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Change of mutual fund manager and Its effect on your portfolio performance

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THERE always is a regular churning of fund managers for various mutual funds.

These can cause some confusion for investors as to how they should act when such developments are taking place all around them. In these situations, investors should be looking very carefully at the role that the fund manager plays, and, they can then react to the different kind of situations that could arise out of these changes. Here are some of the ways by which different conditions can be handled effectively.

Change after a long time: One condition that could actually pose a little bit of worry for an individual investor is when there is a change in the fund manager after a long time.

It is likely that when a fund has been managed for a long time, there is some sort of stability in the decision making process, and, the process is smooth. There is a sort of predictability in the way things would move and if this situation is disrupted, then, the performance of the fund could also get affected.

If investors think that a large part of the performance of the fund was due to the fund manager's role, then, they should evaluate the decision as to how long they can continue with the fund to feel the impact of the changes.

On the other hand, there could also be an element of relief if a long-term fund manager is changed, especially, when the results have been consistently poor, and hence, this leads to the fund lagging in performance.

However, any such decision will require a proper understanding of how the fund is being managed.

Fund manager resignation: There are times when there is a change of a fund manager because the old manager has resigned and moved on to explore other opportunities. This leaves the existing fund without the manager, and hence, the fund is forced to appoint some other fund manager in the place of the former. Many fund houses now follow the strategy of ensuring that there is more than one fund manager who will be looking at a particular fund, so that in case of need, the other manager can take over the responsibilities as the situation warrants.

When this is the case, there should not be any cause for concern for the investor.
Systems or fund manager: Another aspect that needs a lot of attention and understanding is whether the fund house actually functions on the basis of a system for stock selection, or whether, this job is left to the fund manager. When there is already a systematic way by which the selection is undertaken, then, the new fund manager will find it easier to manage the investment, and hence, the new person will be able to tackle issues effectively. On the other hand, if the fund manager was handling everything, then, it could take the new fund manager some time to settle down, and hence, there could be a short disruptive period for the fund.

Generally, when it comes to making an overall decision, it is always better to take a close look at a specific fund's performance, and then, the investor can take a decision over time. 

 

 

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