Mr. Smarty Pants fund manager works hard on analysis and insider information and makes his fund a multi-bagger. A smart Fund Manager is the one who has insider information, contacts and can judge global cues and rides the rise without falling for the pits. A smarter Fund Manager is the one who knows about such a fund manager.
Enter Fund of Funds and you get the best of both worlds. A scheme may say that it is going to mobilize funds and issue units to the investors but investments would be made not in shares in the bourses or in IPOs but in the units of existing mutual fund schemes. This is a variant of diversification.
What does a Fund of Funds manager do? He spots all the Smarty Pants working their ass off and invests in their funds. By putting, say, 10 per cent of the funds each in ten different equity schemes of mutual fund houses one can savour the mixed fruit of the efforts of fund managers belonging to all these ten houses. But the charge against such schemes is that they are too passive, reducing the mutual fund house to the role of a docile intermediary. Whatever be the case, I’m sure the investor won’t complain as long as Fund of Funds keep providing returns the way they have been doing in the past.
(Based on an extract from Baron’s)
Enter Fund of Funds and you get the best of both worlds. A scheme may say that it is going to mobilize funds and issue units to the investors but investments would be made not in shares in the bourses or in IPOs but in the units of existing mutual fund schemes. This is a variant of diversification.
What does a Fund of Funds manager do? He spots all the Smarty Pants working their ass off and invests in their funds. By putting, say, 10 per cent of the funds each in ten different equity schemes of mutual fund houses one can savour the mixed fruit of the efforts of fund managers belonging to all these ten houses. But the charge against such schemes is that they are too passive, reducing the mutual fund house to the role of a docile intermediary. Whatever be the case, I’m sure the investor won’t complain as long as Fund of Funds keep providing returns the way they have been doing in the past.
(Based on an extract from Baron’s)
2 comments:
with the current situation its not certain as to where the bottom lies of how much will the upside be. lets see how long do the fund of funds remain peroformers. i also feel that the customer awareness about such funds is not much.
Sanjay.
hii rahul...my manager would not be happy to read this one...hez one smarty pants too you know...many hedge funds are coming up with new FoFs keeping in mind what Goldman Sachs predicted about the indian markets. good work man..keep it up.. Dwaipayan
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