iCapital: How Independent Is The Advice When They Hold Vested Interests In The Same Shares They Are Advising On?

I received one comment on my blog posting yesterday: More on iCapital Transparent Issue.

The Wanderer said...

• Exactly.....Conflict of interest lah......When they want to sell rrrr, they so scare you sell first hor (if they call a sell in their investment letter first, especialllly during BEAR markettt.)No doubt about that, Kellogg of interest ler...

Dearest Wander,

Yes, a couple of folks have accused me of Bashing iCapital and Tan Teng Boo for No Reason? but surely these facts clearly shows the fuzziness between iCapital's fund management and its investment advisory business.

The simple argument remains, how could the investment advisory make a totally independent investment advice when the very same company owns interest in the very same share!

In my humble opinion, I really think that it is just so wrong for iCapital to be disposing the same shares where their investment advisory has a buy/hold on it.

I find it so shambolic that they tell their subscribers that the shares is worth a buy/hold while their fund management reckons that there exist justifiable reasons to sell these very same shares!

Let's look at the said disposals from iCapital.biz. Now I would assume these disposals were made during the quarter ended Feb 29th 2008, as mentioned on the blog posting, What Do You Think of ICap's Recent Disposal Of Shares Held?

Let's do a simple comparison and compares the highs the stocks that icapital was disposing while their investment advisory recommended a buy/hold on these very same stock. I would look at the highs made during the period, from 1st Dec 2007 to 29th Feb 2008.

Take Boustead Holdings, it traded as high as 7.00+ during this period. It's now 4.74.

Take Intergrax, it traded a as high as 1.40+ during this period. It's now 0.695.

Take Lion Diversified, it traded as high as 2.00 during this period. It's now 1.03.

Take Petronas Dagangan, it traded as high as 8.60+ during this period. It's now 7.00.

Take Poh Kong, it traded as high as 0.70+ during this period. It's now 0.44.

ps: If any error is made on the stock highs, please let me know.

How?

It would appear to me that iCapital fund management was spot on in disposing these shares during that 1st Dec to 29th Feb 2008, where it disposed some 50 million worth of shares. Yes the sum of disposals were as much as 50 million ringgit!

Absolute brilliant for the fund!

But what about their subscribers?

What about their readers?

Remember iCapital has a buy/hold recommendation on these very same stocks! And what if their poor subscribers decides to follow these advice? Look at the end result now! Did you see how those shares that iCapital has sold has fallen?

How?

Again my issue is very simple, how could the investment advisory make a totally independent investment advice when the very same company owns interest in the very same share?!