Category: Anecdotes

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Anecdotes MutualFunds

The Ant and The Elephants

Ajit Dayal recounts a story from when he launched the Quantum Long-Term Equity fund, the company’s flagship product for Indian investors, 10 years ago.

At the time, he met one of India’s biggest fund distributors and was told that if he wanted investors, he would have to pay a kickback, which would be a measure of how much money Quantum wanted to raise and how long the company wanted to hold on to this cash.

Mr Dayal asked the distributor why he was not interested in the fund’s style or his long-term record. The distributor responded: “You are an ant. The elephants in this industry dance to my tune. What can you do? You can’t change the system.”

Mr Dayal, who used to run a fund for Vanguard during the 1990s and early 2000s, did not pay the kickback. Instead, Quantum decided to bypass the middleman and distribute its funds directly to investors in India, selling products through its own website.-from FT

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Anecdotes

The biggest perk of working at Pidilite

Maintaining relationships has been a hallmark at Pidilite, be it within or outside the organisation. It has established the Fevicol Champions Club in 2002, which works towards encouraging high ethical standards and building the carpenter community through various social and professional activities. The club has 96,000 members across 600 cities. So, Pidilite has a database of most of the carpenters in India.

Bharat Puri,MD Pidilite, himself was pleasantly surprised to see how this data can help. Puri’s parents (his father is a retired colonel in the Indian Army) stay in Chandigarh. One day, his mother called to know how she can fix an almirah which was infested with termites. There was only one carpenter she knew who could fix it, but did not know how to contact him. She only knew his name was Raju.

Puri’s sales head overheard the conversation. By evening, his team had nailed Raju from their database of carpenters in Chandigarh. Raju fixed the almirah that evening- from Forbes

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Beating the Market

Source:Ben Carlson

 

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Anecdotes

An Investment Insight

I’m lucky to have received many gifts of investment insight early in my career.  Perhaps foremost among them is one I picked up in New York about 40 years ago, at a lunch meeting of what we called the Third Thursday Group.  It concerned the three stages of a bull market:

 

  • the first, when only a few especially insightful people suspect improvement might occur,
  • the second, when most people accept that improvement is actually taking place, and
  • the third, when everyone concludes that things are sure to improve forever.

 

Between the first stage and the last, nothing has to have changed in terms of fundamentals.  The difference lies in the perspective investors are bringing to their decisions.  But clearly, it’s great to be a buyer in the first stage and essential not to be in the last.

–Howard Marks

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Anecdotes MutualFunds

Welcome to the world of Mutual Fund Stripping

Source:Manoj Nagpal

An investor was sitting in his Chennai office with a smug smile. He had recently concluded the sale of his stake in an electronics company to a private equity fund for over Rs.500 crore. But his smug smile was due to something else.

Out of the blue, he had received a call from a leading wealth management firm. The suave talking private banker at the other end of the line had succinctly explained to him how smart tax planning through a dividend strip could help him save a bulk of his tax liability. “Invest in a mutual fund scheme that will give a large dividend after three months. The dividend will create a notional book loss, get your money back after three months and your taxes disappear,” the private banker had put in simple terms to him.

To which the Chennai investor with wide eyes queried, “But isn’t a mutual fund for the long term, and how would we ever know which fund will declare a dividend after three months? Isn’t that illegal?” The private banker explained, “For a smart investor like you, we have all this information informally beforehand. That’s our cutting edge. And it’s not just one fund; I have this information for four mutual funds that are doing this in October itself—welcome to the world of mutual fund stripping.”

He finally invested Rs.140 crore in this dividend strip opportunity to create an accounting book loss of Rs.50 crore and save his taxes. (This is a true story and the situation narrated here is exactly as it happened.)

–wrote Manoj Nagpal