If someone invested Rs 10,000 in a bank fixed deposit at 8% in March 2006, it would havegrown to more than Rs 15,000 by now. If invested in the DSP BlackRock Top 100 fund, theinvestment would have zoomed to Rs 20,250. Even if it was left to idle in the savings bank account, it would have grown to Rs 12,100. In the HSBC Progressive Themes fund, the value of the investment is floundering at Rs 10,200.This shows that fund managers don't always get it right. Many of them are as prone to makingmistakes as the common investor. At the time of the dotcom bust of 2000, many funds had linedtheir portfolios with dud tech stocks. In 2007, most funds were reducing their exposure to ITC,Infosys and TCS and bingeing on infrastructure stocks, such as L&T, Bhel and RelianceCommunications. While ITC, TCS and Infosys have done very well in the past four years, theinfrastructure sector has got mired in all sorts of problems.
Focus on AUM, not returns
It's also clear that the focus of fund houses was on collecting assets rather than generating goodreturns for investors. Besides the 2.25% entry load on equity funds, the fund houses also earnedfrom the expense ratio they deduct from the NAV of a fund every year. What was the rationaleof launching an equity fund like Reliance Equity when faithful warhorses, such as RelianceGrowth (launched 1995), Reliance Vision (1995) and Reliance Regular Savings Equity (2005),were already at work?Reliance Equity has earned 3.56% annualised returns since its launch, compared to the 7.33%growth in its benchmark index, the Nifty. During the same period, Reliance Vision earned8.46%, Reliance Growth earned 11.44% and Reliance Regular Savings Equity rose 16.08%.When you adjust for inflation, which has been very high in the past 4-5 years, the losses mount.LIC Nomura India Vision has lost more than 13% every year. SBI One India investors have lost