My view - a mutual fund may have risks clearly defined in its investment strategy but there is this bigger risk of the fund manager not following the rules. As always, the manager does not lose the job, the fund earns the fees and investors lose.
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Anyone who has been following the coverage of the crisis in the media (mainstream and social), would have noted that much of the attention has been on Kotak MF, and on the so-called “safety” of FMPs. In this post, I’d like to move that spotlight a bit. The way I see it, firstly, the risks in investing in FMPs are, more or less, the same as they have been over the last several years. It’s just that many investors, advisors, and fund houses, have been in denial over the fact that portfolio concentration is a bigger risk than credit quality in itself. While I’ve talked at length about this previously, in this post, I want to talk about the questionable choices made by fund houses this time around, once this risk became a likely reality. Secondly, I feel that looking at the FMP fiasco from the lens of the decisions of HDFC MF (rather than Kotak MF) offers a better picture of what has happened. Investors in Kotak FMPs may have been the first to be visibly impacted, but it was HDFC MF that was the first to make the choices that brought us to where we are.
Read more at http://mfcritic.blogspot.com/2019/04/thoughts-on-fmp-fiasco.html
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Anyone who has been following the coverage of the crisis in the media (mainstream and social), would have noted that much of the attention has been on Kotak MF, and on the so-called “safety” of FMPs. In this post, I’d like to move that spotlight a bit. The way I see it, firstly, the risks in investing in FMPs are, more or less, the same as they have been over the last several years. It’s just that many investors, advisors, and fund houses, have been in denial over the fact that portfolio concentration is a bigger risk than credit quality in itself. While I’ve talked at length about this previously, in this post, I want to talk about the questionable choices made by fund houses this time around, once this risk became a likely reality. Secondly, I feel that looking at the FMP fiasco from the lens of the decisions of HDFC MF (rather than Kotak MF) offers a better picture of what has happened. Investors in Kotak FMPs may have been the first to be visibly impacted, but it was HDFC MF that was the first to make the choices that brought us to where we are.
Read more at http://mfcritic.blogspot.com/2019/04/thoughts-on-fmp-fiasco.html
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