Skip to main content

Fund house or Fund manager – Which one?

The mutual fund (MF) sector has come a long way. In 1987, the doors were first thrown open for entry of the first non-UTI mutual fund. During those early days, only the public sector was allowed to operate MFs.

Then, in 1993 (a watershed year for MFs), private sector mutual funds made their appearance. Kothari Pioneer (now merged with Franklin Templeton) was the first in India. In a relatively short span, the assets under MF management have grown phenomenally to around `7.5 lakh crore. But it is still only the tip of the iceberg; the bulk of Indian savings are parked in bank deposits. But, over time, as investors gradually discover it is indeed the instrument of an MF that is the ideal vehicle to build one's capital over a period of time, the figure will increase manifold.

That said, it is strange that one needs qualifications to distribute (sell) funds, there are none needed to manage these! One would think that if distributing funds is a responsible task, managing the distributed funds would be more so. Currently, anyone can be a fund manager regardless of their qualifications.

Basically, the issue thrown up is, how important is the role of the fund manager in the overall scheme? Are qualifications and credentials of an individual more critical or are the systems, processes and risk management strategies put into place by the MF that employs him? Does the fund manager's investment style take precedence over the fund's investment process or is it the other way around?

MANAGER VERSUS HOUSE

There is no plain yes or no answer and it depends upon the fund and its philosophy. When you invest, you are implicitly reposing a certain amount of trust into the fund manager's expertise and capability. You are essentially hiring a professional to manage your money and pick your stocks and because of the cost sharing with thousands of others, the professional expertise comes at an economical price.

Conventional logic would say it is the ability and the skill of this professional, the fund manager, that should generate the returns. However, is it always so? Investing thousands of crores belonging to hundreds of thousands of investors is clearly not a one-man job. What's more, now even the international markets are being opened for domestic mutual funds.

Typically, MFs are usually managed by a team of managers, backed up by analysts and researchers. Just like a captain is as good as his team, without able support, no matter how skilled a fund manager is, he will not be able to deliver optimally.

Second, it also depends upon the type of fund under management. A passive fund, such as an index fund that mirrors a certain benchmark, does not require the active intervention of a fund manager. Similarly, a quant or an arbitrage scheme, where the mandate of the fund is mechanical and pre-defined and not dependent upon individual calls, requires more of software, systems and IT support, rather than fund management expertise.

The other factor one has to consider is the management philosophy of the fund house -- whether process-driven or one that provides fund managers latitude and flexibility. Some houses give a fair amount of autonomy to the fund manager in taking large sectoral calls, churning the portfolio or even investing in small caps or unlisted companies, subject of course to Sebi regulations. On the other hand, there are fund houses that follow a strong, process-driven investment style and the fund manager's role is to perform within the parameters defined by the institution.
 

Popular posts from this blog

JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund    The new fund offer opens for subscription on 16 th June and closes on 30 th June. JP Morgan Mutual Fund today announced the launch of its open end fund of fund called Emerging Markets Opportunities Equity Offshore Fund. The fund will invest in an aggressively managed portfolio of emerging market companies in the underlying fund - JPMorgan Funds - Emerging Markets Opportunities Fund, says a JP Morgan press release. Noriko Kuroki, Client Portfolio Manager, Global Emerging Markets Team (Singapore), JPMAM said, "Emerging markets have been out of favour for several years, as growth decelerated and earnings struggled. However, in a world of globalisation, we believe that EM will eventually re-couple with DM, leading to the long-aw...
Read more

Nifty F&O

  1. What is a straddle? A strategy using Nifty options usually before a major event or when one is uncertain of market direction. Comprises purchase of a Nifty call and put option of the same strike price. Usually strikes are purchased closer to the level of the underlying index. 2. What is better ­ buying or selling a straddle? It depends.Implied volatili ty of options, or near-term expectations of price swings in an un derlier like Nifty , usually peaks before an event and falls when the outcome plays out ­ like Infy re sults in past years. However, once the event plays out, a sharp rise or fall in Nifty could result in price of the straddle rising ­ benefiting buy ers. But, normally , those who sell or write options charge hefty premiums from buyers in the hope that fall in volatility would ensure the options end out-of-the-money, hurting buyers. 3. So, do straddle sellers end up winning most of the time? Yes. That's invariably the case when market volatility is trending on the...
Read more

Jeevan Labh

 The Life Insurance Corporation of India has announced Jeevan Labh , its limited-premium, with-profits endowment plan .   It comes with a premium paying terms of 10, 15 and 16 years for corresponding policy tenures of 16, 21, and 25 years respectively. ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saving Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) Fund 9. Religare Tax Plan 10. Birla Sun Life Tax Plan Invest in Best Performing 2016 Tax Saver Mutual Funds Online Invest Online Download Application Forms For further information contact Prajna Capital on 94 83...
Read more

L&T Long Term Infrastructure Bond 2012 Tranche 2 Application Forms

Application form for Tax Saving Long Term Infrastructure Bond     L&T Long Term Infra Bond Application form     Submit filled up application     Collection canter near you     --------------------------------------------- Invest Tax Saving Mutual Funds Online Mutual Funds Online   Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications   ---------------------------------------------   How to apply to PFC Bonds? Apply for PFC Tax Free Bonds forms below Download PFC TAX Free Bond Application Forms Submit the filled up form to Collection canter near you How to apply to NHAI Bonds? You can download the NHAI Tax Free Bonds forms below Download NHAI Tax Free bond Application Forms Submit the filled up form to Collection canter near you        
Read more

Systematic withdrawal plan

  Start Systematic withdrawal plan Online Although an SWP gives you regular income and saves on taxes in the long term, you cannot open an SWP on a scheme where you have an ongoing SIP   iStockPhoto If you are planning to take a sabbatical from work or are retiring soon, you may be looking at different investment options that give a regular income. Usually, a lump sum is invested to get regular fixed amounts later. Popular products include post office monthly income scheme, Senior Citizens' Savings Scheme and monthly income plans (MIPs). A lesser known option is the systematic withdrawal plan (SWP) in mutual funds. Recently, some funds have even removed the exit load on SWPs if you were to withdraw up to 15-20% in the first year, to encourage people who want to start investing in this instrument. Here is a look at what an SWP is. WHAT IS SWP? Many of us would be familiar with a systematic investment plan (SIP ), where a corpus ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now