In every Mutual Fund class of mine…I have said ‘a fund is managed professionally’ . Professionally as in that the fund manager receives a fee and is not managed like a proprietor (like say how a Rakesh Jhunjhunwala would manage his own money).

Many people used to think ‘professional’ meant opposite of amateur – and they were not wrong either…

And if it is PSU with a fantastic reputation, you were SURE that it was managed by professionals, right?

However, what happens if the NEW CEO comes and tells you that in the past the funds were always managed by amateurs?

I KNOW that it is not a well managed fund, it has political pressures, …but I did not expect the CEO to come and acknowledge it in public, that is all. Now that he has said that his funds are in pathetic shape, let us ask the following questions:

a) When did you know, sir, that the LiC mutual funds were managed by amateurs? on joining or earlier?

b) Just saying ‘they were amateurs’ maybe easy for you – but people who have lost money due to their incompetence should be compensated by the TRUSTEE out of their fees, right? that is what I was taught when I asked ‘what is the role of the trustee’.

c) Were these the same amateurs who at some point in time were / are managing the Rs. 600,000 crore LiC fund? Apart from ULIP of course.

d) do you not think you owe the unit holders and the country an explanation about usage of the word amateurs?

e) why should the investors not just take the money and run? after all in 2018 a new CEO will come and say…’in the past the fund house was run by…’ . Should unit holders be worried, or amused?

f) In the US, you Mr. Sathe would have been sued for a million dollars and your corporation would have been sued for a billion. In India you will get away with that.

g) You will now be on watch and we will want to see how your fund managers perform. If they perform well, they will be poached. If they do not perform well they will revert to the parent body I presume?

h) I must hasten to add that you have not said anything new, you have just admitted what we know. Thank you for your frankness.

i) I am happy that Sebi is now being headed by an ex CEO of a fund house, and I hope he reads this interview!

j) So apologies to all my students for telling them that a mutual fund is professionally managed.

I do not have to apologise to my friends, relatives, readers, and clients – I have never sold or held units of this fund house. Ever.

Now I continue my no LIC stand, successfully. And I am happy with the title Chandan Kishore Kant decided to give for the interview that he had with you and got published here:

http://www.business-standard.com/article/markets/dramatic-steps-required-to-raise-value-of-mfs-in-investors-mind-nilesh-sathe-113070400875_1.html

 

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  1. Crux of the story anything which has the name LIC associated just run in opposite direction with full speed

  2. Well said Suraj. Also include PSU companies as their policies and governance are dictated by government for its own use.

    So as Subra always insists, fund house plays an important role in MF selection.

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