It is not only the shareholders. What I did not notice is that...

It is not only the shareholders. What I did not notice is that FID actually adds value to its customers in the fund management business. Think about this. FID will charge you around 2% to manage your money in their funds. Good thing, and what Mr.Singh actually said on the TV is that they feel sorry for those who were charged performance fees, and the woman who was interviewing him literally choked a bit. Hunter Hall charged lots of performance fees, and the business collapsed under the weight of it when the funds underperformed. If fund managers are used to big bonuses based on performance fees, they leave in troves if there is none for a few years; if a customer feels bad for the outrageous fees but stayed because of the outperformance, he or she will leave when the inevitable underperformance happens. This is not a good strategy to build a sustainable business in fund management industry. It is a recipe for disaster.

FID does not have a in-house portfolio management team. That saves a lot of money on 'talents'. When they do hire outside managers, they can probably negotiate a favorable fee instead of those posted on a typical retail customer.Having said that, although customers are being charged a double fee, first in FID's funds and then the funds sourced by FID, they are still earning a very good return. I draw two conclusions from this. First, FID probably give back part of the saving from having a lean cost structure and the negotiated discounts to its customers, which is a win-win. And second, which is less likely, is FID actually knows how to pick the right managers. Otherwise, it is hard to explain their funds' out outperformance over time.

That brings me back to one of the questions posted on this forum which remained unanswered. A question was if a declining market will affect FID like 08-09 when the shares fell by 3/4(2.4-60c I remember)? The answer is yes and no. A bear market will decapitate this stock, there is no doubt about it. The inherent operating leverage and the fear of the market participants(redemption) will drive the stock down ruthlessly. On the other hand, FID is a lot bigger now. And in this business, scale is quite important. With 2.5 billion FUM, if FID can negotiate a 5 basis points fee reduction, that is 1.25m right into the bottom line. Let's imagine you are a fund manager looking for business and charging 1% per year. If FID offers your 200m instead of 100m, will you mind a 5 basis point reduction in fees? I think the story will only get better from here. The money FID is managing is a drop in the ocean. It can grow double digits from here for a long long time. So as long as there is no change in its business model and corporate culture, investors should buy more and ignore the short term earnings decline.

I have a question in mind and I hope someone can answer it for me. If FID's business is sound and proved over time, who hasn't anyone copied it? I know NVR had this land options thing going for decades yet no one is really copying, but would appreciate anyone who can shed some lights on this.