The top fund managers were chosen through a process of eligibility screening, compiling track records, and ranking based on specific metrics

Top 10 equity mutual fund managers 2024: Ranking methodology ET Wealth created virtual NAVs for each fund manager, and all metrics assessed were based on these ‘virtual NAVs

ET Wealth has ranked the top 10 equity mutual fund managers for 2024 in collaboration with investment research platform PrimeInvestor. The annual ranking features the top wealth creators of 2024 who have excelled in balancing risk and returns.

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The idea behind this exercise was to track fund manager performance, not scheme performance. This was possible only by following the fund manager across schemes and AMCs. A fund manager might have been managing a large-cap fund as well as a mid-cap or small-cap fund. To obtain a unified score that captured performance across fund mandates, ET Wealth created virtual NAVs for each fund manager, and all metrics assessed were based on these ‘virtual’ NAVs.

The best fund managers were selected using the following steps:

1.Gating: The first step was to create a list of fund managers eligible for the ranking.
2.Track record: A single track record was created for each fund manager.
3.Ranking: The fund managers were ranked on the basis of various metrics, subject to certain conditions.

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Also read | Best equity mutual fund managers 2024

Gating

All open-ended funds in the active equity category, except sub-categories like ‘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 chosen to ensure the assessment of rolling three-year returns over at least three cycles, allowing for adequate number of observations and smoothening out 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 for the 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. Every fund manager, whether primary or managing a fund jointly, was ranked.

Track record

In this stage, a virtual NAV was created for each fund manager, based on the funds and the duration for which they managed the funds. Essentially, a fund manager’s virtual NAV for each business day would change in line with the change in NAV of all funds he had managed in that period. The funds managed for longer periods would have had a higher influence on the NAV than the funds managed for shorter time frames.

All the data considered has been as of 31 December 2024. The fund manager record cut-off was also taken on the same date. Overall, we had 60 fund managers who met our criteria.

Ranking

The performance of each fund manager (as represented by the respective virtual NAVs) was used to rank the fund managers on the basis of various metrics as shown above:

This 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 erratic returns.
The Nifty 50 and Nifty 500 indices were used together to measure the ability to deliver on both upside and downside beyond their respective benchmarks. For example, the Nifty 500 tested a large-cap fund’s ability to outperform in upcycles, while the Nifty 50 tested a mid- and small-cap fund’s downside containment in downcycles. This also helped normalise performance due to market-cap divergences.

Final list

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 2024 cut-off date used in this exercise, the fund manager was dropped.

This story originally appeared on: India Times - Author:Faqs of Insurances