair view – it is HIS view. However even RV has to admit that LIC managers are not the greatest (LIC mutual fund languishes in every chart, right) and it is the finance ministry which decides whether LiC should hold 19% of Ongc or 23% – the fund manager be damned.
So immaterial of whether MF or UL – please remember when the newspapers say ‘LIC loses 1200 crores in PSU investment’ read it as YOU have lost it if you have an endowment plan of LIC – UL or otherwise.
Regarding costs, I agree with RV to pick one fund of a fund house which does not earn enough to pay one fund manager is not right. Having said that Quantum does have a scheme with a low management fee. However I also have a Unit Linked Endowment plan with ZERO risk charges, very low admin charges and 0.8% asset management charges. This was a UL bought in 2004 – from Hdfc standard life insurance. Having said that, I am not at all happy with the fund manager’s performance – despite the amc charges being low.
So finally it does come down to good management. A well managed low cost fund is the best. In a UL (mine is for 30 years, and it is already 8 years old) to expect the same fund manager for 30 years is a joke. Even in a mutual fund to expect the same fund manager to continue for the rest of its life is IMPOSSIBLE. I started investing in I Pru MF only after Nilesh and Naren got into the management. Bias? Not sure, but I do have a lot of respect for Nilesh Shah, Naren Sankaran, Saurabh Nanavati (he was the fund manager of Hdfc slic when I bought the UL product) , Siva, Anup Maheshwari, Nagnath, etc.
However when you invest in their funds you do realize that these people are not permanent – so you do look for a good set of globally accepted practices to ensure that the funds are well managed beyond their lives.
I agree with Srikanth – the fact that the insurance and investment HAVE to be separate (what if I liked the fund but not the risk charges?) …so it gets kinda complicated.
HOWEVER for the end user he could have both, right?
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