JM Financial Mutual Fund is the 17th largest AMC (Asset Management Company). Its total AUM (Assets Under Management) on last working day of October 2009 was approximately Rs 8800 crores (1 crore = 10millions). Over the next few posts I would do an analysis of schemes and investment philosophy of this fund house.
There are 37 mutual fund companies doing business in this country. Many others are lined up to enter the market. For a common investor it becomes very difficult to evaluate a fund house or a scheme. This can happen due to many reasons. I am listing some of them below.
1. A common investor may not be qualified enough to analyze a fund house and mutual fund schemes
2. If she is qualified and has some background of having studied the mathematical tools and financial models required for this type of analysis, she may not find the time to do it
3. Due to the above two reasons a common retail investors depends upon an expert (like a financial planner, financial advisor, life insurance agent, banker), a magazine or a website, or an expert on TV. However all of them may have their axes to grind and nests to feather. Financial planners, financial advisors, bankers can be lured by AMC through aggressive marketing. After all many AMCs are known to reward advisors and bankers for meeting sales targets by paying them a higher brokerage, gifting white goods, or worse sponsoring trips to flesh pots of South East Asian countries (yes you read correctly). Bankers are known to be prone to sales target and sales pressure which leads to a sub optimal outcome for the investor.
Magazines and websites which claim to be neutral and pro investor draw their sustenance from advertisement revenue generated from mutual fund companies (visit any popular site which rates and analyzes mutual fund schemes and count the number of ads). The so called experts who appear on TV are usually owners of mutual fund magazines and earn their daily bread by writing good things about their paymaster mutual funds (whose bread I eat his song I sing). I recently visited a very popular website on mutual funds. The landing page of the website has an ad by an insurance company (why is this messiah of retail investor and pro mutual fund movement taking money from an insurance company which fleece their customers by charging astronomical fees. Oh, I get it he must be doing it free of cost). The home page has ad by at least 5 mutual funds. A banner on the top advertises a electronics goods company. Then there are ads by Google on the home page. Once inside the site you will also find a matrimonial site selling its wares and other mutual fund companies tom tomming their schemes. I am confused whose bread is this guy eating and whose song is he singing. But then he must have turned senile by appearing too much on TV.
As unfortunate as it may be, you cannot depend upon the majority of people I have listed above for as simple a thing as honest mutual fund advisory.
My aim is to dispassionately analyze schemes of one AMC at a time. Choosing which AMC to begin with was a choice to be made and I asked my random number generator to make this difficult choice for me. Mr. Random Number Generator told me to begin with JM Financial Mutual Fund.
Scope of this analysis is bounded by statistical tools and mathematical finance. I will not give credit to gut feeling the fund managers might have voiced in the past or to their conversations with angles sitting on their shoulders, although both of these affect the performance of the fund and in turn the investors.
Analyzing a fund house performance is a major project and will take time. Your constructive feedback is valuable. Kindly refrain from making remarks of hindsight and passion.
6 comments:
I sincerely don't balme anyone except the mindset of Investors(which ofcourse is not unique). This has to change otherwise we will see more of Sandeep Sabharwal.
Couple of Caveats.
1: DOn't just look at 1 year Performance(it changes every day)
2: Look at all the funds in top quarticle in 1yr,2yr,3yr and 5yr and then filter the funds which are more there in top quartile in all the horizons.
Peter, couldn't agree with you more. Investors get carried away when the market is bullish. So called advisors pop up every where like tadpoles after rain.
Peter if I look at funds which are in top quartile in all the time horizons then no reasonable conclusion can be drawn. Fund performance varies widely over a chosen time period. Please elaborate how can we rate a fund by checking its availability in top quartile over 1y, 2y, 3y, and 5y time horizons. And why are you not taking 4years time horizon. What is the rationale behind not including 4 years?
kindly do tell us your qualifications which give you the right frame of mind to analizise mutual funds and for that matter other things.
same apply's for mr peter pl do tell us how you are qualified to be judge of mutual fund industry.
@ Mr Anonymous
Dear Sir,
Before asking others to give their credentials have the courage to disclose your name. Please stop posting anonymous.
I have 7 Years of Exp in the INdustry. A CFP, ofcourse an AMFI. I am the Spiderman, Mr Anonymous. I think that should answer your question.
Ecophile: The Idea is to look for consistency. The algorithm just filters out funds which are pretty consistent. I believe it's good to chase consistency in an MF than superlative performance. Which will amount to timing the market.
See " YOu can be hot, you can be consistent, you cannot be consistently hot."
I have one more solution to filter out funds which are consistent.....In case you are Game?
Sir, Great if You can get 4 years performance, please include that as well, Will give more accuracy to the outcome.
best if you get for 4.99 years as well ;-)
Post a Comment