The Hindu Business Line : When nothing comes free, why not pay for research/advisory?

WILL you really make a huge mistake if you stick to your gut feel, past performance figures and not much else before you home in on the equity funds to invest in? Or, should the combination of gut and performance be enough to influence your decision? Or, should you go beyond the first principles and factor in other critical matters, however complicated such an exercise may be?

Conventional wisdom has it that investors - well, most of them anyway - generally enter funds blindly, with a little regard to what some specialists say are tools that should be used to guide their investment strategy.

Some of these tools, it is pointed out, can be derived from `ratio analysis', a technique that is said to be employed by those at the cutting-edge of investing. The technique, for all one hears about MF research, is not really in use in this country. At any rate, not many in India would say they have already used it to their advantage. Or profits.

The other day, Business Line was invited to a presentation by people who claim to be actually using them to their advantage. Plexus Management, the banner under which they have joined forces, claimed they wished to "deconstruct the performance of fund managers along quantifiable lines and position (their) performance as per the stated benchmarks".

For the average investor, some of those profound words may well confuse, confound and corrupt. But the point is, Plexus is seeking to analyse all basic ratios as well as indicate advanced risk/return ratios with an intention to foresee potential winners. They wish to find out how far a fund manager will go in order to provide returns and for how long.

The equity funds space in the Indian market, as every one will agree by now, is getting more and more crowded. Witness the new schemes that are being introduced at breakneck speed. On that front, it seems our fund houses will never tire, never falter and never say no - not when it comes to new offerings. (The result is plainly evident: The Multicaps and the Midcaps are replacing the good old Equity and Growth. But, let us stop discussing this trite topic right here, shall we?)

The maze of competing equity funds that we see today will become even more labyrinthine in the days to come. Good for us, that. After all, there will be more choices, offered perhaps by (hopefully) more players. Investment plans may come with more options and sub-options. Some funds will have single managers, while some others will have multiple. Some may woo you with exotic features bundled into their products. Life certainly will not be simple then.

In the ensuing melee, what is wrong if organisations such as Plexus can try to be in a position in order to create a difference? But the question is, will people in this country pay good money and actually buy research/advisory? After all, they have become oh-so-comfortable with getting things for free.

The answer, straight from the gut, is this: Investors, at the end of the day, will be more interested in profits than anything else. Show them the money, and they will be happy. But there will be a price to pay. It is as simple as that.

Lack of adequate infrastructure is acting as a speed breaker for rapid economic growth. The Government alone cannot spend large amounts on the development of infrastructure.

Prudential ICICI MF

Feedback may be sent to nilanjan@thehindu.co.in

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