MFs build second line of fund managers amid top-level exits

Illustration: Binay Sinha
The mutual fund (MF) sector is grooming newer talent to become lead fund managers, amid a spate of recent high-profile exits. Given the robust inflow from domestic investors and a positive growth outlook, the Rs 19 lakh crore asset management sector is trying to ensure a second line of fund managers.

 

There 40-player MF sector has seen its assets under management double in three years. It has also seen inflow of Rs 7 lakh crore in this period, about Rs 2.5 lakh crore in equity.

 

In the recent past, top and mid-level asset management companies (AMCs) have seen exits of marquee fund managers, in most cases also the face of the fund house. The list of high-profile exits includes S Naganath of DSP BlackRock MF, Manish Gunwani of ICICI Prudential MF, Kenneth Andrade of IDFC MF and Anoop Bhaskar of UTI MF.

 

Sector players say high-profile exits denting investor trust in the fund house is playing on every AMC’s mind. So, each fund house is trying to address the uncertainty from potential exits.

 

“We hold weekly meetings where a sector is analysed in-depth. These are attended by all analysts, irrespective of sector expertise,  helping them develop a detailed understanding. Such shared processes eventually help them to evolve into a fund manager. Further, many of our funds have co-fund managers. This enables necessary experience in fund management and eventually a smooth transition into the lead fund manager role,” says Nimesh Shah, managing director of ICICI Prudential MF.

 

“As part of our talent development programme, we prefer to hire from within and promote from the internal team to meet new openings. Such practices help us develop and strengthen a high performance culture in investment management,” says A Balasubramanian, chief executive officer (CEO), Aditya Birla Sun Life MF.

 

Most fund houses emphasise on building a process of putting in place investment principles and involving the entire investment team in stock selection and portfolio creation.

 

“We have a model whereby an analyst who shows potential can migrate to fund management over a period. Our strong second line of analysts ensures some back-up in the unfortunate event of a fund manager leaving. Meanwhile, we try and ensure fund managers manage a maximum of two-three funds and also avoid a single manager dominating the thought process and selecting of stocks. This helps our fund managers to stay focused on the portfolios and ensures a consistency of ideas across schemes,” says Anup Maheshwari, head of equities, DSP BlackRock MF.

 

Sector players say investors like to be associated with marquee names, such as Prashant Jain of HDFC MF, S Naren of ICICI Prudential AMC, Sunil Singhania of Reliance Nippon MF, Nilesh Shah of Kotak MF or Anoop Bhaskar of IDFC Mutual. These fund managers have been around for over two decades and helped investors to create wealth.

 

Fund houses say they are eager to promote new names, to ensure the management legacy continues if some of the high-profile managers leave.

 

“We have provided opportunities for our internal talent pool and have seen some of our analysts and dealers graduate to become fund managers,” says Sundeep Sikka, CEO of Reliance Nippon MF.

 

UTI MF says it has a system where people start as analysts before rising to the position of fund manager. “Fund managers are often groomed by initially working on a sector or thematic fund. Some have also led the research function before moving on to fund management. The other key element to enable transitions is to have a clearly defined positioning and framework for each fund. We have articulated the same for each fund and emphasise style discipline,” says Vetri Subramaniam, its head-equity.


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