The problem with all regulators is that they speak the language of the strongest player. So the Insurance regulator brought in a rule which said “the rider premium cannot be more than the base product premium”. This was because LIC did not have any riders when Hdfc was selling its critical illness rider as a very important rider along with its term insurance plan.

Such a diktat by the regulator can completely upset your growth plans.

Now if you are a very influential mutual fund player you are a big player. This is stating the obvious is it not?

So if you are big player what all do you need to do?

• Grow bigger
• Be far more profitable
• Show your profits, eps, roce, ronw to do an IPO
• Ensure that smarter funds cannot compete with you
• Make it difficult if not impossible for newer entrants to catch up with you

How does one achieve this? By employing good fund managers who are honest and competent. Of course. However, this anybody can do, right?

Remember all the big fund houses built their business initially by getting the INVESTOR TO FUND IT. So when you see the fabulous returns that the long term numbers show, remember NO INVESTOR GOT THOSE RETURNS. Wow? Well in the initial stages when you invested (till 2009) you paid a 2% entry load (well some even made it 2.25%) and some like Franklin Templeton did not charge an entry load for the people who did an SIP. However, you can ignore those numbers and assume a safe entry load of 2%. Very honestly till 2009 they used to put an * and say “entry and exit loads have been ignored”. Now that * has disappeared as has the note. For those amc which did an IPO (they were still called IPO and not NFO) they were allowed to charge a 6% entry load. Well, well that has gone.

So recently one ex Sebi chief said “Indian mutual funds are expensive”. Well, he is the person who made it expensive!!!!! Go Google. Some of these illustrious and big people decided that the mutual fund industry should grow AND the growing expenses should be borne by the UNIT HOLDERS, not the shareholders. Great. It worked and still works.

Not very long ago the expenses were broken up as “expenses”, and “asset management fees” – at 1.5% and 1%. To claim the expenses you had to incur the expenses (OMG why am I saying the obvious). However, suddenly the biggies with huge big fund schemes could not justify the expenses.

Hey Bingo! the expenses were made fungible and the limit went to 3.3%. Wow. Who did it? No not the ifa, not the registrar, not the banker…come on take a guess. No, I did not say it, you did!! So now you have big huge gorilla like funds charging you the FULL expenses without having to incur it? What has it done? Obvious, is it not? all that money has gone to the bottom line. Running a mutual fund is far LESS risky than running a bank and FAR more profitable. Just look how profitable the top few fund houses are. Especially Hdfc mutual fund. Now go and decide whether to buy the share. (Caveat: Hdfc has been a very important group in my wealth journey, and I have been a shareholder since 1980).

Then the fund houses made it difficult for the small guy to come in by making the “net worth requirement” high. Rs.10 crores became Rs. 20 crores and then it became Rs. 50 crores. This meant that a few small good quality professionals could not have started a mutual fund and the players had to be big!! Like ITC is very happy that tobacco ads are banned – no new brand can ever hope to come into India. ITC is assured that the cancer stick is exclusively their domain. Smoker be damned, shareholder be rewarded.

much more to come…but you may not want to read more than this in one shot. Its nauseating, right?