Financial Daily from THE HINDU group of publications
Wednesday, Apr 28, 2004
Markets - Mutual Funds
`Star struck' MFs look to team-based initiatives
Mumbai , April 27
THE `star' fund manager is on the descent, if HR consultants and asset management companies are to be believed.
The mutual fund industry has been rocked by the news of some high-profile exits over the last two to three months and some of these have forced asset management companies to switch to a team-based investment initiative rather than a single `star' fund manager.
Mr Nilesh Shah, an award-winning fund manager from Franklin Templeton Investments India, is switching loyalties to Prudential ICICI Asset Management Company (AMC). The announcement came close on the heels of Prudential ICICI AMC slipping to the fourth place in terms of assets under management.
"Even though bringing in a high-profile manager would help in propping up the performance of the company in the short-term, AMCs are realising the folly of relying on a single person over the long-term," says the financial service head of a placement consultancy.
In the initial stages, once the company realises its new hire has high potential, it is keen to project them as stars.
"If these potential stars manage to pull out some early successes, then the organisation wants the investing public to place faith in that person. So the "star person" gets bigger with time. The stakes are high, so we try to retain the person as much as possible, but beyond a point we have to take a business decision on salaries and let these stars go. The impact is significant, even if it is short to medium term," says the Vice-President (Human Resources) of a leading AMC.
"We don't see any significant impact of Mr Shah's exit on our business or the way our fixed income portfolios are managed. We follow a disciplined, process-driven and team-based approach to investing, which has delivered good results for our investors," said Mr Ravi Mehrotra, Chief Executive Officer, Franklin Templeton India, dismissing the consequence of losing its senior fund manager.
However, Prudential ICICI AMC counters that high-profile hiring is not a knee-jerk reaction to slipping AUM (assets under management). "Developing talent from within is the corner stone of our HR strategy. When we recruit people from outside, it is to enhance and strengthen our current team with complementary skill sets", according to Mr Vasant Sanzgiri, Senior Vice-President (Human Resources), Prudential ICICI AMC.
Investor interests are better protected in a team-based fund management approach. The method also ensures that the fund has many specialists in various sectors to ensure optimal stock picking. AMCs that continue to have "fund manager" based approach are ensuring that they have strong processes that aid these managers.
The verdict, overall, clearly is that stars are on the descent; the investor might just be an unlikely beneficiary.
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