Lies, Lies and Honest Lies
We all know who writes columns of lies, lies and honest lies, so here is a dig…
Look at the Quantum Mutual fund advertisements which appeared in the national press. The advertisement says “we have eliminated distribution commission…” so your money works for you.
There are 2 types of charges that a customer pays in a mutual fund scheme. One is the sales cost and one is the management of funds (amc cost).
Whether right or wrong, it was SEBI that abolished the ‘sales costs’ also known as ‘entry load’. Only person who can take credit for this (rightly or wrongly) is the ex-chief of SEBI, Mr. Bhave.
The asset management charges of most mutual funds is in the region of 2.5%p.a. – however as there is a sliding scale the bigger funds charge less. So while a quantum mutual fund would charge you 2.5% p.a. some funds like Hdfc Top 200 would charge you 1.86% p.a. This means there is a saving of 0.64% – and this gap would keep increasing.
If you go to www.myiris.com, www.moneycontrol.com, www.valueresearchonline.com – you will be able to find out whether Quantum was the best fund to invest or whether it was Top 200, I pru Discovery, I pru Dynamic, Reliance Growth…YOU need to take the call.
The ad then says ‘We did not launch numerous schemes to please the distributors’ – well Tata Mutual fund got the name of a ‘New scheme factory’ – valueresearchonline.com gave them that name. Sure many fund houses launched many schemes, but the client SHOULD have exercised the OPTION of not investing, is it not? In a crowded market it is the MARKET’S job to separate the men from the boys…
hmmm…
am expecting distributors of national level at Chennai to react to this news item!
Pramod
Subra,
Still, “nothing in this world is right or wrong; only points of view.” I am not an investor in quantum but the fund has done well over the bear market period. May be Mr. Ajit wants to take the credit that he was the first to launch a no load fund at the risk of being extinct and that is praise worthy however it is different to change your self and to change the world. It is only SEBI that freed us from load & no fund has “followed the example” set by quantum.
Anyhow its marketing and this is quantum’s way of marketing itself they want to postion themselves as “the only sage among the crooks” in this MF jungle. Let them enjoy.
and last note :- What about the 4% exit load in QEF ? Mr. flag bearer of truth
NPR
Subra, the AMC cost for Quantum LT Equity & Quantum Tax funds, now, is 1.5%. One of the LOWEST in Equity funds right now.
Disclosure: Am an investor in Quantum funds.
Muthu
If Quantum walks the talk, then why they are distributing MF products through Personalfn and earn distributory commissions?
Why don’t they become fee only planners?
Also they just have one multicap equity fund. No midcap or small cap fund. Very poor offering of debt products too.
As you’ve rightly highlighted, there is no sales commission any longer and distributory commissions are paid out of the expense ratio. Larger funds are likely to have a lesser expense ratio despite paying distributors trail commission.
NPR
Muthu,
Quantum AMC, PersonalFn are as far as I know, different companies. May be same promoter, but different companies. Even if PersonalFn distributes Quantum Funds, it does not earn any distributory commission out of Quantum AMC funds. I see no conflict here.
Quantum believes in simplicity (atleast till now) and so, they have not launched mid-cap or other funds. I don’t see anything wrong with it, per se.
AS an investor in Quantum Funds, they have done & are doing a decent job. But, I may be biased, as am an investor already.
-NPR
Muthu
I agree that Quantum long term equity fund is a good fund to be invested in.
They may be different companies, but I understand the ownership is the same.
If one takes an ethical or moral stand that distributory commissions are wrong, then they should not receive the same from other fund houses.
Otherwise Honest Truth becomes one big lie.
Equitymaster was condemning derivatives as financial weapons of mass destruction. Now they are providing paid reports for derivatives trading and claim tall returns.
I’m a subscriber to some of equitymaster’s services and they are too aggressive in marketing, to the extent of repulsive.
Sambaran Mitra
Submitting this dummy comment so that I can track the comment thread.
@Subra, On your blog is there any way to signup for follow-up comments without making a dummy comment?
Jagadees
Subra
From june 2010, both quantum long term equity and tax saving schemes are charging only 1.5% expense ratio. But the HDFC top 200 with large AUM and most of templeton funds still charges in the range of 1.79%-1.9%. It took them almost a decade for these fund houses to bring the expense ratio under 2%!!!!
Jagadees
Patachitram
Today morning i came across one adv on TV given by some govt scheme…
It’s last punch line goes something like this “Pahle hum kaam dhoondte the ab kaam humein dhoondta hai”, delivered by what looked like a bunch of farmers or village folks…
I was just thinking, how true is that. Govt by giving so many schemes like NREGA etc etc.. ‘work’ is seriously looking for these folks who are rather just happy seating at home getting sort of free food.
So, talk of lies, or distorted news!!
Paul
Quantum MF brought in the concept and SEBI made a sane decision, which made other to follow it.
I am an investor in their equity fund and their tax saver fund. I love them because of the simplicity. I dont want to decide between a Cash Saving Liquid Fund and a Treasury Management Liquid Fund just to set up an STP!
Simplicity is good. I also do invest in HDFC, Templeton,UTI and Fidelity, but they have too many investments products and I need to do some 10 minutes search to get the details and news on my fund alone.
I prefer quantum for simplicity and will be staying with them till they offer simplicity.
PS:- If the big MF distributor from Chennai is stopping distribution of Quantum, I will surely transfer all my funds with them to my local broker who serve all MFs.Yes, they will be missing the heft commissions from my other funds!
iarab
Suppose I invest ONLINE directly through the AMC’s web page, bypassing the distributor. Then what happens to the trail commission (say 05% to 0.75%)? Whether this amount will be used for purchase of additional units for me, OR will be encashed by some one in the name of some hidden / fictitious fees?
In other words, while investing, can I save on this train commisison, by any means?
Srikanth
Subra,
Not sure if you are referring to us as the “Big distributor from Chennai” – if you are, thanks! We are surely a distrbutor and we are from Chenani – but not yet “Big”…:-)
We are a distributor of Quantum MF and have no plans to stop distributing their schemes. True, they do not provide us any commissions, but we will continue to carry their schemes..
Regarding their ad – it is their style to be a bit “in-your-face” about their claims – they did launch a no-load scheme when nobody else did, and the expense ratio of their Long term equity fund is 1.5% which is lower than comparable five-star schemes…
Thanks,
Srikanth
FundsIndia.com
Muthu
If expense ratio is the only criterion, then one may go for an index fund or NPS. May be Quantum can start an index fund and keep the expense ratio at 0.18% like that of Vanguard.
Amway sells direct to customers. Does this means they are only good and HUL or ITC is bad?
I do not see why there is a notion among some that financial advisor earning money is wrong. Isn’t also a source of right livelihood? Is advisors are there to serve the society with charitable intent?
If someone says so, good luck to him and his clients.
As long as one is ethical and legal, what is wrong with any profession?
Any profession would exist as long as the market feels a need for it. If the market decides financial advisors are not required, then it is an ultimate decision without any recourse.
Many who visit this blog are informed investors. You may not understand the level of financial ignorance, handholding required and rampant misselling resulting in confusion for investors. Many highly qualified professionals too are financially illiterate.
subra
I do not know who is the ‘big distributor’ from chennai. I can only guess..it could be Ramesh Bhat…of IFA Galaxy. Not just because he is big, but also if he does something more people will know about what he is doing….not sure…any comments?
Muthu
What would FundsIndia do if all the AMCs take a stand like that of Quantum? I read in one of the interviews about the funding they have received and planning to break even this year.
How AMCs would then be able to penetrate market?
We cannot forget that there are even IFAs who have corpus bigger than Quantum mutual fund.
Would aggregators like FundsIndia and their sub-brokers / associates be able to survive only on the fee paid by the clients?
I’m curious to know how many investors are willing to pay 1% as asset management fee per annum to the advisors.
If that is the case, we can abolish even trail commissions and go only for pure fee model.
We can all then go the Quantum way and thank them for setting the trend.
Many customers do not mind paying fee but still prefer the major portion to come from product (inbuilt pricing).
Am I probably missing ‘right’ customers and seeing only the ‘wrong’ ones?
Mr.Srikanth may have more associate and customer base. He may be able to throw some light on this.
Srikanth
Muthu,
That is a fair question – and many of our customers have asked similar questions too.
Answer is – we will do what we have to do – start charging investors if needed to run our business. Our current zero pricing is based on the current revenue model. If the revenue model changes drastically, our pricing model will also have to change.
Whether it will work, whether customers will pay for the services is anybody’s guess. We are reasonably confident that there will be enough of a customer base who will pay for us to thrive as a business.
thanks,
Srikanth
pravin
quantum did what bhave “forced” others to do.quantum has all the rights to brag.in fact quantum proved that you dont need a Bhave for the market place to evolve.our faith in regulator babus is pretty solid ,looks like.
bharat shah
i like quantum and shrikanth’s reply! a am investor of quantum mf.
Anshuk
Quantum LTEF’s 1.5% expense ratio is unmatched in the industry and is below HDFC Top 200
Srikanth’s (FundsIndia.com) straightforward and simple response should be applauded. You are doing very good.
Houdini
Subra,
I have been a avid reader of your blogs and commenting for the first time as the article had an undertone of slight bias and i was not really expecting it from a person of your knowledge and stature.
Quantum LT equity fund has performed better than its peers over 1 and 3 year period and it doesn’t have a 5 year record to boast of (yet). and yes, it has lower expense ratio then other funds (mentioned in your article).
I compared on value-research.
Regards,
A reader.