Super mail from Quantum Mutual Fund CEO to investors

The below is the text of an email received from Quantum Mutual Fund, asking investors not to worry about their making the 50 Crore net worth requirement! Had to share this one...

The Mathematics of Rs 50 crore

Dear Investor,

Ever since SEBI has announced the "be a serious player" minimum Rs 50 crore net worth criteria for an AMC; many of you have written to us, asking "What will happen to Quantum Mutual Fund? We love what you do and what you stand for, but what if you don't achieve the INR 50 crore mark over the next 3 years, what will happen to my investment in Quantum Mutual Fund?"

Absolutely the right question, dear investor. As the CEO of Quantum AMC, I take this opportunity to put to rest your concerns.

The mathematics of Rs 50 crore.

In May, 2014 SEBI decided to raise the minimum net worth for an Asset Management Company to Rs. 50 crore instead of the earlier level of Rs. 10 crore. This, according to SEBI, will keep the serious players in the industry. SEBI has given AMCs that do not currently have a net worth of 50 crore, a period of 3 years to achieve the same.

Quantum Mutual Fund is one of those AMC's that have a net worth of less than 50 crore. Our net worth as on March 31, 2014 stood at Rs. 28 crore.

In our view if we grow at the same pace of profitability of approximately Rs 3 crore per year (our average rate of profitability for the past 3 years) then we will have added Rs 9 crore to our net worth byMarch 31, 2017. This will take our net worth to Rs 37 crore - still short by Rs 13 crore to reach the magical Rs 50 crore mark as suggested by SEBI.

At that stage, our Sponsor and parent Quantum Advisors will inject the required Rs 13 crore (or more) capital into Quantum AMC. Quantum Advisors' current net worth is over Rs 60 crore and - in theory - Quantum could inject the balance Rs 22 crore (Rs 50 crore - Rs 28 crore existing net worth) today.

So, there is no need to worry.

We plan to stay on in the "profession" of investment management.

But, what if Quantum does not make it to the Rs 50 crore mark?

Despite the reality of past profits and a strong sense of commitment, you may still have a doubt. "What if", you ask, "What if Quantum AMC fails to reach the Rs 50 crore net worth mark?"

This is a very valid point, my dear investor, very valid.

In the very unlikely scenario that Quantum AMC does not reach its minimum net worth, we will have to wind down our mutual funds. And you will have to take the savings you trusted with us elsewhere. There will be no loss to you - well, you will lose having a relationship with us, that is true!

But your money will never be at risk. And you will have to choose another fund house. You will need to find someone you can trust, someone whose very existence is to serve you.

Yes, it is scary. This, in the end, is a test of your faith - as much as it is a test of our commitment. If you believe what we are doing at Quantum Mutual Fund is right. And if you believe what we are doing at Quantum Mutual Fund is helping you reach your financial goals. Then, you cannot let us be at risk. You need to ensure that more of your savings are deployed in the Quantum Mutual Fund. If we succeed, you will succeed. If you succeed, we will succeed. No other fund house has that simple - but powerful - equation. The regulator has thrown a road block in your way. We are ready to cross it - will you cross it with us?

My twitter handle: @invest_mutual