Thread by @shyamsek

When one sector or theme sustains performance for years, the MFs can't risk not owning them enough.

Now, we have a horde of fund managers with the same compulsions.

The contrarians are made to look silly by this herd of hoarders.

But i have never seen the herd win in the end.

In 2000, two MF houses took pole position in tech funds. They bought overwhelming part of scheme portfolios with assortment of tech cos. The two FM were gods. But lost jobs in few years after apocalypse struck. But, infy remained a grt company long after. Investors lost & left.

2008 saw the same story repeat in Infra & power. Concentration of ownership by MFs, ignoring portfolio risks, misselling sector heavy schemes as diversified & less risky investments-history repeated. Investors lost and left. Most market fav went to 5% of peak valuation or lower.

The confidence with which smallcaps cos were giving guidance was warning enough. It was clear in the broker conferences. But, nobody wanted to leave the party. The notice combined with noise made us forget that the whole circus was thriving on greed. Liquidity was just too low.

2018 saw very nuanced story telling. Especially, in financials. MFIs, HFCs & NBFCs were Dalal street's triangle. Novice investors in Bermuda shorts were lured in. The truth is PSBs in capital distress caused a temporary space for faster growth. History repeats for new guys now.

The small cap circus is the real. Joker in the pack. Many of us were also in this show, whether we expected, liked or enjoyed it. As more capital flows sought opportunity, all small boats rose in that flood of inflows. 20PE became cheap for smallcaps. I've never seen this before.

In all this the remarkable irony is that the most decorated 5star rated equity funds went down in every cycle after the boom ended. Their PF performed poorly 2 or 3 yrs after bull Markets & long stint in top quartile. That's a clear irony. Something industry won't talk about.