Imagine a scenario where you have newly invested in a fund and the next morning you wake up with the news of your fund manager exiting the fund, what would you do? Should you be worried or is it ok? Would it make any difference to your fund’s performance? But one thing is for sure, a part of your diligently done homework and research have gone in vain.
Switching jobs is a very trendy and rewarding thing to do in every industry. The mutual fund industry is no exception. Fund managers either get promoted or make a switch. Does a fund manager change mean you should also exit the fund? Let’s find out;
A promotion or Switch?
The first thing to find out is whether the fund manager got promoted within the same organization or has switched to a new fund house? If the case is of a promotion, you need not worry much. Within the same organization, your fund manager will oversee the funds he was previously working on and make sure of its consistent performance.
In case there is a switch, you will have to check for a few things to decide whether to exit the fund or continue?
Definition of mandates
This is a very important thing to consider while deciding whether to stay or not. If the mandates of your funds are loosely defined, it might be an issue to worry about. For example, in the case of ELSS and multi-cap funds, there are certain mid-ways one can look for while managing them. in case of small-cap, mid-cap, and large-cap funds, the mandates are quite well-defined.
Change in investment strategy
Investment strategy defines the course of the fund’s progress. If the investment strategy does not align with your investment goals and objectives, you must consider other options. If on the fund manager’s exit, there happens to be a change in the investment strategy of your funds which were earlier in alignment, then you must consider other funds.
The most appropriate indicator of this parameter is the turnover ratio. If there is a considerable change in the turnover ratio, it clearly indicates a significant change.
After there is a change in the fund manager, it is advisable that you track the performance of your fund for at least a year in order to be better able to decide if you should stay or exit the fund. Only because the fund manager has left so you too should leave does not make any sense. If the new manager is doing every bit to maintain and uplift the performance of the fund, stay assured.
Exiting the fund is advisable only if there is a significant downfall in the fund’s performance.
Fund performance depends largely on the fund manager’s diligence and management. People invest in a fund after conducting extensive research on all the essentials of a fund which includes Fund Manager as well. A fund manager serves as a backbone to the fund. If a fund manager is changed, it definitely will affect the fund’s performance but it is not necessary that the change is bad. Before you land on a decision regarding exiting from the fund, do a background check of the new fund manager and then take a call. If this is too much for a decision to be taken single-handedly, seek expert advice from your financial advisor or try Piggy Premier.