Prashant Jain is well known as an equity evangelist. In times when the markets are in the doldrums, he makes impassioned pleas to investors to invest in equities, promising that they will be thankful when the boom times come.
However, now the irony is that the boom times are here and the investors in the funds managed by Prashant Jain have nothing to cheer about. The ignominy is that his mutual funds have under-performed the Sensex and the Index.
Lets see the YOY performance of the funds managed by Prashant Jain.
|Mutual Funds managed by Prashant Jain||Returns from 19.12.2012 to 19.12.2013 (%)|
|HDFC Top 200 Fund (G)||1.5|
|HDFC Monthly Income Plan – Long Term Plan (G)||3.1|
|HDFC Equity Fund – Direct Plan (G)||0.6*|
|HDFC Infrastructure Fund – Direct Plan (G)||(18.2)*|
|HDFC Prudence Fund – Direct Plan (G)||(0.7)*|
* from 1.1.2013
In the same period, CNX NIFTY has given a return of 6.25%. Other mutual funds like the Franklin India High Growth Companies Fund, the ICICI Prudential Focused Bluechip Equity Fund and the Birla Sun Life Frontline Equity Fund have given a YOY return of 9.22%, 8.57% and 7.91% respectively.
To add insult to injury, Value Research has downgraded the rating of Prashant Jain managed funds to 3 stars from 5 stars.
What has caused this severe under performance?
Vivek Kaul of valueresearchonline.com has argued that the problem is because of HDFC Mutual Fund’s gargantum size. In 2010, HDFC Mutual Fund had a corpus of Rs. 86,600 crore. Today, it probably has a couple of thousand crore more.
Vivek Kaul cites Jason Zweig/ Benjamin Graham who explained the phenomenon of an under-performing fund manager in pithy words “As a (mutual) fund grows, its fees become more lucrative, making its managers reluctant to rock the boat. The very risk that managers took to generate their initial high returns could now drive the investors away – and jeopardise all that fee income. So the biggest funds resemble a herd of identical and overfed sheep, all moving in sluggish lockstep, all saying “Baaaa” at the same time.”
The other theory that Kaul explores is that Prashant Jain may have been just “plain lucky” to be in the right place at the right time.
However, Larissa Fernand of Morningstar.in has come out with all guns blazing in favour of Prashant Jain. In an impassioned plea, Larissa has gone down the pages of history to argue that when the whole World crashed in 2007 like a house of cards, Prashant Jain was the last man standing and everybody looked to him for succor.
“Jain is a fund manager who sticks to his conviction” Larissa Fernand says and credits him for not getting carried away with the tech bubble or the bubbles in the real estate and infrastructure sectors. “It will not be not long before he bounces back with a vengeance” she argues with emotion in her voice and urges investors not to lose faith in Prashant Jain.
But the question is when the stock market is hitting new highs everyday, how long will investors tolerate such under performance by taking solace from the history books?
I, for one, have had enough. I am going to jump ship and defect to one of the other better performing funds. If and when Prashant Jain gets his act together, I may come back.
Investors need to be agile to get the biggest bang for their buck.
What is your game plan? Do share!