Sebi chief slammed the MF industry

Giving returns lower than individual investors:

“If you (mutual funds) are producing better returns than what an average investor investing himself in the stock market gets, then why is it that you are unable to convince investors that you are giving them better returns,” said Mr Bhave, at a mutual fund summit organised by the Confederation of Indian Industry (CII). “I mean, are investors so dumb as not to understand that they are getting better returns here (mutual funds) and yet would invest somewhere they would get lesser returns,” he said.

Sales of equity schemes of mutual funds have been hit, after Sebi banned mutual funds from charging investors to pay fees to distributors. Mr Bhave said that mutual funds needed to look at how investors benefit from investing in their products, rather than create an incentive structure that suits them.

Short-Term Focus
“Somehow the focus goes to short-term incentives and that ultimately results in a great loss for investors. And finally, when investors lose money, the whole industry also comes tumbling down. I think, this lesson needs to be internalised by all of us,” he said.

“You are becoming a shock absorber because you are taking short-term money ... now who asked you to take short-term money ... because you see that the neighbour (rival fund house) is taking short-term money and his AUM has gone up, so I need to compete,”

On large number of schemes with little difference
“Even if you put before me 3,000 investment products, I won’t know how to choose from those products. I’ll have no idea of which scheme is good for me,” Mr Bhave said. “If you really want to reach to the so-called small investors in whose name you do everything, does he need 3,000 options? Is there really so much of innovation that is going on? Are these schemes really so different from each other or were there incentives operating in the market that made us generate these 3,000 options?” he said.


Comments:
I think that MF's are cheating investors. We see that all schemes are handled by same fund manager. So what he is doing is when he is making 50% profit and 50% losses he is showing that in his star schemes to keep up their returns while their poorer cousins remain as it is. Overall Gain percentage of the Fund house with respect to equity must be a parameter that funds should provide other wise this skin hiding will continue in my personal opinion. After all this these people are ore interested in showing off their faces before TV screens rather than doing some quality research.

If some one can interested in Mutual Funds can unearth that overall fund house gain per year it would be appreciated.(another topic for Sucheta Dalal)

Well done Mr. Bhave but add some parameters so that Fund house performance is reviewed as a whole or introduce some returns based fee scheme. otherwise we are bound to see another desi version of American Recession

__________________
brijwanth.blogspot.com

If MFs are cheating, then what about Ulips?
They are doing day-light robbery !

__________________
regards
rajesh

MFs have become traders This way much of their gains will be eaten up by taxes.

__________________
'Growth & Value are joined at the hip' - Warren buffet

Originally Posted by rajeshn07

If MFs are cheating, then what about Ulips? They are doing day-light robbery !

Sadly Mr. Bhave can't say much on ULIPS though they are robbing people like anything with 20% commission upfront.

May be the IRDA Chief might have something to say, as a whole these Mutual Funds are doing good Accounting Management and whatever I'm saying is not an accusation but a fact I had recently discovered through a common friend (being a banker has some advantages). Sucheta Dalal and Dhirendra Shah might have got that info earlier.

__________________
brijwanth.blogspot.com

Avoid ULIPS and go for a term policy which costs 10% of the ulip premium.
Remaining invest in a MF /stocks or any guaranteed product.

__________________
regards
rajesh

DTC will kill ULIPs anyway.

__________________
'Growth & Value are joined at the hip' - Warren buffet

Up to a few months ago, ULIPs were being pushed in a big way. An insurance product that helped you also invest in the equity markets, in a single contract, was being touted as a dream product come true.ULIPs are also waste of money. Instead of ULIPs one can take term + long term mutual funds in SIP system.

MFs return positive only in a rising mkt
caveat emptor

Wall Street?s biggest secret Brett Arends' ROI - MarketWatch

__________________
Other side of the moon.........