In this fast pacing world, where people tend to switch jobs frequently, it is likely that your fund manager might quit one day.
What are you supposed to do in such a situation?
Should you also quit and start chasing your fund manager? Or you should wait and trust your new manager?
What is an ideal solution to this?
Thankfully or not, there’s no perfect answer to this question. The importance of the fund manager cannot be understated. The fund managers have a crucial role to play even in a fund house that is team-driven.
The secret, however, is finding a balance between the two, i.e. the mutual fund house's systems and processes and the fund manager's discretion. When investing in a scheme, determining whether to withdraw from it or keep investing in it after a change in fund management, or both, this should be a key consideration.
Examine the various schemes the new fund manager has now or in the past managed before making a choice. Maintain those fund on your watch list and keep an eye on its performance over the following six months. Give the new fund manager 3 to 6 months to establish his credentials before changing if things go south.
Additionally, keep an eye out for a rise in the portfolio turnover ratio of the scheme. A jump in the monthly factsheet following a fund manager change indicates that the new manager is replacing a positive sizable portion of the portfolio, which could affect returns or risk characteristics.
You should also consider whether a sizable, experienced group or a lone manager is in charge of the fund. It should go without saying that the departure of an individual fund manager will have a greater effect than that of a team.
Check to see if the new person in charge has previously worked with the leaving manager. If this is the case, he may be able to continue operating in the same manner after taking over.
You should never consider withdrawing from a fund only because the fund manager has done so. Consider a number of factors before making a decision. It is advisable to keep an eye on the portfolio for few months to see if the new fund manager is making any significant adjustments.
