Investing in an equity fund with 20 years horizon? It’s likely, your fund manager may not stay that long, but should you worry?
About 220 funds have a track record of 10 plus years and out of them there are just 30 odd instances of a fund manager’s tenure being 10 years or more
One of the common reasons to invest in an equity mutual fund is the fund manager’s prowess and stock picking abilities. Of course, a fund manager builds his credibility by demonstrating returns over a longer period of time. So a lot of investors flock to a fund who have managers perceived to be the sharpest investing brains. However, with fund manager churn increasing in the last few years, this strategy may not go well with investors’ plans for holding the fund for a longer time horizon and also at the same time have the same fund manager.
Today mutual funds spend a lot of time telling investors how ‘time in the market’ is more important than ‘timing the market’. So, are you ready to invest in an equity mutual fund for 15-20 years? If yes, don’t expect the fund manager to stay for that tenure in most cases.
Fund manager churn is becoming a regular thing in the mutual funds space. When times are good, fund managers, like any other employee working in the corporate world, go after greener pastures. Fund managers have also changed when internal rejigging of duties happen at a fund-house.
Human psyche
As an investor in the mutual fund space, you may be drawn to a fund on account of one of the following reasons.
1. Historical performance of the fund, especially in the last 1 or 3 years.
2. You heard about the fund from someone you trust.
3. You came across a fund review in an article or TV show or social media.
After a while, you discover the fund manager. Sophisticated or experienced investors follow ‘star fund managers’. These star fund managers are individuals who have a great track-record (historical) in the management of funds.
As individuals, we prefer our food being cooked in a microwave (a machine), our communication coming and going from a mobile (again, a machine), our clothes being washed and dried in a washing machine (obviously, a machine) and even the room temperature of our bedroom being controlled by a machine (AC).
Yet when it comes to investing, or entrusting our financial resources (money), we like to deal with a face. The presence of a fund manager matters to us. If the fund performs during the fund manager tenure, we celebrate him/her, just like we honour our sportsmen, especially the cricketers.
What is better than performance? Sustained performance. As more and more investors are drawn to a fund due to consistent historical returns, the fund starts becoming big. The fund manager becomes big too.
Fund managers are humans. They have ambitions and aspirations, and these can get bigger. So, when a fund manager gets a better offer, they quit.
The churn
There are various reasons why fund manager changes happen. Firstly, they change their employer i.e.fund-house due to various reasons. Two, fund managers responsibilities related to a particular fund changes. They may be assigned to manage a different fund after a few years.
Let us look at some of the notable fund manager changes that have happened over the years. ‘Mid-Cap Mogul’ Kenneth Andrade quit IDFC AMC in June 2015. He had joined IDFC AMC in February 2007 and over the next eight years had become a star manager, revered by all. Andrade now runs Old Bridge Capital Management, a PMS shop.
Anoop Bhaskar, considered a star fund manager, quit UTI AMC in 2015, about eight years after he was made responsible for managing the fund house’s equity assets since 2007. Bhaskar is now in IDFC MF.
In 2016, Taher Badshah, then Head – Equity at Motilal Oswal MF, put in his papers after six years. Under his leadership, Motilal Oswal MF’s flagship schemes like MOSt focused 25 Fund and MOSt Focused Midcap 30 Fund consistently did well. Taher had joined Motilal Oswal Mutual Fund as Senior Fund Manager in June 2010.
Pankaj Murarka, then head of equities of Axis MF, quit in 2016 after spending seven years. He was working with the fund-house since 2009. He was managing fund house’s two flagship schemes – Axis Equity Fund and Axis Small Cap Fund. Murarka later started Renaissance which runs PMS.
In 2017, Manish Gunwani, then Deputy CIO – Equity, ICICI Prudential AMC, resigned to join Reliance MF in September 2017 as CIO – Equity. He was the sole fund manager of Focused Bluechip Equity Fund and co-manager of ICICI Prudential Balanced Advantage Fund and ICICI Prudential Technology Fund. Manish had joined ICICI Prudential AMC in June 2010.
In 2018, Gopal Agrawal, then CIO of Tata Mutual Fund, resigned after a short stint to join DSP MF. He had joined the Tatas in April 2017.
Upcoming equity fund manager Vinay Paharia quit Invesco MF in March 2018. In at least two funds he was the sole fund manager viz – Invesco India Mid Cap Fund and Invesco India Mid N Small Cap Fund. He joined Union MF as CIO.
In 2019, senior fund manager Gautam Sinha Roy quit Motilal Oswal MF. Roy was at the helm of Motilal Oswal Multicap 35 Fund almost since the fund’s inception in 2014. He has now joined ICICI Prudential Life Insurance.
A few might argue some amount of churn is good for the industry. Fund managers want personal ‘growth’ as much as investors want it. If the MF industry starts growing, the fund manager churn also happens along with that.
In fact, during bull markets, fund managers change jobs quickly, while during flat or bearish markets, fund managers, like any other corporate employee, stay put. This does not mean that all fund managers exhibit such tendencies. But, yes a vast majority do.
Data confirms the fact that most fund managers do not stick to a fund or a fund-house for long. So, if you are investing in a fund with a long horizon of say 20-30 years, do not expect the fund manager to share your investment horizon.
There are 430-odd open-ended equity schemes, including plans, in India. Out of them about 220 odd have a track-record of 10 plus years. Out of them, there are just 30 odd instances of a fund manager’s tenure being 10 years or more. This means about 14% of fund managers oversee an equity fund for 10 years. So, it is quite likely that if you invest in a new equity fund with a time horizon of 10 years, the fund manager may quit before you redeem.
Do remember that if you are investing in an equity fund with the existing fund manager already having stayed for 5-10 years, chances are extremely high that there will be a fund manager soon.
That being said, there are those 14% fund managers who have stayed put in a fund and also the fund-house for 10 years or more. Let us have a look at this ‘faithful’ lot.
Staying put
Leading the pack of devoted funds managers is none other than Prashant Jain of HDFC Mutual Fund. He has been managing HDFC Top 100 Fund for over 17 years and HDFC Equity Fund for over 16 years. Prashant’s colleague Vinay R Kulkarni has been managing HDFC Taxsaver Fund as well as HDFC Focused 30 Fund for over 12 years.
Next, is Swati Kulkarni, a celebrated female fund manager in this male-dominated investment management profession. Swati has managed UTI MNC Fund for over 14 years, UTI Dividend Yield Fund for over 13 years, and UTI Mastershare Fund for over 12 years. Another UTI MF veteran is Sanjay Ramdas Dongre who has been managing UTI Infrastructure Fund for nearly 14 years.
In Franklin MF, Anand Radhakrishnan, R Janakiraman and Roshi Jain each have spent over 10 years managing some funds. In Aditya Birla Sun Life MF, Mahesh Patil has spent nearly 14 years managing ABSL Frontline Equity Fund.
In Reliance Nippon, Ashwani Kumar has been managing Reliance Tax Saver (ELSS) Fund for 14 years. His colleague, Sailesh Raj Bhan has been overseeing Reliance Large Cap Fund, Reliance Multi Cap Fund, Reliance Consumption Fund, and Reliance Pharma Fund for over 10 years each.
S Krishna Kumar has been managing Sundaram Small Cap Fund for over 13 years.
In the passive fund space i.e. index funds and ETFs, Hitendra Parekh has been managing Quantum Nifty ETF for 11 years now. ICICI Prudential Nifty Index Fund is being managed by Kayzad Eghlim for 10 years.
Many chief investment officers (CIOs) and senior fund managers are also in the longest-serving list. These include Neelesh Surana (Mirae), Rajat Jain (Principal), Harshad Patwardhan (Edelweiss), Asit Bhandarkar (JM), Chirag Setalvad (HDFC), Dipak Acharya (Baroda), Ajay Garg & Vineet Maloo (Aditya Birla Sun Life).
RupeeIQ take
Bull market territory can skew a fund manager’s track record. During such times, it is easier for managers to produce decent returns since the environment is conducive. So, the ability to outperform over an entire market cycle is a key attribute of a successful manager.
Long-term managers are generally survivors. They stick around because they have established a successful track record. Investors are in safer hands if they’re using successful fund managers who have been investing across several market cycles. But, it can be said with some certainty that most fund managers are more faithful to the investing profession than to the fund house or the fund. As an investor, you must be prepared to see your favourite fund manager go at some point in time. Also funds are not creating systems so much so that the investing philosophy is not dependent on a particular fund manager but on the fund house.
Disclaimer: Views expressed here in this article are for general information and reading purpose only. They do not constitute any guidelines or recommendations on any course of action to be followed by the reader nor are they meant to serve as a professional guide/investment advice.
Kumar Shankar Roy
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