 
INDIA'S BEST FUNDMEN Prashant
Jain ANOOP
BHASKER RITESH
JAIN |
Mutual distraction N Mahalakshmi Is the fund manager bigger or the institution? That's the dilemma faced by investors, as the industry grapples with attrition Fund managers are a hot commodity today. Over the past couple of years, mutual funds have seen a high level of churning as also seen in BPOs. Check this out: At the end of 2005, Anup Maheshwari, head of equities at DSP Merrill Lynch switched to HSBC Mutual Fund as CIO following Sanjeev Duggal’s transfer to Singapore. Vinay Kulkarni, who moved a year ago to Deutsche Mutual after his long stint at UTI Mutual, jumped ship to Tata Mutual once again last month. Replacing him at Deutsche Mutual now is Dhawal Mehta from HDFC Mutual, who had joined the latter after his erstwhile company Alliance Capital was taken over by Birla Sunlife Mutual. Sanjay Sinha, fund manager at UTI Mutual, moved to SBI Mutual Fund following the exit of equity head Sandip Sabharwal to Lotus (Sabharwal resigned from Lotus recently). Now, Maheshwari is back with greater responsibility as corporate strategy head at Merrill. And Mihir Vora grabbed the offer at HSBC Mutual. These are just a few of the many changes that has happened over the past one year. Almost every asset management company has seen a change in its core team. And fund managers are not just swapping jobs within the industry, many of them have landed at hedge funds with better pay and higher flexibility. Even as fund companies are looking at ways to tackle attrition – as continuity of fund performance matters – investors remain a confused lot. Should one keep faith in the fund house or the fund manager? Views differ. Fund marketeers say it is better to stick with a fund house because fund managers change. That’s probably because it is in the interest of fund companies to ensure that they project the institution than an individual. After all, selling funds based on a star fund manager can be damaging. Take the case of Fidelity Magellan fund, which encountered its worst redemption when its star fund manager and among the most successful American investors, Peter Lynch, quit or the outflows faced by Alliance Capital when the poster boy of mutual funds, Samir Arora, announced his decision to move out of the firm. Ved Prakash Chaturvedi, chief executive officer, Tata Mutual, maintains that it does not quite matter whether you trust the fund house or manager. “If you have faith in the economy and believe that the market will reflect what happens in the economy, all you have to do is to decide on your time horizon and a good mechanism to invest,” he says. But, Chaturvedi also tactfully adds, that, “If a fund houses have been there for ten years, and it has given good performance, the chances are that it will not go wrong.” Seconds S Naganath, president and chief executive officer of DSP Merrill Lynch Mutual Fund, “All fund houses, by and large, are trying to institutionalise the process of investing. I think so long as the process is institutionalised, whether person A or person B is managing, makes no difference.” But Dhirendra Kumar, CEO, Value Research, vehemently disagrees. “At some point, fund management crosses the point of being a process. It becomes an instinct. And fund manager’s change makes a difference,” says Kumar. Surely, it is not that the fund manager is all important. Processes are important. There is a possibility that a good fund manager may be replaced by a great fund manager. So there is a risk and it could be either way. “The continuity of fund managers is important. It is not a coincidence that in some of the great performing funds in this country over the past ten years, the common element is continuity of fund managers,” says Kumar. Going by the belief that the fund is just as good as its fund manager, we decided to do a rating of fund managers to help investors make the right choices. We commissioned Value Research to do a rating of fund managers. In all, 33 equity managers and 20 debt fund managers met our criteria. Of these, only 14 equity and 8 debt fund managers are currently in the industry. But the good news is that the rate of outperformance of our top five equity fund managers is over 80 per cent, which is outstanding by global standards. The rate of outperformance in debt has not been as good though. In
this annual issue of Fund Manager, we have profiled the best five
in equity and debt, trying to bring out what makes them successful.
•
HOME Business Standard • FUND MANAGER • October 2006 |