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  • Managers with skin in the game

    Quote by Rajeev Thakkar in The Times of India, September 5, 2016

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    If a fund manager is bullish on the funds he manages, he would invest his own money in the schemes. The new scheme information docu ments (SIDs) that fund houses have released on their website show how much `skin in the game' fund managers have. The redoubtable Prashant Jain of HDFC Mutual Fund heads the list of fund managers bullish on his own funds. He has an estimated ₹ 107 crore invested in different schemes of the fund house (see table) while Sankaran Naren, CIO of ICICI Prudential Mutual Fund, has over ₹ 20 crore invested in the ICICI Pru Dynamic Fund.

    Some managers of smaller funds are more bullish than Jain and Naren.Rajeev Thakkar, CIO and director, PPFAS Mutual Fund, has more than ₹ 7 crore invested in the PPFAS Long Term Value Fund. This is more than 1% of the scheme's total AUM of ₹ 664 crore. "Many people see fund professionals as perma bulls who are permanently bullish on equities. The disclosures of personal and sponsor investments tell the world whether they believe in their own talk," says Thakkar. At the same time, there are funds with very little or no investments by their fund managers or members of the AMC board. "Many of the close-end funds that were launched in recent years have no investments by key employees or fund managers though they were peddled very strongly by some AMCs," points out Manoj Nagpal, CEO of Outlook Asia Capital. Even openended funds have not go much from fund managers. Nagpal says it is strange to see that fund managers or key employees not investing in some large schemes even though the same individuals talk about why the fund is a great investment.

    Should you consider a manager's invetsment when you buy a fund? Not really, because such investments are not a guarantee of future performance."Fund managers and analysts look at whether promoters and employees of a company are buying or selling its shares.While this cannot be the only factor, a fund manager's bullishness is surely one of the things to look at," says T hakkar. Some fund houses are also a c t ive ly e n couraging em ployees to invest in their schemes. At ICICI Prudential Mutual Fund, the bonuses of senior management are invested in mutual fund schemes and redemptions are allowed in a staggered manner across 3-4 years. At Kotak Mutual Fund, employees have taken a voluntary pledge to invest in funds from the AMC. "We want to tell our distributors and investors that we practice what we preach. Just like some restaurants put up a sign saying "The owner eats here", this is a confidence boosting measure to create trust among distribution partners and investors," says Nilesh Shah, Managing Director of Kotak Mutual Fund.

    The original article could be seen here.

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