Note: This interview was published in the January 2016 issue of our premium newsletter, Value Investing Almanack. To gain instant access to more such interviews and other interesting stuff on value investing and business analysis, click here to subscribe now.
SN: Is there a mechanism in Mutual Funds where you repay cash to shareholders if you’re not finding opportunities for a long period of time?
RT: Some people do it by the way of dividend payouts. Other mechanism is that you can shut the doors for the inflows. What you can say is that I’m not getting opportunities now so I wouldn’t be buying anymore. Lot of people have done that also. So you shut the door and say I’ll not take any more inflows from this date onwards. And you can open it as and when the opportunity arises. You can keep it shut for may be 3-6 months or 1 year or whatever period you deem fit.
SN: Being a fund manager, what are your thoughts on indexing?
RT: Indexing has a very important role to play but you can’t overemphasize it. People typically fall into two categories. One category of people are completely pro indexers. And the other is people who are completely against indexing. I am someone who is in between. So at one side indexing acts as a huge control on excessive fund management fees. Since indexing is a low cost mechanism for people to participate in equity markets. It’s a fact that if all the money were to be managed by professional managers the aggregate return that they give to investors will be market return minus fees. They can’t outperform themselves as a group. So mathematics is fine and I appreciate indexing from that point of view.