MUMBAI
:
Capitalmind, a PMS (portfolio management services) provider, became the latest entity to receive the Securities and Exchange Board of India’s (Sebi’s) in-principle approval to launch a fund house. Once launched, it will be India’s 45th fund house.
Investors must keep certain things in mind while investing with new fund houses.
For starters, investors must check whether the asset manager has a track record in managing money, said Kirtan Shah, founder and chief executive of Credence Wealth. “While managing a mutual fund is quite different from managing PMS, as the former is much more tightly regulated with curbs on investment thresholds and limits, a strong track record in PMS also bodes well for a new fund house.”
He added that investors should also look at the pedigree of senior management. “Check whether the senior officials, especially in the investment team, have past experience in the mutual fund industry.”
Picking a fund
When new fund houses launch a new fund, it is important to check whether the fund offers a differentiated strategy. Only then should the fund launched by a new fund house be considered for investment.
“If it is just a similar fund strategy that already exists in the industry, then it is better to avoid such a fund and let the new fund house build its track record,” said Amol Joshi, the founder of Plan Rupee Investment Services.
Several new fund houses have recently entered the ₹64-trillion mutual fund industry. Mutual fund distributors, PMS providers, fintech platforms, and brokerage houses count among the new mutual fund players.
Interestingly, new fund houses have also been launched by fund managers who were earlier star fund managers in the mutual fund industry before they left to start their own ventures.
Different strategies
New fund houses have tried to differentiate themselves in different ways. For example, some of the new houses are focusing on passively managed funds. They are looking to differentiate themselves by focusing on efficient execution of passive strategies, to keep the tracking error at minimum vis-a-vis the underlying indices.
Other fund houses are using slightly different investment styles and investment philosophies to stand out. Some of the new entrants are focusing on smart-beta or rule-based funds, which blend different factors such as quality, momentum, value, etc. with regular indices like the Nifty 50 to create new investment strategies.
However, it is always advisable to let a new fund house build a track record before considering investing in their funds.
