How Smallcase has queered the pitch for advisers and analysts

livemint.com:

The Smallcase angle Smallcase is a platform that allows advisers and analysts to curate and offer a number of ready-made portfolios of stocks or exchange-traded funds (ETFs) that, according to the firm’s website, track a theme, strategy or objective. People could invest in any portfolio of their choice for a fee. There was no restriction on the number of portfolios that advisers and analysts could offer.

The themes ranged from green energy to digital inclusion to electric mobility, while investment strategies included growth, momentum and ESG (Environmental, Social and Governnance). Things were going just fine until the market regulator came up with the advertisement code on past performance. It ruffled quite a few feathers.

“On the one hand, Sebi is saying we cannot show our past performance, and, on the other hand, the performance of Smallcase managers is displayed by default," said Narasinga Rao, a registered investment advisor and portfolio manager of Sampadha. said. Rao put his Smallcase account on pause immediately after the advertising code was enforced.

"We want to stay away from this as long as there is no clarity." To be sure, there is no option to hide the past performance in the Smallcase platform. “There is no other way to prove our credibility other than to show our performance. We will have to shut shop if we cannot show our past track record," said Kushank Kamal Poddar, a Smallcase manager who is still active on the platform.

Some financial experts, meanwhile, say that RIAs and research analysts are themselves to blame for this situation. Many of them tried to manipulate the system by showing misleading performances to gullible clients. There was also a lack of a standardized way of measuring past