The Hindu Business Line : Managers lost, and found

THERE'S not a single fund house that hasn't seen a reshuffle in its fund management team over the past two years. We talked to three fund-houses to find out how they have tackled attrition.

SBI Mutual Fund: Significant attrition over the past couple of years has left SBI Mutual Fund with a depleted fund management team. Over a two-year period, the fund lost three fund managers — Sachin Sawrikar, Sandip Sabharwal and Nitin Jain. It is hoping to remedy this through lateral recruitments.

Mr N. Sethuram, SBI Mutual's Chief Investment Officer

Mr N. Sethuram, the fund's Chief Investment Officer, says the unexpected exits have been a challenge. But the gradual shift in the fund portfolios towards large-cap stocks last year (because their valuations seemed more attractive) and a clear positioning for each of the equity funds, has helped minimise the impact of these exits on fund performance. In his view, after the secular re-rating of the past year, opportunities for unearthing small or mid-cap stocks have dwindled.

Astute selection of mid cap stocks has helped many of SBI's funds deliver impressive performances over the past two years. Sandip Sabharwal, who excelled in unearthing mid-cap stocks ideas, managed many of these funds.

This apart, the clear positioning for each product-defined mid-cap allocation, stock and sector-specific limits, has helped create a robust investment process. The fund has recruited Sanjay Sinha, earlier with UTI Mutual Fund as Head-Equity; he now oversees all of SBI's diversified equity funds. The immediate priority will be to preserve the good track record of the flagship-the Magnum Contra Fund.

Gopal Agarwal and Sanjay Chabbria, both from SBI's own research team will co-manage mid-cap funds with Sinha. With one senior manager, two junior managers and five researchers, SBI 's fund management team isn't yet at a comfortable number. Mr Sethuram says the fund is shortly taking in two senior fund managers and a few more analysts, which should improve the situation.

The fund already has a performance-based compensation system. Apart from the basic salary, each fund manager gets a performance incentive if the fund makes to the top quartile consistently, in every month of the year. "It is unreasonable to expect to retain the top slot all the time. I would value consistency more", says Mr Sethuram.

Birla Mutual Fund: Over a three-year period, Birla Mutual's fund management team has seen quite a bit of churn. Paras Adenwala, NishidShah and Deven Sangoi have been the notable fund managers who have exited.

Mr S.V. Prasad, CEO, Birla Sun Life Mutual Fund

Mr S.V. Prasad, the fund's CEO, asserts that the exits have not had a material impact on fund performance, because of a "process-driven approach" and investments in people over the past couple of years, which has led to a "decent pool size" of managers.

The fund lays down specific boundaries within which fund managers are expected to function. The fund house restricts itself to an investment universe of 260 stocks. There is also a clear template for every fund that specifies the criteria that each stock has to meet. Birla's flagship fund-Birla Dividend Yield Plus, for instance, only invests in stocks that trade at twice the dividend yield of the Nifty basket.

Birla Sun Life has also initiated a system by which each fund now has a primary and a secondary fund manager. The secondary fund manager — who is from the research team — tackles "housekeeping" issues such as inflows, outflows and dividend payouts from the portfolio. This system gives researchers hands-on experience with the fund in case the primary manager is unavailable. It also ensures continuity of investment style in case of exits.

Apart from taking in people in campus recruitment each year, Birla Sun Life has made lateral recruitments to strengthen its senior fund management team. The senior managers — Mahesh Gandhi, Jayesh Patel and Ajay Argal — carry 8-10 years of experience in research and equity fund management. The fund now has seven analysts in its team, with three equity fund managers.

Mr Prasad says three or four people will be added through campus recruitments from the premier management institutions, in each of the next three years. The fund would prefer to groom its fund managers internally, whenever possible.

UTI Mutual Fund: With one of the largest fund management teams in the business, UTI Mutual Fund has had the luxury of having its own senior researchers replace senior fund managers who have left. The fund has lost experienced hands such as Sanjay Sinha, Vinay Kulkarni and Ajay Argal to rival funds.

Mr A.K. Sridhar, CIO, UTI Mutual Fund.

Mr A.K. Sridhar, Chief Investment Officer of the fund, admits that people are very important in this business, as they contribute the ideas.

UTI has a robust pipeline of people who can be groomed internally into fund managers. Having had a system of co-managed funds for a while now, the fund has a large team of 10 senior fund managers and 10 assistant managers.

This apart, the research team features 10 analysts, taking the team strength to 30. Mr Sridhar claims that the team strength has helped replacements take over seamlessly when the senior managers left. "It is costly to maintain such a big team, but we view it as an investment", he says.

The UTI has recently restructured the pay packages for its managers in consultation with Hewitt Associates. He feels that the fund manager slot is best filled by someone with an 8-10 year record of tracking the stock market.

More Stories on : Insight | Mutual Funds

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page