1. While the size of a Mutual Fund doesn't matter, its fund management definitely does matter to long-term investors, and this is not a one-man job.
2. It is a team of professionals, including analysts, researchers, and the fund manager himself, and its inputs are necessary for investment ideas.
3. In addition, many fund houses have a process-driven approach and strict investment philosophies, within which the fund manager has to function.
4. Some fund houses allow a fund manager to play around the investment parameters, and his credentials are, therefore, critical to the performance of the fund.
5. While he is the lynchpin, any fund house with a process-driven approach, a well-defined philosophy and risk management practices can deliver sound performance without relying purely on the fund manager, and such a fund house can even replace an outgoing star fund manager without affecting the returns.
6. So, you should give precedence to the fund house pedigree over the individual running the scheme, as he is rarely the sole driver of the fund’s performance, especially when investing for very long-term goals.
7. As a thumb rule, evaluating MFs through these 5 Ps is helpful - People, Process, Parent, Performance and Price(charged).
8. All other factors being equal, an inexpensive fund should be preferred over an expensive one.
9. Peer group comparison of funds with similar investment objective and style also enables a fair evaluation in the same category.
10. A process-centric fund house gives limited freedom to the fund manager, who has to abide by its rules, hence the mandates become a crucial factor.
11. Today, most fund houses claim to have robust processes in place, although very few are strict in their implementation.
12. The fund manager, therefore, brings the human element with his experience, knowledge and instinct.
13. In India, the focus tends to be on the fund manager of individual schemes, because fund houses haven't yet done a good job of developing and implementing their own processes.
14. While one can't say how effective a particular fund manager has been on his own strength, in comparison to others, one way to gauge this is by looking at the performance of other funds from the same fund house - if many of them are doing well, its in-built ‘processes’ may be the reason.
15. Having said that, it is often seen that an equity fund manager's role becomes more crucial in multicap, midcap, smallcap, thematic and sectoral funds than in, say, index, largecap, dividend yield and hybrid funds.
2. It is a team of professionals, including analysts, researchers, and the fund manager himself, and its inputs are necessary for investment ideas.
3. In addition, many fund houses have a process-driven approach and strict investment philosophies, within which the fund manager has to function.
4. Some fund houses allow a fund manager to play around the investment parameters, and his credentials are, therefore, critical to the performance of the fund.
5. While he is the lynchpin, any fund house with a process-driven approach, a well-defined philosophy and risk management practices can deliver sound performance without relying purely on the fund manager, and such a fund house can even replace an outgoing star fund manager without affecting the returns.
6. So, you should give precedence to the fund house pedigree over the individual running the scheme, as he is rarely the sole driver of the fund’s performance, especially when investing for very long-term goals.
7. As a thumb rule, evaluating MFs through these 5 Ps is helpful - People, Process, Parent, Performance and Price(charged).
8. All other factors being equal, an inexpensive fund should be preferred over an expensive one.
9. Peer group comparison of funds with similar investment objective and style also enables a fair evaluation in the same category.
10. A process-centric fund house gives limited freedom to the fund manager, who has to abide by its rules, hence the mandates become a crucial factor.
11. Today, most fund houses claim to have robust processes in place, although very few are strict in their implementation.
12. The fund manager, therefore, brings the human element with his experience, knowledge and instinct.
13. In India, the focus tends to be on the fund manager of individual schemes, because fund houses haven't yet done a good job of developing and implementing their own processes.
14. While one can't say how effective a particular fund manager has been on his own strength, in comparison to others, one way to gauge this is by looking at the performance of other funds from the same fund house - if many of them are doing well, its in-built ‘processes’ may be the reason.
15. Having said that, it is often seen that an equity fund manager's role becomes more crucial in multicap, midcap, smallcap, thematic and sectoral funds than in, say, index, largecap, dividend yield and hybrid funds.