Equity fund managers hop jobs

When Peter Lynch left the job of managing US equity fund Fidelity Magellan fund in 1990, he had spent a solid 13 years managing the fund. During his tenure the fund consistently gave returns that beat the market to become a $13 billion fund in terms of assets. Popular wisdom has it that a long association of a fund manager to a mutual fund scheme does wonders to its performance. Even investors are known to be comfortable investing in funds where managers have been around for a longer period.

Interestingly, in this regard, Indian equity fund managers have been found to be fleet-footed compared to their US counterparts. Perhaps with few exceptions like Prashant Jain who has remained associated with HDFC fund for more than a decade, the average tenure of an equity fund manager is less than 2 years. On the other hand, in developed markets like the US and the UK, fund managers have been known to have long-term associations of 10-15 years. Among Indian equity funds, Reliance Growth, UTI Equity Tax Saving, Sundaram Select Focus, FT India Life Stage fund of fund—have had managers managing the fund for more than 8 years. HDFC Prudence is perhaps the fund with longest association— Prashant Jain has been its fund manager for 16 years. Sunil Singhania, head of equities at Reliance Mutual fund says, “Certainly the performance of the funds also depend largely on the tenure of the fund manager. Also, frequent change in the fund manager brings portfolio change and difference in investment strategy.”

While every fund house endeavours to mitigate the risk of the manager quitting, by standardising the risk management measures, stock picking is also believed to be an individualistic attribute. “There is a constant pressure to not only outperform but also remain on the top. It has led to many fund managers quitting the industry to join private equity and hedge funds.” says the CEO of a leading fund house on condition of anonymity.

It is also being increasingly seen that a single fund manager co-manages over 4-5 schemes, all thanks to spate of new NFOs.

TP Raman, MD of Sundaram MF says, “If a fund manager sticks to his style of investment then there is no cause of worry.”

He adds that, consistent good performance is possible only if one fund managers stay for a longer tenure.

Source: http://www.financialexpress.com/news/equity-fund-managers-hop-jobs/727249/0