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How are mutual fund managers assigned funds?

Most CEOs and CIOs we spoke to though, reiterated that the softer skills are more important than domain skills

Have you ever wondered how your fund manager gets assigned the funds? This is not much of a question when it comes to a small fund house, but a large one has a big team of fund managers and many mutual fund schemes.

Such fund houses have to figure out who will manage what. ICICI Prudential Asset Management Co. Ltd, India’s largest mutual fund house with assets under management (AUM) of about Rs1.93 trillion, has about 17 fund managers across equity and debt, who manage close to 150 schemes, excluding schemes like fixed-maturity plans.

HDFC Asset Management Co. Ltd, with Rs1.92 trillion AUM, has about 10 fund managers who manage close to 70 schemes, excluding capital protection oriented and similar types of schemes. So, how does a fund house decide which is the right fit for its fund managers?

Softer skills

A large fund house’s chief executive officer (CEO) told us that he looks for fund managers who approach fund management with passion, and not “somebody for whom it is fashionable to manage funds."

Another large fund house’s CEO added that a successful fund manager should have the capability as well as the aptitude for this job.

The second CEO also said that a fund manager should be a team player, because she needs to deal with not just a large team of fund managers and analysts working under her, but also the outside analysts who are often are in touch with her.

Domain skills

Can a fund manager manage, say, both growth- and value-styled fund managers? Or diversified as well as sector funds equally successfully? “Yes," said a chief investment officer (CIOs) of one of India’s largest fund houses. This CIO’s fund house is known to appoint fund managers from within its own firm (who have been analysts with them for long) and not hire from outside the company.

The first CEO quoted above told us that those who are good at analysing macro trends can make good large-cap fund managers. Those, he says, who are “obsessed" about finding high-growth companies at all times, can become good mid-cap fund managers. Fund managers who are good at analysing companies’ fundamentals, are also known to become successful managers of credit debt funds.

Most CEOs and CIOs we spoke to though, reiterated that the softer skills are more important than domain skills.

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