In the 1990s big corporates would borrow money from banks and lend it to smaller corporates. All of them played this game – Bajaj Auto, Tube Investments, Parle, Ranbaxy, etc. as lenders and smaller companies like Shaan Interwell, Indiana dairy, Sun Ceramics,….as borrowers.

However the overall return that the lenders got could not have exceeded 1% of what they could have got in a bank!

What happened? Well when corporates got cash (far in excess of  what they could use) they thought they had turned bankers! Well it was not so easy. I remember a big corporate head who refused to play this game – and kept all his money in G-secs! Well even for him the falling interest rates ensured good profits on the bond portfolio :).

His argument was simple. He used to say ‘If i make money for my boss, he will perhaps thank me, but if I lose HIS money, I will lose my job for sure!

Today if you are a corporate and you have money for a few days / weeks keep it in a liquid fund. If you have money for 5, 10, 30, 50 years…keep in a dull boring, Index fund.

Alpha does not exist for most of the investors…those who say it exists, ask them to read about Santa Claus..

The whole Maddox fraud, the Citibank fraud, etc. are based on this ‘chasing’ of the alpha problem….it is time we understood it in its Christian sense!!