Fund managers: Little skin in the game

Outlook Asia Capital compiled data that suggests top 30 equity schemes comprising about 60 per cent of mutual fund sector's equity assets

How much skin in the game does your fund manager have? If data compiled by Outlook Asia Capital of top 30 equity schemes comprising about 60 per cent of the mutual fund sector's equity assets are anything to go by, the answer is very little.

Barring perhaps Prashant Jain and S Naren, most top fund managers and key employees have not invested sizeably in schemes managed by them or their own fund house.

"This is contrary to the practice followed by all successful global fund managers in developed countries," said Manoj Nagpal, chief executive, Outlook Asia Capital.

To be sure, no rule dictates fund managers and employees to invest in own fund house's scheme(s). Earlier this year, the markets regulator had said that all fund houses need to disclose aggregate investment in schemes, which includes investments made by board of directors, fund managers, and key employees.

Investing in one's own fund can inspire confidence among ordinary investors. Also, a fund manager is less likely to take rash investment decisions if he has his own money in the scheme, say experts.

Notably, in July 2015, Kotak AMC had asked its employees to sign a voluntary pledge to invest only in Kotak MF schemes.