What does one look for in a fund manager while selecting a scheme. Broadly I am in agreement with people who say that given the fact that all fund managers play with the same parameters, the chances are that they will perform like each other vis a vis the benchmark. Partly true, partly false.

Let us take the airline industry. They all buy air crafts from the same manufacturer (okay 2 of them)

They recruit from the same general population

They do similar training.

However the image of a British Air / Swiss Air is very different from a Biman Air – how does this happen?

Simple. Establishing Good Habits. Making sure that it is a Consistent and Repeatable Process.

Now look at all large cap funds. What you have to look for is the fund manager to build a good system and a process. Not just what the marketing guy says (he has been tutored) but exactly as what the fund manager should want. It is for the trustee to ensure that this happens. PROCESS. Not just process, but Consistent, and Repeatable.

Fund should be true to label. Once you are large cap you cannot do too much of running away. You will have to be about 60-80% copying the index. Some tweaking yes, but large scale no. People have been trained to pick winners, but it is not so easy.

So closet indexing + some longs on favorite sectors MINUS some weightage reduction in sectors like say commodities.

Then draw a graph and see where they cluster. Then you realize that whether you pick up Franklin India Bluechip, SBI Bluechip or Icici Bluechip it may not matter over a longer time, except for the fee.

So go and select the cheapest one. Keep tracking though.

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  1. very few funds in India stick to the label. Also there is very little style audit. Hdfc funds do not say to what investing style they will stick…so it is very difficult to pin fund houses or fund managers…

  2. it may not matter over a longer time, except for the fee.

    So go and select the cheapest one. Keep tracking though.

    monkey throwing darts at the board = fund manager
    — malkiel

  3. The inference is totally incorrect. Pls see the results over any time period, say 5 years to 20 years period. There has been a huge gap in the performance of different fund schemes within the same category, say, Large Caps. How can it happen.
    Birla Sun Life Equity Front Line Equity has given a return of 11.29 % over a 5 years period, whereas DSP Black Rock Top 100 Fund has given a return of only 8.13% over the same period.

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