Take a simple product like ULIP. It sells like hot cake because it is a necessity – life insurance, right?

Well it makes money for the agent, and for the person managing the risk aka the life insurance company.

Wait a minute is it really that profitable?

Must be so many people are dying to become its agents, employees are doing extremely well and Cox and Kings is kept fully engaged!

Having said that Icici Pru Life has a market capitalization exceeding Rs. 63000 crores and that is amazing and awesome…

So the mutual fund industry which takes money from you and me invests in Icici Prudential. So a fund manager invests in another fund manager…and prices go up.

PE is high did you say? oops no pe.

Book value is high? you gotta be joking right?

oh…PB is right? well book value is Rs. 43 and market price is 10x

What about mutual funds?

well the biggies will go IPO now. Suddenly their investment of say Rs. 20 crores will be worth Rs. 10,000 crores. Not bad at all?

How did the aum get built? Well the early mutual fund investors (read people about 55 years old…or more…people like Subra) paid entry load. That was paid as commission to the agent who took Subra to the MF. So I paid money to have my money managed..and BUILD the aum for Hdfc, Icici, Kotak, Franklin Templeton, Birla….all those fund houses in which I invested. Of course Load was a one time fee paid…

and of course MF profitability is even better thant he life insurance profitability. You know why? there is no risk. The full risk is on the unit holder. Wow.