What if your fund manager quits?

Published: June 16, 2015 at 2:55 pm

So social media is abuzz* that someone called Kenneth Andrade is quitting IDFC amc (update: now official). To be frank, I had no clue who he was, until I saw an AIFW post. When I googled his name, I then remembered seeing his interview at VR and that he is the manager of IDFC premier equity.

Perhaps I did not about him because I have no IDFC holdings, but besides Prashant Jain and Rajeev Thakkar, I cannot name any of my fund managers. Thank god for that. One less thing to worry about.

So, what if my fund manager quits? I honestly don’t know what the big deal is.

Fund managers are like any other corporate employee. If they don’t like their work environment, or if someone else offers them a better pay or whatever reason, sooner or later they are bound to jump ship.

I do not have statistics, but I will willing to wager that the average fund manager tenure is something close to 5-7 years.

Why should I quit my holdings just because my ‘star’ fund manager has quit.

Fund manager changes are quite common. It is only when the so called ‘stars’ quit there is a lot of buzz (hey it helps media ad revenue).

Who creates these stars? Is it the media? The distributors? The investor community, or is it the fund house themselves?

Perhaps all of them contribute. The fund houses play a role too by asking fund managers to offer interviews and featuring for promotions.

Therein lies the problem. If an individual is promoted as the face of a fund management team, investors are always going to worry (I am no different, which is why I choose not know who the manager is) if he/she quits.

When Rajeev Thakkar faced the prospect of being jailed for being involved in the accident that killed Parag Parikh, investors (incl. a few freefincal readers) were quick to say, “it is time to quit”.

The amc should focus on promoting the process  and not the person. I remember Parag Parikh saying Rajeev is called as the little WB during the Chennai unit holders meet. That sends out the wrong message to the investor.

I think investors should not be worried about who the fund manager is, and focus on the investment strategy. Whether it is managed by Tom, Dick or Harry, it is the AMCs job to ensure the fund sticks to its strategy.

Perhaps easier said than done. Anything can happen, if a star quits:
1) things may remain as is

2) performance may drop

3)  or pick up

Whatever happens, it will show up in the NAV movement (not NAV value). I base my decisions on the NAV movement only. Good or bad, it will show there.

If I don’t like what I see, I will quit, irrespective of who manages the fund.

Should we look at the tenure of a fund manager while selecting a fund? Hard to say, yes or no. The manager can quit the day you buy units!

In fact, if you want to look at who the fund manager is, consider a consistent performer where the manager has changed multiple times in the past. That is perhaps a sigh that the AMC is strong enough to focus on investment strategy instead of an individual.

So even if Kenneth Andrade is indeed quitting, why not ‘do nothing’, except keep an eye on performance. Who knows it might even improve!

Update 2: It is now official. He has quit.

http://www.cafemutual.com/News/Kenneth-Andrade-quits-IDFC-Mutual-Fund-~3903~New~AMC~23

*Update: This post only deals with how investors react on the news or rumour of a fund manager’s exit.  The buzz mentioned above stems from (besides AIFW)

https://mobile.twitter.com/NagpalManoj/status/610660768942460928?p=v

and

http://epaperbeta.timesofindia.com/Article.aspx?eid=31818&articlexml=HEARD-on-the-Street-16062015011006

I have no information on said fund manager’s careers plans.  As mentioned in the post, I don’t care. This post is to urge that, neither should you.

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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