India's Best Fund Managers 2019

Shifting Sands

Playtime is up for asset management companies, who have been designing imaginative schemes, as Sebi steps in with new regulations. Now it is time for fund managers to colour within the lines

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Mutual funds sahi hai — the advertising blitzkrieg aimed at wooing retail investors seems to be working. Consider this: equity folios crossed the 80-million mark by the end of 2018. In fact, while AMFI launched the awareness campaign in 2017, individual asset management companies collectively spent over Rs.3.50 billion on advertising last year. Their optimism is understandable — the 43-player industry’s  assets under management (AUM), which crossed Rs.10 trillion for the first time in 2014, took less than three years to double beyond  Rs.20 trillion by August 2017! That investors are taking seriously to MFs can be gauged by the tripling of net inflows into equity funds from Rs.532 billion to Rs.1,578 billion between 2014 and 2018 (See: Inflows swell). It is this copious flow that helped the market buffer FII sales of Rs.732 billion in 2018 as domestic investors bought stocks worth Rs.1,097 billion. However, the volatility in the market and regulatory changes by Sebi did have a bearing on the MF industry with only 12 of the 154 large-cap funds managing to beat the benchmark last year (See: The long and short of it).

Crunch Hour

More than the volatility, the biggest change that hit the industry last year was the reclassification of mutual funds that was aimed at reining in the endless duplicity of schemes from desperate fund houses looking to gain a lead in the AUM race. New funds offerings (NFOs) were just adding to the schemes, offering little value to investors.

Under the new classification, there are now 10 categories of equity funds that investors can choose from. Every AMC can only offer one scheme under each of the category allowed by Sebi.

Before the reclassification was announced, AMCs were offering investors more than 800 open-ended schemes. Also, each fund house had its own interpretation of what constituted a large-cap. While some invested in the top 100 stocks, others would look at the top 200 stocks as their universe. The ambiguity was more pronounced when it came to investing in mid-caps. 

Only a handful of funds made a conscious effort to ensure that their weighted average market capitalisat

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