India's Best Fund Managers 2018

Coming of Age

While mutual funds propagate long-term investing, to pick a manager who can deliver market-beating return is a grossly understated challenge 

Mutual funds seem to have become a preferred choice for retail investors. There are several reasons for the growing popularity of mutual funds: first, systematic investment plans (SIPs) have become a way to save and invest for salaried investors — last year alone, SIPs accounted for nearly a third of the Rs.183,000 crore inflow into equity funds, according to industry estimates. Apart from effective marketing, part of this turn in sentiment is because other investment avenues have systematically lost sheen in comparison. Fixed deposit rates are hovering around 6%, making it unattractive for small savers and retirees. For big-ticket spenders, the most preferred asset class till some time ago was real estate, but not any longer. Housing rental yields today range from an abysmal 1% to 3%, even as the ongoing correction in prices make investors wary of the future.

While it is good news that mutual funds are becoming a significant savings tool for retail investors, it’s also heartening to see that all but one fund manager rated in this edition over a 10-year period have outperformed the benchmark Nifty. The top 10 managers, with Rs.144,000 crore of assets under management, generated an average annual return of 12.62% compared with 5.54% for the Nifty. The bottom 10, who command about Rs.47,290 crore of assets, generated 6.65%, still outperforming the Nifty. With more domestic and foreign money flowing into Indian equities, the market will become more efficient, making it a lot more difficult to outperform.

More importantly, given the variance in performance of fund managers — the best gave 17.18% as opposed to the worst at -0.51%, making the right choice of fund managers won’t be easy for a retail investor. The irony is, while mutual funds propagate investing for the long term, to really pick a manager who can deliver market-beating return in the long run is a grossly understated challenge. The noise around annual return and performance anyway make it difficult to assess who is fit for the long haul. Hopefully, our annual edition on individual performance of fund managers over different time periods will serve as a guide for not only keeping a track of yesteryear stars but also for spotting upcoming names who are building a track record for themselves. 

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