The Alpha Moneymen

For mutual fund managers, the past few years have certainly been interesting — to say the least. Equity fund managers have had to deal with a market volatility that has made the strongest stomachs churn. Debt fund managers have seen interest rates move steadily downwards first as the Reserve Bank of India tried to stimulate demand and then start moving up equally steadily as the central bank tried its best to contain inflation.
These few years have, therefore, tested the mettle of Indian fund managers to the limits. Both equity and debt fund managers have had to show great flexibility and strong nerves in order to give good returns to investors.

In the Businessworld-Value Research Best Mutual Funds study, we do not believe in looking at a single year's performance for a simple reason. In a rising market, any fool can put money in the markets and walk out with even more money. In a steeply plunging market, even the best investors lose money, though the really good ones lose less money than the bad ones. As the legendary Peter Lynch once said, if you are a good fund manager, you are right six times out of 10. It is impossible to be right nine times out of ten.

In the BW-Value Research study therefore, we look at a three-year period for equity funds and 18 months for debt funds. In any three-year period, we believe, a fund manager would have faced both a good market and a bad one. (Though few three-year periods have been as volatile as the 2007-10 one.) We do not take a longer term (five years, for instance) because the vast majority of the Indian funds are not more than three years old.

Sure, past performance is never a guarantee for future returns as every mutual fund prospectus will remind you. But at BW, we do believe that a fund manager, who has performed well over a long enough period of time, is likely to keep giving you good returns in the future.
In this special issue, we not only pick the best funds in each of the 11 categories, but also the best fund managers in both debt and equity, as well as the fund house with the largest number of high-performing funds. If you are planning to invest in a mutual fund, this is the perfect guide to help you choose the fund that is best for you.

(This story was published in Businessworld Issue Dated 28-03-2011)