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Dear Mr. Kejriwal:
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Send in your Questions for Ajit...
As you know, Ajit Dayal (Founder, Equitymaster) is going to be the keynote speaker at The Equitymaster Conference 2014 - Beyond Uncertainty.
So here's your chance to send in your questions for Ajit!
Just click here and post questions you would like Ajit to answer in the conference. We will collate and send it out to him.
Now, we can't guarantee that all of these will be answered, but knowing Ajit, am sure he'll try to answer as many as he can...
Don't delay and send in your Questions for Ajit Right Away....
What a powerful and simple idea: pool the resources of tens of millions of individuals for India's economic development and share the benefits and returns with them, after deducting a reasonable fee.
But, in a world driven by big businesses and big conglomerates - most of whom are driven by big greed, as opposed to any balanced and responsible behavior - the mutual fund has become a "dhanda".
The doctor has sold his ethics to the diagnostic testing companies and to the hospitals.
Revenue generation is the key.
The mutual fund employees have sold their souls to the brands they worked for. The brands they work for - who speak the language of "consolidation" and "market share" - have relied on the distribution channels to sell their inappropriate, dangerous, high-priced products. Assets under Management is the key.
SEBI, as a regulator, failed to protect the investors.
In fact, SEBI - by binding itself to suggestions from the large mutual fund houses - may have inadvertently encouraged the theft.
In 1993 the minimum capital required to run a mutual fund business was Rs 3 crore.
By the late 1990s it was raised to Rs 5 crore.
By the early 2000's it was raised to Rs 10 crore.
In the world of politics, one needs Rs 10 crore to fight an election.
The candidate needs to "reach out".
And then once you have reached out and done all your purchases of votes, you need to recover your money.
And to recover the "investment", the politician does things that hurt the public and enrich their friends and families.
Everyone is happy - except the voter.
It is the same principle in the mutual fund "business".
The more capital you need to "show", the more the people with the capital will want as a return!
SEBI wants mutual funds to have a high net worth as they need to build an infrastructure to "reach out".
This "reaching out" has its consequences.
CEOs use the friendly distribution channels to grab the wallets of investors, share the loot with the distribution channels and their key employees, and everyone is happy - except the investor who got looted.
SEBI has failed to understand this simple equation: they now want to raise the minimum net worth and keep it somewhere between Rs 25 crore and Rs 100 crore.
If this intellectually bankrupt proposal finds its way to a law, then investors better watch out: now that their wallets are gone, they should protect whatever little they have left.
So, an idea - like the mutual fund as a product to channel savings, or the birth of a party trying to fight for true independence of decision-making - may be powerful but it may not always have the power to overcome the locusts that prey on an unsuspecting humanity.
AAP is a great idea: but beware these locusts that will strip you off your idealism and make you like any other political party.
It is worth nothing that Victor Hugo was a Romantic.
Romantics don't write poems about locusts, they write poems about the flowers: the flowers that the locusts eventually destroy.
So, follow the dream and the inspirations of the romantic - but don't look to them for a flawless execution for their heads are in the clouds. Their feet are rarely on the ground.
For, if even 1% of the words of every Romantic, idealist and do-gooder who ever lived were implemented, the world would be a far better place.
A musician or artist, on average, would be earning more than a person working for Goldman Sachs or Morgan Stanley, on average.
Aah, what a wonderful world that would be: where true creativity from those who produce some sort of happiness is actually rewarded.
But the well-connected (who reportedly consist of only 1% of society) have ensured that 99.99% of the idealistic words ever written remained as conceptual ideas; as a romantic notion - like a mutual fund.
The 1% sealed the fate for the 99%.
Lessons from a good fund manager
As much as the mutual fund business - run by the CEOs and their courier-pigeon fund managers - is not the model for building a new and ethical political party, there are some lessons from the mutual fund industry to help AAP. One needs to ensure that AAP is not just another idea whose time had come - only to be dealt an untimely death providing more fodder to future Romantic poets.
A good fund manager faces some choices on a daily basis: there are over 6,000 listed companies on the stock exchanges and there is room in the portfolio for maybe 30, 50 or 100 stocks.
How does a good fund management company handle this selection process?
The easy answer suggested by SEBI would be to say "show me Rs 25 crore" and get the license to run a mutual fund business.
But in the real world of mutual funds in many parts of the barbaric financial world "might is not always right". In USA, UK, and Europe (where requiring a high net worth of AMCs is a laughable concept that would land the proposer in a lunatic asylum) some fund managers have processes in place that identify good stocks.
A few important steps to guide AAP as it faces the challenges of trying to figure out which of the people who are banging on your doorway to accept, what role they should play today, and what role they could play in the future:
What AAP has done continues to draw huge interest.
That is the good news.
The bad news is that you may be stuck with people who do not share your economic vision and will end up de-stabilising the powerful trajectory you have chosen.
For this you need to communicate what that trajectory is in a lot more detail.
Like the fund manager running a mutual fund, you need to decide your "investment objective".
While Swaraj was a book that correctly reminded us of our civil and civic history and moral science classes - essential lessons for the improvement of life - there is nothing that exists yet with an AAP stamp which outlines all the issues we need to gauge you on: Pakistan, nuclear options, relations with USA, Europe, China, Sri Lanka, industrial policy, import policy, export policy, SEZ policy, pharma policy, coal and iron ore policy, oil and gas policy....
The candidates must be able to read this economic and foreign policy statement of yours and say, "Yes, I agree with their detailed policies, they have my vote and I plan to join them" or "No, forget this strange lot - I had better stay with the traditional choices we have."
As much as AAP has a right to interview the candidates, the candidates have a right to know more about AAP.
The team you hire must have a "fit" with your various objectives or policies and with your existing team.
This, then, is the lesson from the mutual fund industry:
Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)