I know many IFAs read my blog and so do many investors. I know a couple of fund managers too read it, especially when I write about their fund – but more if I write about a competitor fund.
So here is a Completely Contrarian View.
1. Every site tells you that the ONLY thing you can control is costs: True. So you should buy a fund with the lowest costs. Correct. However my take is, well, a little different. If you are reasonably sure about the fund manager, and his capabilities, it is worth taking a risk with that fund manager. Once upon a time I owned a Unit Linked Endowment Plan and a unit linked Pension plan too.
I had done the theoretically the right things. I had picked up the ULEP with the CHEAPEST fund management costs.
Excellent, so my fund should be doing well, right? Wrong. Saurabh Nanavati quit the fund house, and with it my advantage of paying only 0.80% as fund management charges. Even now Hdfc ULEP is a well managed fund, with a low amc, but my returns on other funds is superior DESPITE the higher fund management.
2. The name of the fund manager is not important, only the process and the fund management skill of the team is important: Guilty. I interacted and found that I would be happy dealing with Siva and then also had some interaction with a couple of CIOs of Hdfc. Once PJ came on the comfort level surely went up. I had started investing with Hdfc Growth fund, and had no complaints. Then the Pioneer funds came into the Hdfc fold and along with it PJ. I felt here was a good fund house (sanitation was in place), and a good fund manager had joined. Remember I had NOTHING against Sanjoy B – but he was a little carried away at times….but I still do hold Hdfc Growth fund..and have no major complaints. But yes the amount of money at stake was still small.
3. My trust on the ‘brand name’ Icici Prudential started ONLY on the day Nilesh Shah joined from Templeton and attracted brilliant fund managers like Naren Sankaran. Here I had the luck of knowing NS from an earlier relationship. Nilesh of course from FT – but he was not what we call the ‘star’ equity fund manager. However he meant ‘cleanliness’ and we saw the results quickly. NS took charge of a couple of funds like Discovery and Dynamic – so that became our favorites too. Since many of us did not make the mistake of investing in Infra, etc. our portfolios did well.
4. The fund house is not important: For me at least, the fund house was very important – which meant I was restricted to about 5-6 fund houses, and on a concentrated basis just 2-3 fund houses to do business. This is tough if your business model is ad dependant…I am not.
I am largely an equity man and still find it easy to do a portfolio construct / deconstruct…
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