Which aspect is more crucial for MF investment: fund house or fund manager?

[allanl]

Hi friends,

I am relatively new to this forum, though I do visit websites like moneycontrol.com to get investment advice and keep track of stock markets. We are in the midst of a massive bull run in Indian equity markets. A lot of small time investors prefer to park their investments in mutual funds rather than direct equity. In this context, I would like to know which aspect is more crucial for investment in an MF scheme, the fund manager or the fund house?

[yoogi]

Fund strategy is more important besides the two you mentioned.

If it is a IT sector or constructuion sector fund, there is very little fund manager can do to stop a steel fall when the market falls.

[np1408]

Originally Posted by allanl

Hi friends,

I am relatively new to this forum, though I do visit websites like moneycontrol.com to get investment advice and keep track of stock markets. We are in the midst of a massive bull run in Indian equity markets. A lot of small time investors prefer to park their investments in mutual funds rather than direct equity. In this context, I would like to know which aspect is more crucial for investment in an MF scheme, the fund manager or the fund house?

While it has been observed that the skills and diligence of a fund manager do play an important role in the returns that an investor gets, over a long-term period what matters the most is the investment process that is adopted by the fund.

Given the attrition rate in the industry, with fund managers being poached from one company to other, it is very risky to park your funds based on who the manager is. It is much safer to invest with a company that has a transparent disciplined investment process, which is independent of individual performance.

What an investor must keep in mind before investing is:

1) His investment objective and that of the fund
2) The costs involved in the fund and how they are deployed.
3) If the costs charged by the mutual fund adds any value to your investment

For eg. Heavy advertising and distribution costs helps the fund house to get ten other investors, but at your cost. The costs incurred for the same outweigh the benefits that you get because of scale.

An example of disciplined profit-based approach is that of Quantum AMC.

The objective of Quantum equity fund is clearly long term and the costs are kept at minima.

you can read more about their process here:

http://www.quantumamc.com/aboutus/philosophy.html

Disclosure: I work with Quantum AMC.