Mutual Funds
Quantum MF head, Ajit Dayal, hits out at HDFC MF

Ajit Dayal, founder, Quantum Asset Managers, has lashed out against the market practices of HDFC Mutual Fund and other large players

Recently, HDFC Mutual Fund took over the assets of Morgan Stanley Mutual Fund. While the reaction of various mutual fund heads was hardly worth noting, Ajit Dayal, founder of Quantum Asset Management, a small but top-performing mutual fund has hit out at HDFC MF and other large players. In a weekly opinion letter called The Honest Truth, he ranted: “As much as I like HDFC as a company, I continue to be amazed why it tolerates the business practices of its affiliate, HDFC Mutual Fund. While HDFC is reputed for setting higher standards in the home lending business, HDFC Mutual Fund - and most of the other fund houses in this "business" of mutual funds - cannot claim any such distinction.”
 

Dayal points out that “HDFC Mutual Fund and its representatives have been involved with various committees of AMFI - the association of the people who run mutual funds - and have had ample opportunity to build something of immense value for India's retail investors. Yet, HDFC Mutual Fund, which - in my opinion - sponges off the immense goodwill of the HDFC brand name, has been a party to practices that hurt retail investors and protect the franchise of the business houses that control the mutual fund industry.”
 

According to Dayal, HDFC Mutual Fund, with the brand of HDFC behind it, “should be aiming to lead the charge of higher standards, better business practices, and more competition. It is, after all, a "leader". But don't hold your breath for this. Reading the chairman of HDFC Group, Mr Deepak Parekh's recent comment about a need for "consolidation" in the industry and the view that India has too many mutual fund houses shows the complete lack of understanding of our profession…But it does show the naked desire to convert a profession into a business: a "business person" wants less competition, a "business person" wants less disclosure, and a "business person" wants growth at any cost. A professional is trained to honour the contract with a client and look after the clients' best interest.”
 

Dayal argues that “Fund managers are professionals: most have rapidly and willingly been converted into doormats for the CEOs who run the mutual fund business. Doctors are professionals: they are now being made part of the profitability chain of diagnostic centres and hospitals via undisclosed commissions for recommending unnecessary tests. The mutual fund industry had endorsed this methodology. The distributor is king and the Indian retail investor has been the sacrificial offering at the slaughter house. Hail the CEOs and their focus on growing Assets under Management! Hail the Fund Managers who pretend that their only job is to manage the investments and turn a blind eye to how the assets were collected or how many lives have been decimated from suspect practices. Their intellectual superiority would make the MBA schools they graduated from proud of their achievements. "Ethics in Business" was a course they probably skipped.”
 

This is not the first time the founder of Quantum Mutual Fund has lashed out on HDFC Mutual Fund. Earlier in the year he called HDFC MF as part of a racket in the mutual fund business which has focused on gathering assets and figuring out ways to ensure that the payment of commissions to distributors is never compromised. (Read: Ajit Dayal, founder of Quantum MF, lashes out at HDFC MF)
 

Dayal’s letter of 30th December says “Rather than fighting for a disclosure of the distribution costs - which comes from the pocket of the retail investor - the fund houses have supported the efforts of AMFI to work for the benefit of distributors and reinstate high, and opaque, commissions. There has been no public voice of persistent dissent by the leadership of HDFC Mutual Fund or any of the "leading" fund houses.”
 

The mutual fund industry lobby is Association of Mutual Funds of India. According to Dayal, AMFI is known to be biased to a few large players. In the past, the larger mutual funds that effectively controls AMFI have been instrumental in endlessly postponing the decision on trail commission, had made a last-ditch effort to preserve the status quo, presumably because large commercial interests were involved. (Read: Foot-dragging on trail commission raises stink of commercial interests). Even recently, the efforts of small distributors to promote trail commissions and scrap upfront commissions have gone in vain as last year AMFI scrapped the plan to ban upfront commission. High upfront commissions lead to the practice of excessive churning by unscrupulous mutual fund distributors in order to earn themselves a higher commission. This practice of fund houses offering a higher upfront commission and lower trail commission is detrimental to many honest distributors who promote investing in mutual funds for the long-term. Only large fund houses can afford paying high upfront commissions to promote their schemes.
 

Dayal further lashes out at large fund houses like HDFC MF saying, “Rather than using their position as a leader in the mutual fund industry to force the industry to adopt better disclosure standards on portfolio turnover, payment to brokers as commissions, payment to investment professionals and senior managements, the opaque practices of limited reporting carry on. Similarly, the recent attempt by SEBI to raise the minimum net worth to run a mutual fund "business" from the existing Rs10 crore to Rs25 crore smacks of a bad policy influenced by a desire to have a closed club of limited members.”
 

Towards the end of the post, Mr Dayal states that, “Sadly, the chapters of the persistent battering of the Indian retail investor will continue to be written. And it is a shame that "leading" mutual fund groups like HDFC Mutual Fund and their well-respected Chairman - who are in prominent positions of leadership or are respected because they carry the HDFC tag on their visiting cards - continue to perpetrate this sorry state of affairs: whether by design or by sheer ignorance.”

User

COMMENTS

tewarisurendra

3 years ago

Mr. Dayal's thinking is restricted to T-15 cities and HNIs only. He is a frustrated person managing a meager AUM. The fact remains that Mutual Funds with 4-5% penetration in the country can not afford the views of Mr. Dayal. He has done nothing to spread awareness and financial literacy among the masses/ retail investors beyond T-15 and simply preferred to eye only the elite class of investors IN T-15. He has got no right to preach the other fund houses. If he is really favouring the investors, he should first attempt to work for financial literacy in B-15 and remote areas. After all T-15 only is not INDIA, it is beyond T-15 also.

REPLY

Nilesh KAMERKAR

In Reply to tewarisurendra 3 years ago

Lack of desired results clearly point towards exaggerated expectations from Financial literacy programmes.

However, forced spending on financial literacy programmes have ended up creating perverse incentives for rent-seeking agencies under the pretext of financial literacy.

tewarisurendra

3 years ago

Mr. Dayal's thinking is restricted to T-15 cities and HNIs only. He is a frustrated person managing a meager AUM. The fact remains that Mutual Funds with 4-5% penetration in the country can not afford the views of Mr. Dayal. He has done nothing to spread awareness and financial literacy among the masses/ retail investors beyond T-15 and simply preferred to eye only the elite class of investors IN T-15. He has got no right to preach the other fund houses. If he is really favouring the investors, he should first attempt to work for financial literacy in B-15 and remote areas. After all T-15 only is not INDIA, it is beyond T-15 also.

tewarisurendra

3 years ago

Mr. Dayal's thinking is restricted to T-15 cities and HNIs only. He is a frustrated person managing a meager AUM. The fact remains that Mutual Funds with 4-5% penetration in the country can not afford the views of Mr. Dayal. He has done nothing to spread awareness and financial literacy among the masses/ retail investors beyond T-15 and simply preferred to eye only the elite class of investors IN T-15. He has got no right to preach the other fund houses. If he is really favouring the investors, he should first attempt to work for financial literacy in B-15 and remote areas. After all T-15 only is not INDIA, it is beyond T-15 also.

tewarisurendra

3 years ago

Mr. Dayal's thinking is restricted to T-15 cities and HNIs only. He is a frustrated person managing a meager AUM. The fact remains that Mutual Funds with 4-5% penetration in the country can not afford the views of Mr. Dayal. He has done nothing to spread awareness and financial literacy among the masses/ retail investors beyond T-15 and simply preferred to eye only the elite class of investors IN T-15. He has got no right to preach the other fund houses. If he is really favouring the investors, he should first attempt to work for financial literacy in B-15 and remote areas. After all T-15 only is not INDIA, it is beyond T-15 also.

Anand Doctor

3 years ago

There is a very simple solution for the investors and honest financial advisors - Skip the commission game; go for 'Direct' plans of mutual funds.
Investors: Find an honest advisor who is ready to work for a fee instead of commission and invest in direct plans as advised by him. Yes, pay a fee. It's cheaper than the results of bad/no advice!
Advisors: Offer the client a fee option and guide them on managing direct plans.

REPLY

Nilesh KAMERKAR

In Reply to Anand Doctor 3 years ago

Even more simpler solution would be for investors to skip advisors and go for the direct plan.

And for advisors to skip advising investors and focus on their own investments.

Why bother about wasting time on a meaningless exercise?

Anand Doctor

In Reply to Nilesh KAMERKAR 3 years ago

Dear Mr. Kamerkar, a lot of investors need guidance for even the most basic aspects of investments and financial planning. Even most HNIs with portfolios in crores of crores have many knowledge and behavioral areas where they need professional help.
Sometimes, it takes people years to even realise that they could have avoided costly mistakes or done much better with a bit of sound advice.
I would go so far as to say that even advisors need to take help from other advisors to understand their own blind spots.
However, to each his own! So feel free to disagree with everything I've written here.
Wish you a healthy financial life!

Nilesh KAMERKAR

In Reply to Anand Doctor 3 years ago

Where investors do not seem to get enough value and advisers fail to get their fair share of remuneration. . . Why get involved in such a transaction?

Anand Doctor

In Reply to Anand Doctor 3 years ago

Investors can also read this article for simple and easy financial planning: http://bit.ly/DilbertsFinPlan

Sam Koshy

3 years ago

Even though Mr Dayal said the truth, there arise a doubt that what prompted him to say this now. Everyone knows that Quantum Mutual Fund do not entertain distributors for their product, so what is his intentions behind this saying now which he seems supporting honest &small distributors. Is there a row inside the AMFI?

REPLY

Suiketu Shah

In Reply to Sam Koshy 3 years ago

Quantum is clearly very unpopular among distributors as they donot encourage them and rightly so.Most MF distributors are just out to fool customers into MF which give highest commission ot them.Beyond that ,not sure what the reason is but it is true Quantum MF has performed far better than HDFC MF last 2 yrs by quite a margin.

Suiketu Shah

3 years ago

Dayal's MF Quantum has performed far better than HDFC's last 1-2 yrs and he had every right to hit out.However his recommendation on equitymaster are below average.

Param

3 years ago

i don't understand the value added in this 'report' - one could have just given a link to the article published by Ajit instead of the kind of amateurish job done...

mAYANK

3 years ago

Very well written, kudos to Mr Dayal for bringing the truth to the forth. I have been advocating that under performing schemes should not be allowed to charge any Management fees and the same has fallen on deaf ears.Giants like HDFC MF instead of creating a level playing field in the Industry are able to bend the rules to their advantage. 2008 RBI Credit Window when in liquidity crisis, Front running by their staff these are few misdeeds which never got highlighted. AMFI is a cotrie of top few MF players where Committees work to interpret regulations suiting their requirement.

Prakash

3 years ago

Not only HDFC MF but HDFC Life Insurance also not living up to the expectations of investors what HDFC as a brand is expected of.HDFC AMC boasts of most profitable AMC whereas there leading equity schemes like HDFC Equity Fund giving below average returns,reasons must be what Mr.Dayal has disclosed in above article.Practices at HDFC life are welkwown.

R Balakrishnan

3 years ago

AMFI has always been a club for the big funds to shut out the small ones. the nexus between distributors, CEOs and CMOs is too deep and will not fall off easily. There is a lot of personal things at some one else's cost that goes on.
The important thing is to remove the distinction between PMS and MFs. That can be done by taxing the MFs as is done in the US or UK on all realised gains. Make it a level playing field so that those who cannot have large capital can operate PMS

Rohit c shah

3 years ago

the reality we cannot do anything

REPLY

Vinay

In Reply to Rohit c shah 3 years ago

You can stop giving them your money!

Nifty, Sensex tantalise bulls and bears : Tuesday closing report

Nifty direction may be clearer by the end of the week
 

The market today opened in the positive and stayed there almost for the entire session except for a few minutes in the first half. Yesterday, we had mentioned in the closing report Sensex, Nifty may suffer a short decline but this decline has been elusive.
 
Today the Sensex opened at 21,178 and moved in the range of 21,123 and 21,231  and closed at 21,171 (up 28 points or 0.13%) while the Nifty opened at 6,307 and moved in the range of 6,287 and 6,317  and closed at 6,304 (up 13 points or 0.21%). The NSE recorded a volume of 58.33 crore shares.
 
Except for MNC (down 0.23%) and Metal (down 0.2%) all the other indices on the NSE closed in the green. The top five gainers were Midcap (0.76%); Energy (0.65%); PSU Bank (0.53%); Nifty Midcap 50 (0.51%) and Infra (0.48%).
 
Of the 50 stocks on the Nifty, 33 ended in the green. The top five gainers were IDFC (4.72%); Jaiprakash Associates (3.13%); Tata Power (2.53%); UltraTech Cement (1.54%) and HCL Technologies (1.52%). The bottom five losers were Bhel (1.78%); Maruti (0.86%); Jindal Steel (0.82%); M&M (0.67%) and Tata Steel (0.59%).
 
Of the 1,226 companies on the NSE, 678 closed in the green, 483 closed in the negative while 65 closed flat.
 
Today, there were rumours about that the prime minister Dr Manmohan Singh is likely to officially opt himself out of the prime minister's race after the 2014 elections. However the PMO said that Manmohan Singh has no intention of stepping down ahead of the 2014 polls.
 
Yesterday, the Confederation of Indian Industry (CII) said that the CII Business Confidence Index (CII-BCI) rose sharply to 54.9% in Q3 December 2013, from 45.7% in Q2 September 2013. The pick-up in BCI for the current quarter comes as a major relief for the economy. The survey also strikes a note of caution as the downside risks to growth have still not abated and supply side bottlenecks continue to pose a problem.
 
US indices had a mixed performance yesterday. The National Association of Realtors said its index of pending home sales rose 0.2% in November to 101.7, slightly above a 10-month low of 101.5 in October, but down from 103.3 in November 2012. The US stock market is closed tomorrow, 1 January 2014, for New Year's Day holiday.
 
Among the Asian indices which were trading today, Shanghai Composite was the top gainer, up 0.88% while NZSE 50 was the top loser down 0.67%.
 
China is scheduled to post its manufacturing purchasing managers' index for December 2013 tomorrow. China should continue its current prudent monetary policy and maintain appropriate liquidity for the world's second-largest economy in 2014, the monetary-policy committee advising the People's Bank of China (PBOC, central bank) said Tuesday in a statement. This should bring about "reasonable growth" of credit.
 
European indices had mixed trading while US Futures were trading flat.

User

Stock Guru scam: ED attaches Rs83 crore assets of Khaire

The properties seized by ED include some 'benami' immovable assets that Ullas Prabhakar Khaire and his wife Raksha of Stock Guru had allegedly purchased on fake identities

Initiating its first action in the multi-crore Stock Guru scam, the Enforcement Directorate (ED) has issued attachment orders on properties worth Rs83 crore of main accused Ullas Prabhakar Khaire and his wife Raksha under anti-money laundering laws.

 

The seized properties, spread in various parts of the country like Mumbai, Ratnagiri and Nagpur in Maharashtra, Hyderabad and other cities in Andhra Pradesh and few places in Haryana, include some 'benami' immovable assets that the couple had allegedly purchased on fake identities.

 

The agency will soon issue prohibitory orders on these assets, including cash, jewellery and bank accounts, under the provisions of the Prevention of Money Laundering Act (PMLA).

 

ED took the latest action after it recorded the statement of the duo, lodged in Tihar jail here in judicial custody, sometime back and went through the probe reports of other agencies in this regard.

 

The agency's action to attach these properties under PMLA is aimed at depriving the accused of the benefits of these assets which are alleged to have been created through the "proceeds of crime" and duping investors of their hard earned money.

 

The sources said apart from the latest attachment orders, some more properties would soon be frozen under the same laws.

 

The agency had registered a money laundering case against Ullas Prabhakar alias Lokeshwar Dev and his wife Raksha alias Priyanka Saraswat earlier this year after they were caught by Delhi Police.

 

Acting in the same case, the Central Bureau of Investigation (CBI), had arrested Yogendra Mittal, an officer from the Indian Revenue Service (IRS) for allegedly receiving bribes from Khaire after raids were conducted by the I-T department against him some years back.

 

The alleged perpetrators of Stock Guru scam—Ulhas Khaire and his wife Raksha—were arrested by Delhi Police's Economic Offences Wing (EOW) in November 2012, nearly 22 months after dubious searches carried out by the Income Tax officer.

 

Khaire and Raksha were arrested for allegedly duping around two lakh investors from seven states of nearly Rs493 crore by promising them high returns on their investment through their firm Stock Guru dealing in shares.

 

The couple had floated the firm in 2010 and allegedly lured people to invest in it promising highly lucrative returns of 20% per month followed by a subsequent refund of the principal amount in the seventh month, through source based investments in the share market.

 

In January 2013, market regulator Securities and Exchange Board of India (SEBI) barred seven persons and and one company from the markets for ten years for their involvement in the Stock Guru fraud.

 

 The order follows a SEBI probe into complaints received by it regarding Khaire alias Lokeshwar Dev and his wife Raksha alias Priyanka Dev, both of whom used several aliases, fraudulently raising more than Rs1,500 crore through sale of preference shares of a company named SGI Research & Analysis.

 

Names used by them included Ulhas Prabhakar Khaire and Raksha J Urs, Siddharth Jay and Maya Siddharth Marathe, Dr Raj and Priya Zaveri, Dr Rakesh Kumar and Prachi Maheshwari.

 

A SEBI probe into the case found that the fraudsters had tricked the investors into putting in their money with a promise of 18% dividend, although the real assured dividend was a minuscule 0.12%.

 

Besides, the money might have mostly been collected in cash to avoid any regulatory glare, as SGI’s bank account had entries for a total amount of just about Rs44 lakh towards subscription of its shares by 162 persons.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)