Multi-Act’s (MA) founding in 1997 was in many ways the culmination of my journey of self-discovery as a passionate value investor after assuming the responsibility for managing my family’s financial assets in 1991. It is, therefore, a very different organization in its interaction with clients compared to the traditional way in which investment services are delivered by financial intermediaries today.
Early in my journey, I realized that traditional agency relationships could lend themselves to very unsatisfactory outcomes for families whose basic task is simply seeking to preserve and grow their financial wealth at satisfactory “real” (and risk) adjusted returns. This realization became even more acute in 1998 when the Asian crisis and the incipient TMT bubble brought agency problems to the fore. MATI was set up in India as a “buy side” equity research provider with initially three “buy-side “analysts as a possible solution to one family’s search for the “right” answer in navigating & investing in the Capital Markets.
A major problem hindering families from realizing their simple investment task is the inherent clash in the structure of the financial services industry, the behavioural biases (both of clients and agents) juxtaposed with actions of Central Banks. In search of the “Holy Grail” of macro-economic stability, Central Banks have unwittingly exacerbated “booms and busts” and the savers/investors have eventually ended up as “roadkill”, as 2000,2009 and 2020 showed.
Multi-Act has been designed to help families address three major issues that families confront in the search of their primary task of preserving and growing their wealth on an inflation adjusted basis:
- We live in challenging macro times and the financial and global monetary structures that investors have all become used to since WW II & especially since 1971 could be prone to unexpected adverse changes, especially for portfolios incorrectly positioned for the changes that will emerge over the next decade.
- Fiduciary relationships are becoming rarer and instead families are more likely to be dealing with agents (i.e. brokers, distributors or even investment managers) whose goals could be misaligned to the investors goals. Caveat Emptor is more likely be the guiding principle for investors in their dealings with intermediaries.
- The plethora of strategies, investment structures available to savers and investors instead of helping have often confused investors with the “true” risk of these structures and more often than not, fostered an unnecessarily short investment horizon by ensnaring families in a short term “performance derby”, which does not meet their original goals and objectives as savers and investors.
There is a need for a greater interaction by investment service providers with clients through a variety of tools and aids to ensure that the investment process developed, is a streamlined one where a family’s needs in the capital markets are completely and fully understood, the dilemmas that all investor face are consensually resolved, and portfolios are constructed through a process that is both educative with continual interaction rather than an agency relationship where “funds” are turned over to an agent; the agent does his/her own thing, and the principal ends as a mere observer.
Multi-Act’s basic goal is to restore the fiduciary responsibility that all Capital Market intermediaries should have and that it is as much the fiduciaries responsibility; as that of the families themselves, in educating investors more fully on these three major issues to help them achieve their goals, preserve their wealth, and successfully navigate the capital markets through these challenging times.
Prashant K. Trivedi, CFA
Founder & Chairman of the Board
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