| Most investors don't bother to look for it. The key milestones they look at before investing, deal with the reputation of the brand and the credibility of the asset management company. But it is really the buzz about a fund that ultimately draws investors to a particular scheme. Ironically, the person, the fund manager who creates the buzz with his performance, is just another name for most investors. |
Looking at the funds in your portfolio that delivered, you would find it is a particular type of fund manager who has delivered. He is shrouded in anonymity, makes an occasional appearance on the personal finance pages but is not the face that spouts wisdom on the gyrations of the Sensex. For the cognoscenti though, he is the face that makes returns happen. He is in that sense worth every penny of the pound that funds chase him with. The best fund managers could be raking in as much as Rs 3 crore a year.
International investors in mature markets spend time and effort tracking fund managers and churn their portfolio accordingly. Says Fidelity International's chief investment officer for the Asia Pacific region, Andrew D. Wells that one of the most important investment tips for ensuring good returns is that investors must look up the track record of fund managers. He cautions that investors must not allow themselves to get impressed by a fund manager delivering the highest but should instead look for the best returns. "Don't focus on the return itself but the quality of the return-the breadth of ideas, number and frequency with which you get them right," he says. Some funds may produce exactly the same return as others but they would have done it in a very singular way. There's a lot of risk if that one idea doesn't go well. A large number of ideas give the stability that if one doesn't work out then the others still will and the returns will be controlled and risk limited. So the key is to look for a fund manager who can produce a high return with lowest possible risk.
|ANUP MAHESHWARI |
NOW AT: DSP Merrill Lynch
INVESTMENT MANTRA: Analyses trends affecting economic growth, corporate performance.
CURRENT TOP PICKS: Non-ferrous metals, media and capital goods
ADVICE: Diversify risk. Give investments time to bear fruit.
K.N. SIVA SUBRAMANIUM
NOW AT: Franklin Templeton
INVESTMENT MANTRA: Focuses on individual stocks rather than the sectors they belong to.
CURRENT TOP PICKS: Grasim, Reliance, L&T, Zee Telefilms.
ADVICE: Stay focussed. Ignore short-term market noises.
SANJAY RAMDAS DONGRE
NOW AT: UTI Mutual Fund
INVESTMENT MANTRA: Gives equal importance to sectoral allocation and stock selection.
CURRENT TOP PICKS: Engineering, construction, cement, software, banking, retail, telecom.
ADVICE: Avoid momentum buying.
|VINAY R. KULKARNI |
NOW AT: Tata Mutual Fund
INVESTMENT MANTRA: The simplest investment ideas are the best.
CURRENT TOP PICKS: Engineering, banking, software, construction.
ADVICE: The best time to buy is during maximum pessimism and to sell is during maximum optimism.
|SUKUMAR RAJAH |
NOW AT: Franklin Templeton
INVESTMENT MANTRA: Selects stocks without any bias to a sector or investment style.
CURRENT TOP PICKS: Grasim, Reliance, L&T, Zee Telefilms.
ADVICE: Retain realistic return expectations after the recent rally at the stock market.
|SHYAM BHAT |
NOW AT: Principal PNB MF
INVESTMENT MANTRA: Invests in fundamentally strong stocks. Diversified portfolio with at most 5% weightage to a stock..
CURRENT TOP PICKS: IT, capital goods, construction, banking.
ADVICE: Avoid impulsive trading and don't try to time the market.
|SANJAY SINHA |
NOW AT: SBI Mutual Fund
INVESTMENT MANTRA: Looks for a sustainable business run by a management which respects shareholders' value.
CURRENT TOP PICKS: Engineering, auto ancillaries, cement.
ADVICE: Rebalance your asset allocation at life's different stages.
Ergo smart money commissioned mutual fund database Value Research to evaluate all Indian fund managers over the past three years on the basis of their performance, irrespective of the funds they managed. For the record, this is a performance evaluation of the fund managers and not the funds that they have been managing. It was a tedious task given the hectic movements from one fund to another that these men, especially the ones with the golden hands, have been making. Returns taken care of, we then applied qualitative filters to remove some exceptional cases from the ranking. This, coupled with the choice of the past three years as the reference period, ensured that only those fund managers who have exemplified the consistency that Wells prescribed stayed on the smart money top list.
The extreme volatility of the last few months followed by the sluggish movement of the markets over the last couple of weeks provided the ideal timing to undertake this exercise. With the Sensex firing back to a record high of nearly 13,000, their advice could prove to be a useful guide to investors facing the heat. The Indian stock markets have been on such a roll over the past three years that a fund manager would have had to work hard to lose money. Runaway stock prices since 2003 have ensured that delivering returns has been easier. Be it the blue-chips (Sensex is up over 281 per cent), the mid-caps (BSE 100 is up 292 per cent) or the small caps (BSE 500 is up 315 per cent). Share prices have risen steeply across sectors and segments beating stock market performance in other countries. Even then, some shares have risen more than others and it is here that a fund manager's ability to pick out a winner from a looser, way before the market begins to price the stocks comes in handy. Soaring corporate profits have ensured handsome dividends. But not all companies have shared these with their shareholders. Looking at a company and its promoters' track record, a fund manager should be able to foretell a profit-sharer from a tight-fisted company. And a good fund-manager should be able to do this not just once but over and over again. Little wonder some of them slog for long hours-typically a working day lasts over 12 hours-over research for stock selection and even meet up with managements of companies and visit floor shops to get an idea of how well-run a company is. Most of the men who featured on our list have had stints overseas which lends an international flavour to their stock research styles. There are some of the best brains in the fund management industry with most of them MBA and some IITians. The ability to keep cool and take the right decision when the markets do somersaults or turn uncertain and a lot of data crunching on indicators of corporate performance are other qualities you'll find in them.
So what puts the best head and shoulders above the rest of the market? With more than half of the stocks that figure on the top 25 share holdings across the funds in a particular category being exactly the same, what matters is a fund manager's ability to dig out those companies that are small and unknown today but will deliver smart returns in future. Who doesn't know that Infosys is a good company? That's why it figures on every fund manager's shareholdings' list. "A good manager must be able to mine diamonds from coal fields," says Anil Chopra, CEO of mf broker Bajaj Capital. He finds that investors tend to track Nilesh Shah, CIO at Prudential ICICI mf who doesn't feature on our list because he was earlier a debt fund manager at Franklin Templeton. Debt funds were not included in this exercise. Several investors shifted their investments when Shah changed jobs just because they want their savings to stay in his hands. We asked Dhirendra Kumar, CEO, Value Research who has been tracking MFs since they were first introduced in India for the answer to the question above . He says that Sukumar Rajah and Siva Subramanium are the conservative, patient variety who don't budge from their portfolios no matter which way the markets turn. When markets fall their performance does not slip as much as the rest of the pack. Kumar finds that Anup Maheshwari has been ahead of the market on key occasions and Vinay Kulkarni is a significant risk taker and an early rider to a trend. Sanjay Sinha, a risk taker too, is an opportunistic momentum player as is Sanjay Dongre who always finds himself in the right stock at the right time. "I like Shyam Bhat for his conviction. He sustains his belief. He initially lacked bandwidth, but is improving on that front now," says Kumar.
To choose your fund manager, check how he chooses his stocks. Find out what is the risk of his portfolio. The risk of a portfolio can be ascertained by looking at the number of stocks and sectors it holds. For instance, a fund with three large holdings and a number of small holdings is riskier than a diversified one that has many stocks in small quantities. Also, it should worry you if the value of the portfolio goes up on the days the market goes down and shrinks on the uptick days. That could be because the fund manager is probably using some contrarian strategies.
Of course we are not saying that you should dump your existing fund manager and pour all your savings into the hands of the top performers on our list. Though we have adopted the highest standards, no such exercise can ever be fool-proof. This is why it's important for investors to keep a watch on their fund managers at all times. It's this patronage that gives cult fund managers like Warren Buffet the reputation of being the sage of Omaha. Buffet attracts people, some of who buy one share for as much as $90,000 (Class A), just to be able to attend the annual shareholders' meeting of his fund Berkshire Hathaway and hear him speak.
The biggest lesson we have drawn from the exercise is both disappointing and satisfying. Disappointing because it did not reveal any new short-cut to healthy returns. Satisfying because it validated the time and tested investment tip: patience and a long-term approach beat too much churning and adventurism. India's top fund managers were unanimous in their advice to investors. Says Sukumar Rajah, CIO, Franklin Templeton: "A person who can desist human weaknesses-greed and hubris, in particular-will succeed in life over the long run."
Disclaimer: Some fund managers on the list have not been featured here as they were unavailable. Recommendations are personal views of the fund managers and not those of the companies they represent.