The way a fund house connects with investors, and the type of products it offers has a lot to do with its vision, which is driven by its head, the chief executive officer (CEO). Of course, the team matters; but how it goes ahead collectively depends on the CEO. Broadly, there are two types of CEOs in the Indian mutual funds (MF) industry. One is a former fund manager and the other comes from a non-fund managerial background, such as sales or marketing. Eight of the top 20 asset management companies (AMCs), and two of the top five, are headed by former money managers. So, who makes for a better CEO? Does the origin matter?

When it comes to scrutinizing companies and evaluating risk, fund managers do it naturally. Fund management is the heart of the business. If there are no schemes to manage, there wouldn’t be a fund house. In a market like India where actively-managed funds outperform passively-managed ones, its important for funds to do well. No amount of brilliant sales strategies can rescue an underperforming fund. After the global credit crisis in 2008, many sponsors of AMCs in India felt the need to manage risk and reputation, and started looking towards fund managers to head their MF businesses. For example, when Axis Asset Management Co. Ltd was launched in 2009, its sponsors were unanimous in their decision to appoint a fund manager to head the MF business. Rajiv Anand, who was heading investments at IDFC Asset Management, came on board to lead Axis AMC. When Anand moved to Axis Bank in May 2013, Chandresh Nigam—who was heading equity funds at Axis AMC—took over. A. Balasubramanian and Nandkumar Surti, too, benefitted from similar risk-aversion moves by sponsors during the period and took over as CEOs of Birla Sun Life AMC and JP Morgan (India) Asset Management, respectively.

Does that mean that those with a background in sales are at a disadvantage? No. In fact, some of the most successful AMC heads have a sales and marketing background. Pankaj Razdan (deputy CEO of Aditya Birla Group’s financial services division) headed ICICI Prudential AMC between January 2004 and 2007; and Amitabh Chaturvedi, former head of Reliance Capital AMC between 2003 and 2005 and later head of the group’s overall financial services till 2008, are said to be among the most successful MF CEOs. Under Razdan’s leadership, ICICI Prudential AMC’s assets went up from about 150 billion to about 500 billion. Under Chaturvedi, Reliance Capital AMC’s assets went up from about 25 billion to about 900 billion. There are other success stories too.

Most fund managers claim that their clan produces better CEOs because they can empathise with fund managers more than a sales head could. One such CEO told me that fund managers may underperform when markets are volatile; it’s not the fund manager’s fault. He said a CEO with a sales background may not understand this.

The challenge comes when a fund manager-turned-CEO is not able to let go of his earlier function. A fund manager told me that he was “taken to the laundry" often by his former boss, who himself had been a fund manager. Frequent clashes with fund managers (who may once have been junior managers and now head teams) and an inability to let go of the fund management function is a constant complain about this type of CEOs. A wealth manager said that he saw a recently appointed CEO commenting on equity markets on business news channels when he should have been talking about “issues affecting the MF industry, like, perhaps, upfronts commission. Ideally, he should leave equity markets to his fund managers".

Some fund managers, however, are happy to continue in that function for long. A chief investment officer of a large fund house tells me that fund managers belong to a specialised area of money management, a sort of a cocooned existence, that leaves them with little expertise to handle a CEO’s job. He says as long as the CEO gives fund managers the space to perform, maintains a harmonious relationship and listens to the fund management, the arrangement works well. While the CEO handles the complexities of the market and industry, fund managers like him are better off handling the complexities of investments, he said.

But running an AMC is not just about managing performance. It’s also about managing people; something that a CEO with a sales background may be better equipped to do, having managed large sales teams. On the contrary, a head fund manager manages about 20 people. Here, a sales-CEO takes the lead. Apart from people management skills, this type of a person may be able to keep abreast with distribution—how a distributor in Jharkhand, for instance, may have to be treated differently from a distributor in Bengaluru. I am told that Anand and Nigam, due to their fund management backgrounds, were initially guided by their sales teams exhaustively.

There are many examples that come up of CEOs who are considered to be good leaders, but none more than Razdan. Although known to be a poster boy for sales, he was also known by fund managers under him as one who’d give them space. Even though Razdan gave credit to the sales team when the funds performed, said a former fund manager who had worked under him, “he acknowledged that fund managers are very crucial. His biggest plus point was he knew how to reward people". There are at least six AMC’s CEOs today who have worked under Razdan at some point.

The past six years have seen a fair share of CEOs appointed from the fund management fraternity because of sponsors’ focus on risk management. But with markets expected to enter a multi-year bull run, it remains to be seen if the tide would turn, yet again, towards those that come a sales background.