‘The owner eats here.’ This restaurant sign tells consumers about the confidence the owner has in his own eatery, and the quality of the food served. Yes, there can be no greater advertisement if the owner is also a passionate consumer of the same product or service.
In the financial markets space, many investors often argue that money managers should invest their own money in schemes that they professionally manage. This money, in Wall Street parlance, is called skin in the game. When fund managers invest in their own scheme, it is usually taken as a sign of confidence. It is then that a ‘mutual fund’ truly becomes ‘mutual’ in every sense of the word. So, is your favourite fund manager putting his/her money alongside investors’ resources? Let us find out (dont miss the image below).
Recent data put out by investment advisory firm Outlook Asia Capital throws some light on the ‘skin in the game’ of fund managers of the biggest equity funds in India. Among the biggest funds, the highest amount of money has been put in ICICI Prudential Balanced Advantage Fund. The fund, whose equity portion is managed by Sankaren Naren, has fund managers invest over Rs 53 crore.
At no. 2 is Prashant Jain-managed HDFC Equity Fund where managers have invested Rs 33.83 crore. The HDFC Equity Fund is one of the only funds that have never seen a fund manager change, which has also ensured that the fund manager’s personal money grew in step with the fund.
In the third slot is another ICICI Pru AMC scheme – ICICI Prudential Multi Asset Fund. Its fund managers have invested Rs 31.56 crore. This scheme is managed by Naren, Ihab Dalwai and Anuj Tagra.
HDFC Top 100 Fund is no. 4 on the skin in the game chart. Prashant Jain’s investments are worth Rs 16.93 crore in this top-quality fund managed by him. Next is ICICI Prudential Debt & Equity Fund, managed by Naren, Atul P and Manish B. Here, the scheme has fund manager investments worth over Rs 14 crore.
Parag Parikh Long Term Equity Fund, with assets of about Rs 1200 crore, is also on this list, thanks to fund manager Rajeev Thakkar, who has put nearly Rs 10 crore in the fund. As a percentage of AUM, Thakkar’s skin in the game is the highest across any equity or equity-linked mutual fund in India.
From a percentage of AUM perspective, funds like Reliance Vision, Motilal Oswal Focused 25, L&T Large and Midcap, Franklin Build India and Mirae Asset Emerging Bluechip have seen a good amount of fund manager’s investments in their own schemes.
There are many top and popular equity funds with at least Rs 1 crore of fund manager money. This list includes Mirae Asset India Equity, ICICI Prudential Large & Mid Cap, Aditya Birla Sun Life Equity Advantage, HDFC Small Cap, HDFC Infrastructure, IDFC Core Equity, Sundaram Mid Cap, IDFC Sterling Value, Reliance Growth etc.
Investors must remember that the absence of fund manager money in a fund may not necessarily be a bad signal.
A particular fund may not be what a fund manager would require in their personal portfolio, even though as a professional they manage the fund. For instance, the biggest tax saver funds (ELSS) may not see investments by the fund manager, if his/her tax savings requirements are met by other avenues like employees’ provident fund.
Many of the large fund-houses have employee bonus programmes that are compulsorily invested into their own AMC funds. Hence, this might show large investments by fund managers and AMC personnel of some houses in their funds.
Also, do note that top fund managers of some of the country’s biggest equity-linked MFs are rich individuals themselves. They may have a lot more money in terms of investible surplus compared to others.