Cash flow

Mumbai, Sept. 10: Asset management companies are forking out mega bucks to find managers for their mutual funds, sparking a major churn in an industry that is notoriously short on talent.

Result: an upheaval on an unprecedented scale.

There’s also a flipside to the story: careers of fund managers are running on turbocharge and there’s a growing disconnect between pay and performance as the mutual funds industry desperately struggles to retain fickle talent.

The compensation packets of fund managers are rising faster than the valuations of the investment corpuses that they are hired to manage.

“There has been an unprecedented growth in the equity corpus of the mutual fund houses. In the past one and a half years, the equity corpus of the whole industry has gone up 2.5 times,” said Dhirendra Kumar of Value Research. Industry circles say an average fund manager draws a minimum of Rs 50 lakh a year; the top-notch players get way above Rs 1 crore.

“No one is ready to change jobs without a minimum hike of 50 per cent and on the base salary which they currently draw, it sure works out to a neat sum,” says a portfolio manager.

Ironically, the sensex has also risen by nearly 50 per cent in the past year. However, the average returns posted by the diversified equity funds for the period have been a subdued 31.96 per cent, with barely a few managing to beat the sensex.

Despite the mind-boggling numbers, the fund houses are having trouble scouting for suitable stockpickers.

As a result, HSBC has temporarily decided not to name a captain of the team by deciding not to recruit a chief investment officer (CIO) for the time being. Last December, HSBC had hired Anup Maheshwari as chief investment officer from DSP Merrill Lynch Fund Managers but he left for an independent adviser role in less than a year. Now he has again gone back to DSP Merrill Lynch.

Private equity and hedge funds have arrived by the droves and have nobbled several fund managers. And to top it all, the regulatory headaches are also forcing the managers to give a serious thought to whether the risks involved with being a fund manager are worth it.

In the most recent instance, Sandip Sabharwal, the CIO of Lotus Mutual Fund, put in his papers as he was chargesheeted by the CBI in a six-year-old scam. The dearth of a suitable candidate to replace him has now forced the asset management house to defer its scheme launch by at least three to four months.

“This situation has seen many equity analysts being stepped up as fund managers,” said Sanjay Sinha, head of equities at SBI Mutual Fund.