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Despite its own patchy performance, ING Mutual Fund has come up with the idea of choosing funds for you and funneling your money into them
"Mutual fund investing today has become complex and stressful. Investors need to choose from thousands of funds, closely track their performance, take decisions to retain or change funds, attract tax liability if funds are changed before 12 months and finally, reconcile all these holdings at the end of the year. ING IM's unique Multi-Manager Fund of Funds' capability simplifies all of this in an instant," according to ING Investment Management India managing director & CEO Navin Suri, at the launch of ING's latest FoF (Fund of Funds).
It is great that ING, being a fund management company, has noticed a flaw in its own business model! Will ING's FoF solution work? In fact, is ING even qualified to offer a selected portfolio of best funds? If it could, why can't it select the best stocks to buy?
This scheme will funnel your investment to different schemes; the selection is solely on the discretion of the ING fund managers. You are just given the liberty to choose from four risk profiles-'cautious', 'conservative', 'prudent' and 'aggressive'- each offering a different mix of asset classes.
You will be informed about the funds in your portfolio but only after the investment is made by the fund manager. Again, if the process was so good, why is the performance of ING's schemes so average and erratic?
ING will hope that financial advisers can throw their clients' cash into multi-manager investment funds. These funds can save financial advisers the trouble of picking individual funds for their client by allowing them to put the cash with one fund manager, who then spreads the money across a range of other funds and asset classes. ING OptiMix Financial Planning Fund, an open-ended FoF scheme aimed at simplifying investing in mutual funds, does the same thing.
The question whether the performance of these funds lives up to the theory is answered with a disappointing 'it depends'. Firstly, it depends on what you're measuring. What will you compare the FoF with? For one, there are additional costs involved in the multi-manager approach. Not only is there the cost of underlying funds, but there is the cost to be paid to the multi-manager, in this case ING.
Very few active funds consistently beat the market when charges are taken into account. If you add in an extra level of charges, the evidence is even more stacked against you. The chance of picking the one that can beat the market is very slim.
No wonder that the ING OptiMix 5 Star Multi-Manager FoF Scheme - Growth and ING OptiMix Multi-Manager Equity Fund - Plan A - Growth have given returns of just 10.65% and 1.23% respectively since inception in 2007. ING's own equity fund, called Core Equity, has given a return of 12% since 1999 as against 17% by the BSE 200. The multi-manager idea is a simple gimmick to collect money.