Lessons for Investors, advisors and AMCs from winding up of
6 schemes of FT
I have written a blog on Mutual Fund Sahi Hai and covered
good bit about the Mutual Funds and its advantages also. If you have missed it,
read it here.
https://www.blogger.com/blog/post/edit/7225299464715636707/1228797090538678759
Would urge you to read above blog before reading this blog!!
It will help you understand it well.
I see many (so called) experts who flood social media who
may or may not have direct investments into these 6 schemes of FT are also
talking about it and spreading their view points. I also thought to voice out
my view point. Hope this helps existing and prospective investors of MF too!!
Before going further, I will make disclosure that-
1)
“I haven’t suggested or Invested monies in any
of the FT debt funds nor had any allocation in Credit Risk funds of industry.
In fact if any investors, had monies in Credit Risk funds, I have promptly told
them to redeem (despite the fact that these Investments were made thru us). I
believe it’s my duty to guide on overall portfolio of the client.
2)
I understand the pain of the Investors who’s
monies are stuck in these 6 FT schemes and have empathy for them.
3)
I am not biased towards FT and have zero AUM
with them. I also believe FT should satisfy the large number of Investors and
draw up a plan to liquidate the assets in best possible manner, that investors
feel satisfied.
4)
I also believe that what has happened shouldn’t
have happened as “liquidity on call” is MF’s promise and therefore Investor’s
right. But I also understand that the situation got aggravated with lockdown
and negative sentiments in Bond market.
5)
I also believe that regulator and industry is
all set to correct the course and bring back confidence/ transparency in MF
industry. Satisfying all parties will never be possible, but satisfying most
would mean justice done👍 .
In hindsight, everyone is right. If the fury is from affected investors, it’s justified but if it’s from the watcher or critic, they need to be responsible and not try to attract eyeballs!! Everyone has freedom to speak and write😊
I tell my clients “Post Mortems are successful but operations
can fail.” So as Advisor/Investor/ Fund Manager, who does operation, are likely
to fail sometimes.
Let me now talk about the responsibilities of 3 constituents
of Investments viz Investor, Advisor and the Fund Management team (AMC).
AMC:
1)
AMC and the fund Management team should have
acted more wisely in the scenario when Lockdown was quite possible and
expectations were built 1 month before.
2)
Credit scenario was bad and clouds were not off
the sky since 2 yrs. This should have prompted fund managers to cut their
exposures in high risk and illiquid holdings. Bravado attitude of higher yield
to investors was avoidable for some time. It would have meant low AUM but want
bring situation to wind up of 6 schemes.
3)
Investors found to be smarter than the fund
management team, who exited schemes before the time in anticipation of
problems. AMC did fail to be ahead here.
Advisor:
1)
WM/RM/Advisors/agents or distributors should
have done due diligence and study before advising any product. It’s your
responsibility to do because clients invests money on your trust, knowledge and
prudence.
2)
Advisors have fiduciary responsibility towards
the Investors and should have watched the situation closely. If NPAs are making
headlines since 4-5 yrs, how can a portfolio with low rated papers be sold to
Investors on expectation of higher returns?? These 6 schemes are also sold as
alternate to FDs in some cases – a crime in my language.
3)
There were continuous downgrades and defaults in
many schemes. Big names like ILFS, DHFL, Indiabulls, Essel, Vodafone etc have
surfaced in 2 yrs. This should have been enough to trigger caution.
4)
If your investor insists on high yield investments,
have you shared your perspective on the possible risk attached to it? If
Investor knew it all, he will not invest thru you!! You should do your job no
matter what the pressure be like. Today
the same client will leave you and go to another person.
Investor:
1)
With pinch of salt, investors must also accept
that they are not holy cow. It’s your own hard earn money! Have you done enough
research about who you are investing with? I know lot of people invest thru relatives,
neighbourhood agent, old known source etc. If you do not pay attention to your
money, how good is it to expect someone else will pay attention. Child with
maid and child with mother, who does better?
2)
Haven’t
you seen segregated portfolio in your valuation report? Have you monitored
your portfolio with diligence from time to time? Did you ask right questions to
your advisor? Did you get satisfactory response from advisor?
3)
While investing,
a thought that you worked hard to earn this money, will make you more
responsible towards it!! I am not asking you to be fanatic but in unusual
times, you must also become vigilant.
4)
Spend some time in identifying good advisor. See
if your goals and his goals are aligned. Is he/she can offer continuity and
consistency of relationship? Check the knowledge levels and can you trust your
money with them?
5)
Caveat emptor- “Buyers Beware”. Investor should
beware that if there is loss, it will be only your’s and not advisor’s or AMC’s.
So choose wise advisor who has knowledge and pedigree to steer thru cycles.
Best drivers and the one’s who can drive on rough terrain.
Not to underscore the responsibilities of AMCs and Advisors, It’s
Investor who needs to be careful in choosing. That’s why our signature line is “Risk comes until you know what, where and why you are
investing”
I am willing to offer
free consultation on your queries, concern over the phone. Pls text me on
9833778887.
Bhavesh Damania I Founder and Chief Care Taker-
Wealthcare Investments I Personal Finance
Guest- CNBC TV 18, CNBC Bajaar, Outlook Money, Mint, Navabharat I Blogger
wealthcarein@gmail.com
and 9833778887
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"Risk comes until you know what, where and why you are Investing”
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