Is being honest a “contrarian” thing to do?

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 Posted by Ajit Dayal on Saturday, September 12, 2009

“So why”, asked my guest, “Are you a contrarian?”

“No, sir, we are not ‘contrarians’. We do not sell stocks because others are buying and we do not buy stocks because others are selling. We are not ‘contrarians’. We are long term investors who buy stocks based on what is referred to as the ‘value’ approach.”

“I am referring to your approach to the mutual fund business”, he clarified, “not to your investment approach.”

I smiled.

“Tell me”, I quizzed, “since when is being honest a ‘contrarian’ characteristic? And should the question not be asked to those who you perceive to be different – different from what we do?”

So, the 90 minute discussion is over with much laughter and disbelief.

Are we for real, are we really, really real??

Yes, Quantum Mutual Fund is for real. We are a business: we have costs and we need revenues to match those costs.

Our revenues – like any other mutual fund house anywhere in the world – come from the fees we earn on the assets we manage.

And if those assets do not increase – if more investors do not give us a portion of their total savings pool to “manage”, Quantum Mutual Funds will not have revenues. And will not be able to pay salaries. And will, well, fade away.

It is not an outcome that I want – and I know that with your support it will never happen.

Why am I so confident?

Because we have something unique to offer.

It may be a “contrarian” view: but it is our view.

We are custodians of your capital, when you invest in the Quantum Long Term Equity Fund you are putting your future into our hands.

Into the hands of the investment processes we have built.

Into our ability to question managements on why they do what they do.

We may own only 0.00001% of a company’s share capital. But that means we are paying 0.00001% of that CEO’s salary.

‘We’ means ‘you’ – and all the other investors and unit holders in the Quantum Long Term Equity Fund.

For the honour of the responsibility of looking after your savings, we as fund managers have the right and the responsibility to ask questions.

And why were we not using the distribution channel to “sell” you our Fund?

Because – as is well documented and known – the channel was not necessarily working for the good of the investors. It was influenced, in many instances, for the fees that came with “selling” a Fund.

There are many barbers, dentists, doctors, financial advisors, distributors who are successful – and have stayed honest.

http://www.equitymaster.com/ht/detail.asp?date=9/11/2009&story=4

You probably know them and can identify them.

If they could do it – why can’t Quantum?

Why can’t Quantum Mutual Fund be the most respected and successful fund house?

Quantum does not have to be the “largest”.

Size is irrelevant when the “contrarian” path is more important.

The means to the end, said Gandhi, are as important as the end itself.

So, yes, we are not a charity.

But that does not mean I have to run a scam-infested racketeering entity.

We will happily stay “contrarian” – and yet give you what you need: sensible risk-adjusted returns as you channel your savings regularly for your long term investments.