There is a big problem all distributors face. When the product becomes good and has a successful track record, the distribution margins reduce. So it is a catch 22 situation. You work hard, collect money for a fund house, they employ a good fund manager who delivers good results…so the scheme does well. Then the fund house says – no foreign trips, no booze, no…..

What does a distributor do…..this is a REPORTED conversation. You would have heard parts of it on television, from your distributor, or read it in articles in magazines. The media also DOES not like the funds which do really well – their media spend also goes down. They do not offer ‘intelligent sound bytes’ (ok Taleb calls it an oxymoron) on all topics…here it is:

Client: I wish to start a SIP of Rs. 100,000 for 10 years.

Distributor: Yes sir, I would suggest ABC supernova fund.

C: Why not Hdfc Top 200?

D: Sir it is a good fund, but the corpus is become too big sir.

C: So how does it matter? It will get better attention from the fund manager, media, analysts, is that not good?

D: No sir. The nav of this scheme is already at 190 – ALMOST 200, so it is expensive. The fund I am suggesting has an Nav of just Rs. 31 sir. You see by the time 31 becomes 62…200 cannot become 400 no?

C: Arre, Subramoney says Top 200 is a good fund because it is a well managed fund. He never talks about NAV.

D: Sir I do not know who is Subramoney, but sir you know that I do not recommend expensive funds. That is why I am recommending ABC supernova fund, from ABC fund house.

C: Hmm I agree – I have seen with shares also..a small share can become a multi bagger, a big share cannot. Subramoney says he had bought Gillette at 37 and now it is 2300. If I buy at 2300 will it be a 100 bagger, it will not!

D: Yes sir, that is what I mean…Sir which scheme is Subramoney recommending now?

C: that is the problem. He does not recommend. He only ridicules his readers for making mistakes. Like this conversation he may put it on the blog.

D: Sir where does S invest his money?

C: Oh he has 80% of his money in direct equities – and I believe he bought even last week…but I do not know what.

D: Why do you not ask him for a peek into his portfolio? Even big investors like Rakesh Jhunjhunwala allows it.

C: Never asked. However from a reading of his blog, I know the following funds exist in his portfolio: Hdfc top 200, Hdfc Equity, Hdfc Prudence, Franklin India Blue Chip, Hdfc Tax Saver, Franklin India flexicap, Franklin Prima.

D: OMG….sir these are such expensive funds!! All of them have an NAV of 200+. Sir, he is misleading you. He must have bought it long back.

C: Hmmm

D: Sir he must have bought it 12-14 years ago when these funds were cheap -say 15-20 Rs. Now he must be asking you to buy, so that he can sell.

C: OMG I never thought of that….

D: Sir you should know which websites to trust. Please visit out website -ABC fund house. You can even visit some independent websites sir. Last week we were rated 4 star. It shows the scheme NOW has a great potential.

C: arre, this also Subramoney says…’Ratings are backward looking, not forward looking’…and you are saying…

D: Sir people like Subramoney may be knowing fund managers personally so they may be investing in some schemes…we have to stick to cheap fund houses sir.

C: Now I see…your presentation is so nice…see last one quarter ABC Supernova fund has performed better than hdfc prudence fund! So indeed ABC Supernova is also a performing fund…it has done better than Hdfc prudence!

C: I agree…please give me ABC Supernova fund form….and here is the cheque for Rs. 100,000.

Learning? well i want comments on the learning please!