The fund house, and not just its schemes, indicate quality
Trying to assess a fund house's quality and practices can be difficult for an individual investor
It’s not just the mutual fund schemes, fund managers and strategies that you should look at before buying. Sure, a good track record and reasonable sounding strategy are things to look at, but if you take a step back and look at the fund house, you may see signs that can also influence your buying or selling decision.
STICKING AROUND FOR LONG
Fund managers advice long-term investing, but do they follow the same advice when it comes to their own career? It helps if your fund manager has stayed with the fund house for a long time. While there is no guarantee that this actually helps the fund or how many years she needs stay to ensure performance, it’s a comfort to note if your fund manager has been with the fund house for long. Prashant Jain (chief investment officer, HDFC Asset Management Co. Ltd), S. Naren (chief investment officer-equity, ICICI Prudential Asset Management Co. Ltd) and Amandeep Chopra (head-fixed income, UTI Asset Management Co. Ltd) are just some of the fund managers who have been with their respective fund houses for many years (20, 10 and 20 years, respectively). Mid-sized fund house Religare Invesco Asset Management Co. Ltd, too, has had its chief investment officer, Vetri Subramaniam, since its inception in December 2008.
A long-standing chief executive officer, too, says something about the fund house. Milind Barve, for example, has headed HDFC AMC since its inception in July 2000. Of course, this is not an automatic certification to a fund house’s pedigree, but a low churn in top management is a good indicator.
DON’T GO JUST BY SIZE OR AD BLITZ
It’s a misconception that only large-sized fund houses or those that advertise a lot are good AMCs. Mint50—the curated list of MF schemes that Mint recommends to its readers—has a fair share of schemes from smaller fund houses such as Quantum Asset Management Co. Pvt. Ltd (overall assets of 575 crore) and Mirae Asset Global Investment (India) Pvt. Ltd (1,818 crore overall assets). Sometimes, you see many advertisements from a fund house. But that doesn’t necessarily make it a good choice. Tonnes of closed-end funds were advertised in 2014, but only a few were worthy.
FUND POLICIES
Some fund houses follow good practices in all processes. For instance, fund houses such as Quantum and HDFC don’t launch too many new funds. Too many new fund offers is generally viewed as poor practice.
DSP BlackRock Investment Managers Pvt. Ltd, for example, does not have too varied a set of strategies. So, some holdings can be common between different schemes. Such a practice reduces unnecessary duplication.
Trying to assess a fund house’s quality and practices can be difficult for an individual investor. Therefore, it may be better to seek expert advice from, say, a distributor or financial adviser.
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