Top fund managers: How fund managers are ranked, know methodology here To get a unified score that captures performance across fund mandates, ET Wealth created virtual NAVs for each fund manager and all metrics are based on these ‘virtual NAVs
The idea behind the exercise is to track fund manager performance, not scheme performance. This is possible only if we follow the fund manager across schemes and asset management companies. A fund manager may be managing a large-cap fund and also a mid-cap or small-cap fund. To get a unified score that captures performance across fund mandates, we created virtual NAVs for each fund manager and all metrics are based on these ‘virtual’ NAVs.The best fund managers were selected using the following steps:
Gating: The first step involved creating a list of fund managers eligible for ranking.
Track record: A single track record was created for each fund manager.
Ranking: The fund managers were then ranked on the basis of various metrics, subject to certain qualifying conditions.
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Gating
All open-ended funds in the active equity category, except sub-categories of ‘sector’, ‘thematic’, and ‘others’, were taken in this study.
The fund management history of each of these funds for the past six years was taken into account. A six-year period was taken to ensure we were able to assess rolling three-year returns over an extended time frame, allowing for adequate number of observations and smoothening out of market phases.
All those who have been fund managers for at least 70 months (in one or more funds) in the past six years were added to ranking. No restriction was imposed on the number of breaks in fund management. As long as the cumulative break was less than two months, the manager was added to the ranking
Track record
In this stage, a virtual NAV was created for each of the fund managers based on the funds and duration for which they had managed the funds. Essentially, a fund manager’s virtual NAV for each business day would change in step with the change in NAV of all funds he/she had managed in that period. The funds managed for longer periods would have a higher influence on the NAV than the funds managed for shorter time frames.
All the data considered has been as of 31 December 2023. The fund manager record cut-off was also taken on the same date. Overall, we got 49 fund managers who met our criteria.
Ranking
In this stage, the performance of each fund manager (as represented by the respective virtual NAVs) was used to rank the fund managers based on various metrics as shown above:
The above-mentioned combination of metrics ensured that the market-cap orientation of a fund would not unduly influence the manager’s score.The consistency scores also ensured that very volatile funds were tested for consistent returns and penalised for any erratic returns.Final list
From the above data, the final list was arrived at by taking the top 10 by rank after the following were considered:
Where the fund managers were from the same fund house and there was an overlap in funds managed, the primary fund manager was considered.Where a fund manager had quit after the December 2023 cut-off date, the fund manager was dropped.
This story originally appeared on: India Times - Author:Faqs of Insurances
