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Thursday, April 13, 2006

Path ahead for mutual funds in India

Assets of Indian mutual funds in March rose to Rs 2.318 trillion. However, the mutual fund industry has been flush with competition. Every company launched their Equity, Tax-Saver, and Contra funds. How can the mutual funds differentiate themselves? The scientific view is that people would look into things like the track record of the fund manager; the prospectus of the fund; expense charges etc. But in today’s date when sensex is past 11000; evaluating funds on all these parameters is difficult. If one had to do all this analysis; why should he invest in funds; why not invest directly? So companies started differentiating themselves through fancy names: Life Style Fund, Rural India Fund, Infrastructure fund, etc. And the big daddy of all names: The Special Situations Fund. Mutual fund advertisements have already shown the analogy with cricket; they are yet to hire Amitabh Bacchan though.

So what’s in store for the mutual fund industry; how will they differentiate? Here are my suggestions:

  1. Remix funds: Combine old fund ideas to make new investment themes and start MFs like Infrastructure Contra fund-Baby Doll mix, or IT Financial services fund- Naughty Party Bathtub mix.
  2. More relevant investment themes: Funds with themes like Contra, Infrastructure etc has become clichéd. More relevant themes now would be “Bhai-Bhai se fayda” fund which will invest in companies or their competitors likely to benefit from family feuds. Or Strike se Labh fund which will invest in companies that benefir from PSU strikes which are only going to increase in future.
  3. Think of more specific funds: Like say a Jogeswari-Vikroli Link Road Fund – a fund that will invest in companies that will benefit from the completion of that road. Similar funds could be Ullasnagar slum rehab fund, Mithi to Thames River fund etc.
  4. Get superstitious with fund names: Start funds with names beginning only with K (like the Ekta Kapur soaps); change your fund manager’s names to make it begin with that lucky M.
  5. Get superstitious with Fund management: Declare in the prospectus that the fund will invest in companies whose head offices are Vaastu certified; invest in IPOs which open on auspicious dates; trade during auspicious times in the day, and force fund managers to ask Bejan Daruwala before any action.
  6. Arouse nationalistic feelings: Like Hindi-me-Bole fund that states the risk factors in Hindi. Indian mutual fund companies can get inspired by the new crappy Voltas ad (India ka AC, Korea ka nai)

P.S.: Mutual funds should never hire Navjot Sidhu to read their risk factors on TV. Laced with three crappy analogies for each line read; the reading risk factors would never end. Credits also to Jayesh for his ideas for this post.

7 comments:

pranav said...

Cum! I am here only1 My number is 82034672...

My e-mail is firstname.secondname@alumni.insead.edu

Anonymous said...

"Mutual funds should never hire Navjot Sidhu to read their risk factors on TV"

HAHAHAHAHAH

Totally Agree :)

www.eternalprofits.net

Bombay Addict said...

Hilarious ! Again agree with the Sidhu angle. Hey - why don't you have that "e-mail" link on your blog ? I am going to forward this anyways - its really funny.

Shivaji said...

bombayaddict:

Suggestion implemented. Thanks :-)

iyer education said...

great post with brimming & brilliant ideas...

how about color coded mf's? eg
red for companies in the communist areas of bengal and kerala, green for co's in pakistan etc

N.M. Finserv said...

hi :-)
nice stuff. i too have a suggestion, but on a slightly serious note though. what abot the new MFs being city-centric? like a fund for companies in Mumbai, another for Bangalore, Pune, Noida, Gurgaon, Hyderabad, etc etc.
moreover, what about the MFs offering new services like ATM cards, insurance products, etc for the investors?
i think a lot many things can be done to improve the things for MF industry. feel frre to get back to me for such views. you can also visit www.nmfinserv.com to knowmore about my business activities.

Anonymous said...

Has anybody ever wondered, who is the bugger who makes the max moolah out of the entire mutual fund embroglio? The man is the broker! Whether the market rises or sinks, the bull runs or the bear bottles, the bugger is milking all the time. And if there is one guy who is insulated from the stat warning: 'Mutual Fund Investments are subject to market risks... it's him. So why shuld one go the exploring this mutual money spinner? And mutual thoughts?