Winner’s Luck?
Success is not so much about money. Tushar Kapoor, Abhishek Bachhan, children of successful people like Rohan Gavaskar, etc. were born with a silver (golden?) spoon. They did not (do not) need any great success in life for a decent life style. Clearly none of them ‘earned’ enough to have the current life-style. However, all of them crave for success -money they already have. Even when it comes to writing a book – you make no money till you sell a few million – Chetan Bhagat style. However, most of us like to ‘chase numbers’ – number of books written, how much each book sells, etc. No, it is not about money, it is just numbers. Should it matter? No. Not from logic point of view, but from a status seeking behavior. It is common in the animal world – see Animal Planet!
Sorry I digress. We have all heard of Stephen King – his books sold millions. Once, long long ago he wanted to publish more than one book a year! We are talking about the 1970s when it was thought that an author should write only one book in a year. So Stephen King wrote under the pen name Richard Bachman. When a book was written under the name of Stephen King it sold millions of copies. When it was published under RB’s name it sold 28000 copies. Till one day Stephen King confessed that Richard Bachman was his pen name. Then it sold 3 million copies. Ditto for JK Rowling who wrote under the pen name of Galbraith. The book went to #3 from #4709. That is the power of success. I remember a famous poet who was called to be the chief guest at a college poetry competition. After the first prize was announced, he read a poem which got the greatest applause. He then confessed that the poem he read out was written by the student ranked 4th. He had swapped poems! This brings us to a very important lesson – Winners keep winning. This also shows how popular music sells more, popular books sell more, popular programs get more popular, POPULAR FUNDS KEEP ATTRACTING funds even with poor performance. A winner gets a chance – but they need to keep the brand popular…..HOWEVER this is not right.
Now when a big fund launches an NFO – let us say Icici Pru launches a NFO at the same time as say Mirae, the attention to Naren will OBVIOUSLY be higher. More money power, more distribution, backing of a bank and power of the brand IPru and brand Naren – will all ensure a 1:5 kinda attention. However given 2, 4, 5 years it is performance which will play a role…RIGHT?
Well no. We keep putting more money into popular funds…
Now imagine an IFA who has been in this profession for a very long time and he was recommending only Hdfc, Birla, Franklin Templeton and Reliance. Now he starts recommending Motilal Oswal, Mirae, Invesco, and PPFAS.
His allocation will still favor the biggies for 60% – and only 40% will go to the ‘new’ 4 fund houses.
Now you know why the big gets bigger?
You will have to see some disruption for the ranking to change dramatically. Remember, more than 75% of the profits (I could be wrong by a small number…its just an approximation)….come from the big fund houses.
The newer fund houses will have to do something dramatic to change the situation….well Mirae seems to be doing something right – see the 56% growth? well, well….
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Vivek (@vpj25)
The interesting question which an investor has forgotten to ask is Why a new NFO now ? I am fed up of advisors calling me up saying Naren has invested 15 – 25 Cr of his own funds in the NFO so you should invest or switch from other ICICI funds into the NFO. This is the line followed by all the wealth management companies who called. The question arises – do I need another NFO in my portfolio – Err What about the funds in my portfolio will they not perform as well as the New fund ??? If so why did my advisor ask me to invest in them in the 1st place. So a fund gave multibagger returns over the last 3/ 4 years and is now underperforming – should i ditch my old investments or stick it out – That is a Golden question – Who answers this ? The suited Booted employee from the bank or MF House or So called wealth advisory ? Sometimes i feel they are as ignorant as i am. They are only chasing targets to get a promotion. What about me ? Where are they taking my portfolio ? I wonder how many people ask this question – and more importantly what is the answer to this question.
Krish
New launches and discounts (from electronics, RE, to food menus) are part and parcel of the business. It is up to the customer to get into or not. If you are not doing these, soon you will be out of business.
KSKarthik
It is more like a trust bias. Once a winner, we think he/she has done something right and repose our trust, even if we find other better options. It’s just fear of the new.