Lagging performance of ING’s “quantitative” portfolio scheme, made worse by astronomical fees and costs

In another example of aggressive selling in a bull market, ING’s quant scheme, aided by ‘friendly’ media, is gathering lots of assets from the wealthy, no matter its poor performance and high fees

If you go by media reports, ING India BSE200 Quant equity portfolio (IIB200QE Portfolio) a portfolio management scheme (PMS) based on so-called quantitative strategies, is handsomely beating BSE200 every month. The performance is supposed to be so good that the asset base of the PMS has reached around Rs1,000 crore in 15 months. Its aim is to grow assets to Rs1,500 crore by end 2010. With a little more help from interested media, this may indeed be possible - as long as facts can be ignored - and you believe the marketing literature.

ING marketing blitz says that it would record a performance that beats the benchmark consistently. It gives an impression that the scheme has been running for a long time. It provides data up to three years but this is merely how ING would have performed given the method it is using.

(Source: ING India marketing presentation)

The facts are quite different. The scheme was launched in July 2009 and this has been its recent performance.

(Source: ING India disclosure document)

According to the above table the returns of IIB200QE are lower than the benchmark. Secondly, one year return on an index fund is tax free while the same on the PMS would be taxed. But that is not the most pathetic part of the story.

The real killer for investors is ING's upfront entry charge of up to 5%; annual fees of an astronomical 7%; variable management fees linked to portfolio performance; exit fee of 5% on the NAV on early termination; custodian/accounting fees, registrar and transfer agent fees, brokerage and transaction costs and other charges as applicable (bank charges, stamp duty, legal & professional fees and out-of-pocket expenses). After all these costs, there is no hope in hell for investors to be able to beat the benchmark. In fact, every single charge is fixed. So, if the market goes down (a remote possibility for most investors!), all fixed charges would be gouged out of the portfolio. ING India company officials nonchalantly compare the IIB200QE Portfolio marketing presentation returns with BSE200 in media articles to highlight the success of their scheme. In reality the returns dwindle to nothing, if one considers the steep fee structure of ING.

According to ING India officials, "The disclosure document carries the weighted average performance of all clients invested in the product post all expenses such as entry load, exit load, management fee, documentation and activation charges.

These charges are explicitly disclosed in the product application form to the investor. The returns in the marketing materials are that of the model for the reporting period, which is disclosed as well. The disclosure document also takes into account the impact of timing of new and additional flows as well as that of redemptions which is otherwise inherently unique to each client." Internet forums have intermittent comments that seem to be from people with interest to promote the IIB200QE scheme.

Also, PMS based on "quantitative" methods is taking liberty with the term, although this is fairly common in India. Reliance Quant Plus Fund, Motilal Oswal's M50 Exchange Traded Fund and Religare Agile Fund are among the existing quant funds in the mutual fund space. Pramerica Asset Managers and IDFC MF are believed to be launching quant funds soon. These are marketing gimmicks.

The best of quants rely on computers and mathematics to detect patterns, capture the pattern in models/formula and teach computers to spit out buys and sells based on these models. Quants develop a hypothesis defining a relationship among various past data (prices, seasons/months, streaks of winning or losing days etc.), then look at how statistically significant that relationship is. This includes testing the relationship within data in different time periods, market environments, etc., in order to test the robustness theory. Finally, they would take investment/trading positions by presuming that those past relationships would continue to hold in future. It is as close as finance can come to a scientific approach.

In the 1980s, the head of the equity-trading floor in Goldman Sachs, Robert Rubin (later head of Bill Clinton's White House economic team, Secretary of the Treasury, and a senior Citigroup official), hired an academic and a Ph. D.
economist to assist in trading. The academic was Fisher Black, now best known for the Black-Scholes model on opinion pricing that later won the Nobel Prize for Economics for Myron Scholes. None of Indian money managers come even remotely close to this. Calling Indian mutual funds and PMS based on quantitative methods is a joke.

PMS with or without fancy names like 'quant' are being pushed with the help of fat commissions as the market has turned extremely bullish. Since they come late in the rally, fund picking incompetence and high costs would destroy returns - no matter what vested interests in the media say.



Suleiman Haq

3 years ago

But this fund has given me phenomenal returns at CAGR of 18%. I dont agree with this analysis though I generally find this column very useful

Krupa R

4 years ago

Cannot agree with the article more!!

The portfolio under performed at less than 4% return over 1 year. The fees they charge is so heavy for the service they provide.

Customer support is pathetic and the response is vague.

And I repent for opting for this service from ING. Strongly recommend all investors not to sign up for this service from ING either directly or through ICICI.

a acharya

5 years ago

Agree, this is crap. I had to lose out 10% for over a year of patience. Had I invested in simple FD, I would have made +8% so I am looking at 18% gap! It only served ING to earn from me through fees and the nation through transaction costs...Forget exotic schemes like these...!


6 years ago

I too invested in the ING 200 scheme around Dec 09, worst returns, waited for a year so that they dont charge me exit load and exited in 13th month. Lucky enought to get principal + some returns due to good market condition of Nifty 6000+ else compared to banchmark - worst ever. Yes what is common is sweet talk. Pune

Anil Gupta

6 years ago

I am sorry I did not seee your analysis before making an investment decision. I also missed it again after I questioned ING on 6 months performance. Now after 16 months return is meagre 5.5%, much less than bank interest or PPF or MIS. Their playing with words making ignorant clients become fools. Their objective is " significantly outperform Nifty/BSE in 1-3 year time frame. Suri and Nishant are nowhere to be found. Nobody replies to investors in 24/48/72 hours promised. And if they do after a week, they say their model was robust, dont know wht went wrong. Keep invested. Why if in 1 year return is (-)10% of nifty, with their 6% fee and quite similar charges for transaction, they cant outperform Nifty in 7 years now. Poor gullible investor, and SEBI with eyes blind like our judicial system

Durgesh H

6 years ago

I had invested in this ING Quant PMS after persistent selling by Dhiraj from ING & Cawsi from ICICI Bank. I've finally made any exit after consistently poor performance. ING & ICICI Bank are misguiding people on this PMS which has underperformed since inception. It has not even beaten BSE 200 benchmark in most time phases and there is a huge expense structure. I would suggest investors to stay away from this fund and invest in leading mutual funds.


6 years ago

Wonderful article, saved my hard earned money from clutches of marketing person misselling it to me. Heartfelt thanks to the article writer

Herd on the Street: JM Financial, IDBI Bank, South Indian Bank, Brushman India Shree Ashtavinayak Cine Vision, Development Credit Bank

JM Financial: Despite the company's denials, market talk around this stock refuses to abate. The belief is that there will be a majority stake in JM's asset management company. The market also believes that Spandana Sphoorty Financial (the microfinance company in which JM is said to hold a stake) will soon go public. JM Financial is a financial services group with interests in investment banking, institutional equity sales, trading, research and broking, private and corporate wealth management, equity broking, portfolio management, asset management, commodity broking, NBFC activities, private equity and asset reconstruction.

In the June quarter, the company earned Rs1.1 billion from its investment banking and securities business (versus Rs772 million y-o-y), Rs651 million from its securities funding and fund-based activities (versus Rs254 million), Rs176 million from alternative asset management (versus Rs101 million) and Rs91 million from asset management (versus Rs77 million). Nimesh Kampani, chairman & managing director, is an accused in the Rs1 billion Nagarjuna Finance deposits scam.

IDBI Bank, South Indian Bank: There are rumours floating around that IDBI Bank will take over South Indian Bank. IDBI Bank earned a net profit of Rs2.5 billion in its June quarter while South Indian Bank earned Rs583 million.

Brushman India: Rumours are floating around of Asian Paints taking over. There is also some buzz that the promoter is being questioned by the CBI for his involvement in the Koda scam. The company makes paintbrushes. The stock has risen from Rs7 levels to Rs10+ levels. The activity looks suspiciously operator-driven. Retail investors should be careful. This is an 'S' group company which earned a revenue of Rs33 million in its June quarter and a loss of Rs15.3 million. Kapil Kumar is the MD of the company.

Shree Ashtavinayak Cine Vision: After the stock took off after the success of Dabangg (reported by Moneylife in this section), there are now rumours of Anil Ambani's interest in acquiring a stake in the company. The stock has risen from Rs11 in July to Rs30+ currently.

Development Credit Bank: Rumours of a merger with HDFC Bank. Market players are even talking about a due diligence by HDFC Bank. DCB has been looking at merging with a larger bank for the last couple of years. In the June quarter, HDFC Bank earned a net profit of Rs8 billion while DCB made a loss of Rs29 million (FY10 loss at Rs785 million).

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).




7 years ago

i love the sight. content is king that is what you have proved.


7 years ago

while i admire moneylife for exposing for its eyeopening articles and exposures im quite surprised at the complete absence of any expose on andra pradesh s most notorious group
hoping to see something from you about this group


7 years ago




In Reply to TARUN DAS 7 years ago

specifially what stock are you talking about "tarun das" ??

ashok mahajan

7 years ago

these are the part of share market specialy in bull phase.
both company make fool to innocent invester and make huge money


7 years ago

Theres nothing going on just that hawala crook trying to dump his stock t

Koda money rode on hawala

Navin Upadhyay | New Delhi

The economic investigation agencies probing the Madhu Koda scam have unearthed huge pay-off remitted from abroad to agents and facilitators for grabbing mining lease in Jharkhand when Koda was the Chief Minister.

Sources said that Koda’s close aide Binod Sinha helped a major steel company grab mining lease in the State. The company agreed to pay part of the payment in cash for the contract of extracting iron ore from Jharkhand mines and remaining by remitting it to two separate companies linked to Sinha and his aides.

Sources said probe agencies have learnt that Koda and his associates used hawala channels in a big way to receive pay-offs for awarding mining lease to different companies. The bribes were routed to a spate of companies and then passed off to Koda and his aides.

In the present case, the probe agencies have learnt that as per the understanding reached between the steel company and Koda’s aides, the former allegedly routed the money through Global Absolute Research Private Ltd and Brushman India Ltd. The two separate companies are headed by one person, whose role is already under scanner in the scam.

Sources said there is evidence to establish that Tony Dildar Singh, a senior official of the Global Research, visited Ranchi in 2007 to finalise the mining lease and cut off the ‘deal’ with Koda’s aides. Dildar Singh is believed to be the main person involved in transferring funds from Dubai, Delhi, London, India, and Singapore.

The probe agencies have found evidence to establish that Koda’s APS Arun Kumar Srivastava had written to Dildar Singh and one Anil Adi Nath Bastabade in 2007, inviting them to explore business possibilities in Jharkhand on the instruction of Koda and Binod Sinha. Anil Bastabade is a key player in the scam.

Probe agencies are investigating a series of suspected transactions reflected in the accounts of Global Absolute Research Pvt Limited and Brushman India Ltd. Sources said that on March 14, 2007, Global Research received payment of Rs 3.5 lakh from London and again received Rs 11 crore in the third week of October from New York.

On March 10, 2008, the company again received Rs 46 lakh from the same source in New York. On April 4, Global Research received foreign remittance of US$ 1,99,972.50 by Vishes Infotechnic from New York. On June 6, another London-based company remitted US$ 1,41,14.02 to it.

Also under scanner is a remittance of $11,710,507.00 that flowed into the account of Brushman India from London on August 1, and then re-routed to Singapore, Hong Kong, and Dubai.

Bastabade is well connected in Delhi, London, Dubai and had visited Ranchi several times between 2006 and 2008 when Koda was the CM...

Kuwait Petroleum may bid in upcoming NELP round with ONGC

New Delhi: Kuwait Petroleum Corporation (KPC) is likely to bid in the forthcoming round of New Exploration Licensing Policy (NELP) with state-owned Oil & Natural Gas Corporation (ONGC), reports PTI quoting a company official.

Kuwait Foreign Petroleum Exploration Company (KUFPEC), a subsidiary of KPC, will join ONGC in bidding for oil and gas blocks to be offered in the ninth round of NELP scheduled to be launched on 15th October.

"We are joining our friends (ONGC)," KUFPEC head for east operations Ali D Al-shammari said after delegation-level talks between the Kuwait's oil minister and Indian petroleum minister Murli Deora.

Mr Deora said India imports around 11.8 million tonnes of crude annually from Kuwait and is looking at increasing the volumes.

KPC was one of the seven suitors for fuel retailing firm IBP Co Ltd, in which the government sold its shareholding through a strategic sale in 2002. IOC outbid KPC, Royal Dutch Shell and Reliance Industries to buy IBP.

Yesterday, Kuwait's oil minister Sheikh Ahmad al-Abdullah al-Sabah had said that his country is keen on entering into a long-term contract for supply of Kuwaiti crude oil to India. He also deliberated on the Organisation of Petroleum Exporting Countries (OPEC) nation using strategic crude oil storages being built in Mangalore and Vizag for storage of Kuwaiti crude.

This, along with downstream investment opportunities in petrochemical projects, such as the olefin project of ONGC Petro Additions Ltd (OPAL), the aromatics project of ONGC Mangalore Petrochemicals Ltd (OMPL) and IOC's Paradip petrochemicals project, would be discussed threadbare when he meets oil minister Murli Deora tomorrow afternoon.

Also, the interest of Indian companies to acquire a fertiliser plant in Kuwait, run by Petrochemicals Industries Company (PIC) and KPC, as well as the possibility of investing jointly in fertiliser production inside and outside Kuwait, and negotiation of a long-term urea offtake agreement from Kuwait by India, would figure in tomorrow's talks.


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