Quantum has been a direct to investor AMC since its inception. Now direct plans are also offered by your peers. Has this posed as a competition to you?
Yes, we were the first but now we are not the only fund house which offers direct plans. But ultimately, the track record counts. So you may have a low cost product but that doesn’t mean you are better. A lower TER means a better chance to have a good outcome/performance because you are charging less than other fund managers. But you have to pick the right stocks to perform.
Your schemes always had a low TER. So why are corporates not investing in your funds?
We would love to have corporate investors but they think we are small. They don’t find us sexy. Imagine your boss says that Mr. Modi is the best Prime Minister since the birth of India and you come to meet us and we tell you that we are not excited, it is unlikely you will invest in our schemes.
It’s not that we don’t want corporate investors but they have to also like what we are doing. Some people think we are silly but that’s fine.
At a time when foreign AMCs are exiting India you got a foreign partner (Fairfax Holdings) to invest in your AMC. How did you convince them?
I think they see the long term potential. They believe in us as we have a track record, a stable team and integrity.
Indian fund managers typically manage many schemes. How many funds should one fund manager ideally manage?
It depends on the strategy. If the funds have the same focus then it doesn’t matter. If every fund has a different objective then I don’t think a fund manager should manage more than two or three schemes.
In the overseas markets, fund managers specialize in managing certain schemes, sector and companies. For instance, if you are managing small caps then you will only do small caps.
SEBI requires AMCs to put seed capital in schemes. Do you think fund managers should also invest in the schemes managed by them?
I think it is nice if fund managers invest their own money in the schemes managed by them. But I think it is wrong to make it compulsory because for many people it is their first job or second job and they are still saving. The first thing you want to do when you receive bonuses or salary is to buy your own house. So it’s kind of unfair to force you to put money into your own schemes, especially if you are managing equity schemes. You may believe in it (having skin in the game) but you have to also make sure that your family is comfortable. Sometimes laws are silly but principles are good. There should be voluntary disclosure if you invest in the schemes managed by you.
Whom do you look up to in the field of investment management?
I like Swiss based investor Marc Faber because there have been instances when my views were different from Mr. Warren Buffet, who is widely respected by investors across the world. I’m more in sync with a cautious approach than a completely bullish approach to world which Mr. Buffet can have.
Is it a good idea to follow the principles followed by investment gurus?
I think you need to first figure out what risk you are willing to take and then you find a guru for that risk level. So if you are a cautious investor then Marc Faber is probably your guru. If you are very optimistic on the world then Mr. Buffet is your guru.
Which is your favorite book and why would you recommend it to others?
I don’t read books anymore. I would recommend investment managers to watch these two documentaries – ‘Why We Fight’ and ‘The Inside Job’.
Why We Fight shows why the US got involved in multiple fights.
The Inside Job is about Lehman Crisis and how it happened. It shows how financial firms lied, cheated and ripped the system. The fund management industry will change a lot if they watch this documentary.
