Thread by @iRadhikaGupta

The 10 questions I would ask an AMC if I were an investor, that usually don’t get asked.

A thread...

1. What is your definition of good performance? And bad performance?

Very important. If your definition doesn’t align with the AMC, you will always be frustrated.

2. You outperformed your peers by a huge margin this year? Why? Exactly why?

Extreme outperformance is never questioned. It should be - it reveals a lot including tail risks.

3. What is your edge? Is it some unique process? Is it a person? Is it costs? Is it access to bonds / stocks? Is it nothing?

This will tell you why performance is sustainable. Even nothing is fine - an AMCs edge could be just distribution. It’s good to know.

4. When will you underperform? In absolute and vs others?

Every one will underperform at some point. You might as well know when to be prepared?

5. What does your CEO / board do when you underperform? More reviews? Have you had to change strategies? Honestly.

Fund teams should be supported in a bad run, rather than made to change strategies. The ability to weather it out matters!

6. Which of your peers are closest to you in approach? Which are different?

This will help you invest and diversify in different styles of investing across funds.

7. If you got 10 percent redemptions in a month what would happen? What about 20 percent?

Critical especially for illiquid asset classes like mid caps and credit. Being too big and too illiquid to fail is the reason funds fail.

8. What percentage of AUM is owned by the top 5, 10, 20, 50 advisors? Or distributors?

Funds that have diversified investor bases are sell prone to large single day redemptions that hit your NAV.

9. How did the fund management of the fund change when the fund manager changes? How often did fund managers change?

Consistency of fund team is very important for a scheme.

10. Do you have a process document? That has not just equity philosophy but duration, credit, and other stuff? When and why do you deviate from it? What will you never do?

Boundaries protect investors. The small things like debt in hybrid funds can kill you. Policy helps!

Finally, ideally please don’t troll me or kill me :)

I love the AMC business and I love MFs. Better questions means better answers, and more informed investors.

Happy investing!