1. The distinction between the two is done by the alpha returns which various fund managers generate, over and above the index return which is a replication of the market situation.
2. In a growing economy like ours, with higher market volatility, fund managers are able to utilize it for alpha returns, although probability of all of them being able to do so every year is less.
3. Thereafter, peer group comparison of funds, with similar investment objective and style, enables their fair evaluation in the same category.
4. All other factors being equal, a lesser expensive fund should be preferred for a long-term portfolio.
5. At the end of the day, it is the long-term earnings and ratings among peers which help in comparison and selection of actively managed funds.
6. Having said that, the contribution of a fund manager is also significant because he brings the human element that no 'process' can replicate, as good stock selection requires a lot of experience, knowledge and instinct.
7. While it's rarely a one-man show, reputed fund houses try to ensure that the fund does not go awry if a fund manager leaves.
8. Although it's very natural to be concerned, there's no need to rashly redeem or terminate SIPs, and one should ‘wait and watch’ because not all fund managers are equally important.
9. If it's a fund that very closely tracks a benchmark, or has “top 100” market cap stocks, or relies on a quant model, or is a dividend yield or even a hybrid or debt fund, it won't face too many problems when he leaves.
10. If it's a multi-cap, mid-cap or a small-cap fund, then bottom-up stock picking and making right calls is extremely important, and his exit could be critical because it's his personal judgment that goes into adding alpha.
11. While one doesn't really know a leaving fund manager's "individual" effort, if most funds of an AMC do well, it could be due to its 'processes’.
12. We can also review other schemes run by the past fund manager to check if he had a positive impact on them.
13. We can also look at schemes managed by new fund manager to check if he did a great job elsewhere, if not better, as there is a possibility that he may actually work out better.
14. If outgoing fund manager did stick to his mandate well, then we should watch if the new one is following suit, by keeping close track of transition, and whether his "moves" are still a good fit with our portfolio - before making our own "moves".
2. In a growing economy like ours, with higher market volatility, fund managers are able to utilize it for alpha returns, although probability of all of them being able to do so every year is less.
3. Thereafter, peer group comparison of funds, with similar investment objective and style, enables their fair evaluation in the same category.
4. All other factors being equal, a lesser expensive fund should be preferred for a long-term portfolio.
5. At the end of the day, it is the long-term earnings and ratings among peers which help in comparison and selection of actively managed funds.
6. Having said that, the contribution of a fund manager is also significant because he brings the human element that no 'process' can replicate, as good stock selection requires a lot of experience, knowledge and instinct.
7. While it's rarely a one-man show, reputed fund houses try to ensure that the fund does not go awry if a fund manager leaves.
8. Although it's very natural to be concerned, there's no need to rashly redeem or terminate SIPs, and one should ‘wait and watch’ because not all fund managers are equally important.
9. If it's a fund that very closely tracks a benchmark, or has “top 100” market cap stocks, or relies on a quant model, or is a dividend yield or even a hybrid or debt fund, it won't face too many problems when he leaves.
10. If it's a multi-cap, mid-cap or a small-cap fund, then bottom-up stock picking and making right calls is extremely important, and his exit could be critical because it's his personal judgment that goes into adding alpha.
11. While one doesn't really know a leaving fund manager's "individual" effort, if most funds of an AMC do well, it could be due to its 'processes’.
12. We can also review other schemes run by the past fund manager to check if he had a positive impact on them.
13. We can also look at schemes managed by new fund manager to check if he did a great job elsewhere, if not better, as there is a possibility that he may actually work out better.
14. If outgoing fund manager did stick to his mandate well, then we should watch if the new one is following suit, by keeping close track of transition, and whether his "moves" are still a good fit with our portfolio - before making our own "moves".