Two Fund Managers For One Mutual Fund Scheme: Is It A Good Idea?

Mar 27, 2018

In the last 15-18 months, some high profile fund managers of the Indian mutual fund industry switched jobs -- within the industry.

You can imagine how challenging might have been for mutual fund houses or Asset Management Companies (AMCs) to find a replacement for fund managers, although there are processes in place.

Handover becomes a challenging task when key employees leave the organisation. And losing key personnel creates a huge vacuum, albeit temporarily.

When a mutual fund houses replaces fund manager/s with an entirely new face, some who is unfamiliar with the management style and the portfolio strategy of the previous fund manager, it carries some element of risk to mutual fund scheme/s he will manage, and may potentially affect the scheme's performance.

To avoid such situations, mutual fund houses have now started adopting a safe strategy of appointing a co-fund manager for their flagship schemes.

The other reason for mutual funds appointing an additional fund manager for their flagship schemes is compliance.

As you know, the capital market regulator recently issued new rules to rationalise the process of categorization of mutual fund schemes. Since then, a number of mutual fund schemes with similar investment mandates have merged or are in the process.

This investor-friendly diktat from the regulator has resulted in fund houses trim their product basket of course, to an extent; but, has also increased the burden on fund manager owing to scheme mergers.

And since flagship schemes attract Assets Under Management (AUM), mutual fund houses are appointing additional fund managers, for each such scheme.

In the recent past, five fund houses have decided to lessen the workload of the existing fund managers....

• DSP BlackRock Mutual Fund
• Reliance Nippon Mutual Fund
• UTI Mutual Fund
• DHFL Pramerica Mutual Fund
• Principal Mutual Fund

They have appointed co-managers for their flagship schemes or the ones collecting large corpus.

The mutual fund schemes that will be co-managed are:

• DSP BlackRock Micro Cap Fund
• DSP BlackRock Small and Mid Cap Fund
• Reliance Small Cap Fund
• UTI Opportunities Fund
• UTI India Lifestyle Fund
• DHFL Pramerica Insta Cash Plus Fund
• DHFL Pramerica Ultra Short Term Fund
• Principal Smart Equity Fund
• Principal Equity Savings Fund

Is it a good idea?

Well, in addition to sharing the workload, a co-fund manager can bring in fresh perspective without wandering away from the investment mandate of a mutual fund scheme.

It also reduces the dependency on a single fund manager.

And as long as too many cooks are not spoiling the broth---in this case the overall performance of a scheme----and are adhering the investment processes and systems followed at the fund house, two (or more) fund managers for a single scheme isn't a bad idea.

Many other fund houses may soon follow suit.

This article first appeared on PersonalFN here.

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