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Skin in the game!

PPFAS Mutual Fund
PPFAS Mutual Fund

The document discusses the importance of fund managers having "skin in the game" by personally investing in the schemes they manage. It explains that there are two types of money managers: those that manage money for a fixed fee without a personal investment who are like a pilotless plane, and those that invest their own money who have more incentive to ensure clients succeed as their financial interests are aligned. Managers with skin in the game will behave more prudently and not be as inclined to cut corners. The document advises investors to choose funds where the manager invests alongside them rather than just looking at past performance.

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PPFAS Asset Management Private Limited www.amc.ppfas.com [Investment Manager to PPFAS Mutual Fund] Investor Education Initiative From PPFAS Mutual Fund Skin in the Game
PPFAS Mutual Fund Investor Education Initiative www.amc.ppfas.com Page 1 of 2 Skin in the game Have you ever come across this notice in a restaurant? Does this not reassure you about the quality of food? The same could be extended to money management. The owner eats here everyday. Surely you will feel more assured entrusting money to the second manager. 2. The second kind strongly believes in the scheme that he is managing, and hence invests his own money in it. This is similar to a pilot who is travelling in the same plane, along with you. Hence, he usually wins only if you win. This is known as having 'Skin In The Game. 1. The first kind manages your money for a fixed fee, without investing along with you. In other words, he does not lose, even if you lose. It is similar to travelling in a pilotless plane guided by a remote control. There are two kinds of money managers: ToonClips.com
PPFAS Mutual Fund Investor Education Initiative www.amc.ppfas.com Page 2 of 2 Skin in the game Investing life becomes real when you have some skin in the game! Having 'Skin In The Game' results in: Before choosing a mutual fund, do not go merely by past performance statistics. Choose one where the fund managerisonthesamesideasyouare. Afterall,howcanyoutrustafundhousewhichdoesnottrustitsownmoneymanagementprowess? 1. Your fund managers behaving more prudently. 2. Their financial interest being aligned with yours. 3. Them having less incentive to cut corners. 4. Them having more than merely reputation, at stake. Unfortunately, this is more the exception than the rule in the mutual fund industry. This results in: 1. Stress on managing more assets 2. Launch of too many schemes 3. Marketing departments running the show 4. 'Heads I win Tails you lose' mentality
PPFAS Long Term Value Fund (An Open Ended Equity Scheme) A scheme designed for genuine Long Term Investors! Advertisement

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Skin in the game!

  • 1. PPFAS Asset Management Private Limited www.amc.ppfas.com [Investment Manager to PPFAS Mutual Fund] Investor Education Initiative From PPFAS Mutual Fund Skin in the Game
  • 2. PPFAS Mutual Fund Investor Education Initiative www.amc.ppfas.com Page 1 of 2 Skin in the game Have you ever come across this notice in a restaurant? Does this not reassure you about the quality of food? The same could be extended to money management. The owner eats here everyday. Surely you will feel more assured entrusting money to the second manager. 2. The second kind strongly believes in the scheme that he is managing, and hence invests his own money in it. This is similar to a pilot who is travelling in the same plane, along with you. Hence, he usually wins only if you win. This is known as having 'Skin In The Game. 1. The first kind manages your money for a fixed fee, without investing along with you. In other words, he does not lose, even if you lose. It is similar to travelling in a pilotless plane guided by a remote control. There are two kinds of money managers: ToonClips.com
  • 3. PPFAS Mutual Fund Investor Education Initiative www.amc.ppfas.com Page 2 of 2 Skin in the game Investing life becomes real when you have some skin in the game! Having 'Skin In The Game' results in: Before choosing a mutual fund, do not go merely by past performance statistics. Choose one where the fund managerisonthesamesideasyouare. Afterall,howcanyoutrustafundhousewhichdoesnottrustitsownmoneymanagementprowess? 1. Your fund managers behaving more prudently. 2. Their financial interest being aligned with yours. 3. Them having less incentive to cut corners. 4. Them having more than merely reputation, at stake. Unfortunately, this is more the exception than the rule in the mutual fund industry. This results in: 1. Stress on managing more assets 2. Launch of too many schemes 3. Marketing departments running the show 4. 'Heads I win Tails you lose' mentality
  • 4. PPFAS Long Term Value Fund (An Open Ended Equity Scheme) A scheme designed for genuine Long Term Investors! Advertisement