Retail investors have always heard that Mutual Funds are safer than playing in the markets directly. We often wonder what makes MutualFunds safer? What makes MutualFunds pillars of recurring returns? Several factors make mutual funds safer. The most important one being the presence of an expert human mind. That expert is the fund manager. In short, the manager of the entire investable corpus. The Fund manager is not alone. He or she is assisted by a team of well qualified and dedicated research professionals. Together they comprise the fund management team.
Qualification and experience of Fund Managers?
Fund Managers are not limited by either qualifications or experience.The Top Fund Managers of the previous financial year were mostly Bachelors in Commerce withP.G. in business Analytics.A few were prominent Chartered Accountants and others were engineers with PG in Securities and Finance. Each one of them had at least 15 years of extensive experience in either being a market Risk Analyst, Financial Advisor, Investment Banker, Stock Market Trader or Portfolio Manager. They are very good with the Analytical software and are dexterous with research.
How do fund Managers know where to invest?
Fund Managers draw their information and insight from the research team. Some important data points that they minutely analyze are the following:
- volume and volume Shifts (stock market data)
- Quarter/Half yearly/Annual results of Companies they propose to invest in.
- Experience of the top management and directors.
- Competition in the Industry and its macro outlook
Apart from all the public information that is analyzed by the Fund management team they also visit the manufacturing facilities and offices of the of the companies that they are researching.Meeting one to one with the directors and other top management gives them insight into the true worth of the company. This is practically impossible for a retail investor. Apart from these micro factors, a fund manager will also look at industry/business cycles, interest rate movements (and its impact on the certain company), International outlook, political developments etc.
A fund manager will take a call to invest, de-invest, increase or decrease the fund's exposure in various securities based on thorough research of the specific company and the objective of the scheme.
How to know a good Investment Fund Manager from a bad one?
Seasoned investors give a lot of importance to the fund manager and the fund management team. One can easily discern the good fund manager from the average ones.
- A good fund manager will outperform the benchmark in perpetuity.
- A good fund manager will also keep a watch on which other institutional investors (DII or FII) are buying or selling the stock.
- A good fund manager will be able to identify scripts much ahead of his/her peers.
- A good fund manager is highly experienced and well compensated. Mr. Prashant Jain of HDFC Mutual Fund is the highest paid fund manager in the country.