The Hindu Business Line : Manage and sell - Fund managers' dual role could affect performance

ASSET management companies (AMCs) concede that the immaturity of the Indian mutual fund industry forces fund managers to spend substantial amounts of time in sales activities. Fund managers privately admit that this could be at the cost of the funds' performance.

While internationally fund managers' mandate is only to focus on the performance of their funds, in India, they have a very large role to play in inducing investors to their funds, as well.

Though their primary responsibility is to optimise buy and sell decisions in order to ensure good returns and safety of the funds they manage, fund managers in India are required to visit various branches, meet distributors and investment groups, attend press conferences and in most cases, handle large investors' servicing requirements themselves.

Industry insiders concede that this could be at the peril of the fund and its existing investors. "There is certainly a lack of clear focus that comes into play when fund managers are required to be a part of the selling process. Between distributor meets, queries (and investment advice) from high-net worth investors, communicating market outlook to the media and other non-core functions, there are instances when the focus is not on the fund, even though the dealing room staff would be holding the fort in the fund manager's absence," admitted the Chief Executive Officer of an AMC.

"This phenomenon is primarily due to the fact that the industry is still very nascent in India. We are trying to discourage this practice. For instance, in most cases if a fund manager is required to visit a branch, the branch has to pick up the tab for it," says Mr S.V. Prasad, Chief Executive Officer, Birla Sun Life Asset Management Company.

Mr Nikhil Johri, Chief Operating Officer, of the recently launched ABN Amro AMC, says it is crucial for fund managers to be involved in the sales process at the launch of a new business. At this stage, there is also no threat of lack of focus on the funds, as the investment process is yet to begin. "However, this trend is likely to continue in India in the future as well. Investors are getting used to interacting directly with fund managers, thereby diluting the role of the sales team," he says.

High net worth individuals and corporate treasury head insist on direct interaction with fund managers. Industry insiders reveal that this could sway investment decisions depending on the size of the investor and his criticality to the fund house. Retail investors, on the other hand, only get to meet fund managers if the AMC hosts investor meets.

Distributors say that in smaller fund houses, the access to fund managers is infinite. "Last week, a fund manager came to visit me in my office, rather than the other way round," said Mr Ranaa Kumar, Karvy Distribution Services. "But, good fund managers do not interact with clients directly, he added.

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