Seriously Lame Finance: Reliance Index — Oops! — Quant Plus Fund — When You Don’t Know How To Manage A Fund Ask The Computer To Do That For You

by Vinaya HS on April 3, 2008

in Finance

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Reliance Mutual Fund has announced changes in the features of Reliance Index Fund (Nifty Plan and Sensex Plan) w.e.f. April 18, 2008. As per the proposed changes, the existing Reliance Index Fund’s name will be changed to Reliance Quant Plus Fund.

Source: Moneycontrol.

A classic “WTF mate?” situation. But this was to be expected sooner or later because, an Index Fund with astronomical expense ratios is guaranteed to consistently under perform the benchmark index and is absolutely guaranteed to make the fund house/fund manager rich and the poor investor poor. A Quant Fund with astronomical expense ratios, however, is guaranteed to make its investors destitute.

However, every dark cloud has a silver lining and there’s one here too.

All existing unit holders in the respective plans have the option to exit the fund at the prevailing Net Asset Value (NAV) without any exit load for a period of 30 days from March 18, 2008 to April 17, 2008. Unit holders who do not exercise the exit option by April 17, 2008 would be deemed to have consented to the proposed change.

Source: Moneycontrol.

If you’ve invested in Reliance Index Fund, my sincere advise is to cash out while you can. Next time around, look for a fund house with a better track record.

The fund house (Reliance Capital Asset Management) says,

We have our in-house model, which looks at various factors like valuation, earnings sentiments, price, momentum and shareholder’s value. Also, we would prefer to keep our portfolio’s sector weightage in line with the Nifty’s sector weight (in exceptional case, 20 per cent higher or lower). The investments in the portfolio will not necessary be equally weighted. The fund will be more of an active fund management approach than passive fund management and the rebalance will happen every week.

Source: Business Standard.

Translated into simple English it reads,

We’re clueless.

Related:

To learn how dangerous Quant Funds can be, read Lame Product: Lotus India Agile Fund — Another Great Opportunity To Play Diwali With Your Cash.




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