change of guard and attitude
Jain’s unwavering belief in his thoughts was his most important feature. He wore it as a badge of honor but sometimes it became a millstone around his neck. Although he eventually moved into a much stronger position, some of his big contrarian bets did not yield the expected returns for years. The approach demanded Zen-like patience from investors and advisors alike. Nevertheless, many continued to believe in his abilities. It was his reputation and experience that allowed him the freedom and ability to dig into his heels. Experts believe that goodwill to this extent will not pass on to the fund managers to come.
Rupali Prabhu, CIO and Co-Head of Products & Solutions, Sanctum Wealth, says, “Jain showed great mettle in the face of pressure, but the system always supported him and made it possible for him to do so. Someone else who is not so senior cannot face the same pressures.” The brand played its part in protecting the funds from the mass exodus. If someone else did poorly for so long, investors would have packed up and walked away. Amol Joshi, Founder, PlanRupee Investment Services, says, “Upcoming fund managers will have to pay more attention to market realities.
Anish Teli, Founder, QED Capital Advisors stressed, “It is good to have trust. But even the biggest names in the investing world have shown a willingness to adapt their style, which is where the wind blows. The clearest signal that global markets have sent so far is that process is the star. If investment strategies are not rearranged to reflect market realities, it becomes difficult to play catchup later. Vidya Bala, Head – Research, Primeinvestor.in says, “When the external dynamics is changing rapidly, it is important to constantly look at and rework the investment thesis.
In future, it is expected that the fund house will shift to a deeper process-driven approach. “Now the size of the fund has also become huge and cannot be run individually. This independence will pave the way for stronger processes and framework in the fund house,” believes Santosh Joseph, Founder and Managing Partner, Germinate Investor Services. But as fund houses are expected to give up some of their old ways, it is necessary that up-and-coming fund managers imbibe some of the values practiced by Jain, say experts.
ringing in new
The flagship fund, previously run by veteran fund manager Prashant Jain, will now be run by others.
the beginning of style diversity
In many ways, HDFC AMC has already set this transition in motion over the years. Change has not happened overnight. Led by new CEO Navneet Munot, the fund house is hiring a number of new fund managers to strengthen its investment team. Some of these are established names like Gopal Agarwal, Roshi Jain and Rahul Baijal. This group of fund managers will be responsible for the managed funds of Jain.
Apart from boasting of proven credentials, these fund managers also bring different strengths. Agarwal is known for his ability to read macros, Roshi Jain for his value-centric approach and Baijal for his abilities in the large-cap space. The entire Equity team will now be under the supervision of long-serving fund manager Chirag Setalvad, who himself brings strong efficiencies in the mid- and small-cap segments and adopts a sophisticated mix of growth and value styles. This is a clear indication that the fund house is preparing the ground for greater style diversification across its suite of products. Bala stressed, “HDFC AMC has realized the need of the hour and it is clear how it has gone about hiring people.” “It has been a gradual, well-calculated plan to remove over-dependence on an individual and this has been countered by adding experts across the investment spectrum,” says Joseph.
Uncharted waters
Still, this eclectic facelift is unlikely to be smooth sailing. Unlike earlier, AMCs are likely to take a different route of funds. Industry insiders say the new CIO Setalvad will let fund managers play to their individual strengths. Many of AMC’s funds have already embarked on that path, slowly recalculating portfolios based on the new manager’s style. But it will take time and results will vary. “Specific strategies will help as long as it is clearly communicated to the investors. Otherwise it will get confused,” Bala insists. In the meantime, investors should watch out for some volatility in the style. “Cultural integration is a gradual process. There is bound to be some style drift that could affect the return,” argues Prabhu. It also remains to be seen whether Setalvad will be able to reach his larger leadership role without losing focus on the wealth he manages. How are they adapted?
What should investors do?
There is no reason for investors to panic. “This is not the first time a star fund manager is handing over the baton. AMC has done away with such change in the past,” says Joshi. Fund houses like DSP and Nippon India also went through turmoil but new fund managers came in and they did a good job. “Investors can take comfort in knowing that the brand has thought about it and that the fundamentals of investment cleanliness and efficiency are in place,” Joseph emphasizes. It is perhaps time investors give more weight to fully understand the underlying investment values, rather than subscribing to the cult of star fund managers.