I know one fund manager in India who supports a team that CRITICIZES his portfolio selection. Yes, I agree it is very tough to make oneself open to a public scrutiny, but he does. It is important to remember that Indian fund managers are far, far more open to scrutiny than Mr. Buffett. WB hides a lot of data under the “insurance” garb, but that is for a different post. In fact George Soros’s trading data is far more openly available than Buffetts.

However, in 2013 or 2014 (trying too much from memory instead of Google, but it does not matter) WB had asked one analyst to ask the difficult questions. If I am not wrong, he put him on the panel. Of course the critics said ‘He did not ask the tough questions’.

Spare a thought. How many Indian companies will want to HEAR criticism about themselves IN AN OPEN FORUM? How many of them dare do a serious investor/analyst conference with public scrutiny? I don’t think there will be any private sector company willing to do that. Please remember PSU may have serious governance issues, but they are subject to far far more scrutiny than a pvt sector LISTED company.

India lacks investor bodies, investor activism, and investor participation in annual general meetings. To the best of my knowledge companies take questions only from “pre-approved” people and very few companies have the guts to say “the floor is open to all”. It just does not happen. If a difficult question comes up, the “independent” director says how difficult it was to achieve…etc. and the question is killed very smartly. And then we keep wondering why Indians do not invest in equities. It is much worse if you see Mutual funds behave in company AGM. They just do not bother, and even if they attend, the unit holder has no clue on how they voted.

Forget going to national and international levels. How many of us have the guts to question our own portfolios? or our own trading and investing strategies? I know 15 individuals who submit their DIRECT EQUITY portfolio to me for a scrutiny, and I am allowed to say “you…got lucky” as well as ‘good job, well done’. Most of us use the following statements:

• so what if I have got lesser returns?
• my needs are few
• so what if I took more risk?
• look i am happy with my asset allocation
• but subra you only told me “there is no ideal asset allocation”

all these are excuses that I have heard.

IFA who are serious about their profession should offer their client’s portfolios for scrutiny and criticism by a neutral team. I do think FP Network is in a good place to start such a service for IFA. The IFA should give the data (masked of course) and use the feed back to do a restructuring of the client portfolio. Of course this should be an ongoing exercise and the shuffling may happen once in 3 or 4 years.

It is tough but it is worth doing. Let’s face it – what we learn from WB is not really something new. Every year you find that 50k people will trample to touch his toe, but what is the point if you make the pilgrimage and not IMPLEMENT what you learn?

I am clear that if I go to a good fund manager with my portfolio he is likely to find faults in asset allocation (too much equity), letting some badly managed companies run too long in my portfolio (Hindalco, 1957), not using leverage, not trading enough. I can also be accused of not being active enough in pruning the length of my portfolio. I do submit my portfolio for scrutiny, but I should be seeking a short-seller friend of mine rather than a ‘long only’ person to whom I go to. Even a hedge fund manager who does a ‘long-short’ fund manager will do a better scrutiny rather than a long only guy.

If you have a portfolio (direct equity) in the region of even Rs. 1 crore (non Esop) it will help get a critical view. I know of fund managers who just cannot take criticism and one FM welcoming criticism. If I ask him about his mistakes he says “ignore on grounds of materiality -I need to do somethings for pubic consumption”. At least you and I do not need to do anything to keep others happy! lucky us!!

PS: I am not looking for “scrutiny” business. If you are an IFA, the only product I have for you is a lecture for you or for your clients. This post is just a ‘learning from Buffett’ kind of a one-off post.