Remember to monitor your fund when the fund manager changes

By | November 5, 2011

Investors might often get ruffled when a change in fund managers takes place. Just when you thought you hit the jackpot of equity funds by making all the right choices, because of your fund manager, news that your fund manager is changing can be highly disturbing. This can be termed as a serious issue, as unlike funds, that are a brand of its own, fund managers aren’t much recognizable. People invest in funds solely on the basis of its performance and the brand value it holds. Also new investors who are making their foray into the world of mutual funds opt to invest in reliable and famous brands like HDFC or Reliance. It is only after a certain period of time that investors understand the working of the markets and realize that all prominent investment decisions of the organization are carried out by fund managers.

In such a scenario, news that the fund manager has changed can come as a disappointing surprise to many investors as they feel that it may take a lot of time for their investment dreams to go as planned. Well, it may not be surprising to state that change of fund managers is a very common act in the investment world as in the last 2 years, over 180 fund managers have been changed from their positions, which is a quite disturbing trend since almost half the investment industry is involved. While investors can be assured that there is nothing gigantic to worry about on this issue, the severity of the issue may vary greatly from investor to investor. Since one cannot quantitatively measure the amount of impact a fund manager has on the success of a fund, it is difficult to provide a quantitative answer on the same. All fund managers depend on factors like market conditions, their investment mandate, institutional parentage and other critical factors before making any investment decision. As these decisions may vary from person to person, it is difficult to assess the contribution of every manager to the fund.

While in some situations, the exit of a fund manager from the fund has led to a downfall in the profitability of such a fund, in some scenarios, the entry of a new fund manager in the fund has increased its profitability too. As this change and its incoming factors cannot be measured accurately, there is only one golden rule investors must abide by in case their fund manager changes. Investors need to exude vigilance and caution, closely scrutinizing the performance of their fund, so as to try and safeguard themselves from any downfall of their investment. Many investors do not seem to understand as to why a change of fund managers is required. Well, one of the many reasons is that fluctuation in skill-based jobs is a common phenomenon in a competitive city like India. It helps managers make informed decisions in their profession and move up the corporate leader. Although this change can be termed unfortunate for it is unexpected, investors have no other choice since it is the way the market functions. But as prudent investors, it is mandatory for you to be watchful of changes that are bound to affect your returns. The main reason for opting to invest in Mutual Funds is to grow your investments so that it can help you achieve your financial goals. But, if the returns are wiped out due to uninformed decisions or even because of risky propositions which you were unaware of, it will lead to problems like borrowing debt for example, personal loan, home loan etc to finance your requirements. In order to avoid such mishaps, ensure that you have your funds secured without jumping to conclusions just for earning those extra few rupees by risking your future.

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