Money
How much does your fund manager earn in a year?
Summary
- Mint has collated the annual salaries of two highest-paid executives for each of the top 10 asset management companies by average asset under management. We also explain whether these salaries should be a factor when picking a mutual fund.
Fund managers help grow their customers' wealth, but have you ever wondered how much they earn themselves?
In 2016, the Securities and Exchange Board of India (Sebi) said asset management companies (AMCs) must disclose annual remuneration of their fund managers and other executives on their websites. The aim was to improve disclosure norms for funds. However, the data for each AMC is available only to their own investors.
Mint has collated the annual salaries of two highest-paid executives for each of the top 10 AMCs by average asset under management (AUM). If your mutual fund is not on this list, you can use your folio number to access this data in the disclosures section of the AMC’s website.
Does fund manager's salary matter when picking a mutual fund?
Experts said that while it's good to know the salary of a fund manager, it shouldn't be a significant factor in your decision to invest in a particular mutual fund.
“When investing in a mutual fund, all expenses, including manager compensation, are embedded in the total expense ratio (TER), which should be the key metric for investors. A higher TER could be due to many things, such as a larger research team, use of advanced technology, etc," said Vishal Dhawan, founder, Plan Ahead Wealth Advisors.
He added, "There could be many reasons for high executive compensation, such as the size of the fund house, or a smaller fund house paying more to attract and retain talent. Over the past 5-10 years, the mutual fund industry has tried to move away from the concept of ‘star fund managers’. So, this should not be a major determinant when choosing a fund, as emphasising team effort over individual performance has gained traction," he added.
Rushabh Desai, founder, Rupee With Rushabh Investment Services, agreed, saying CXO remuneration is an internal matter and shouldn’t affect investors in a big way. “Sebi mandated disclosing this data as part of costs disclosures of the AMC. Investors should focus on the long-term track record of the fund and not on executives’ remuneration," he said.
However, since the asset-management fees includes the fund managers' salaries, it warrants questioning if the fund underperforms for a long time, Desai added. When choosing a fund, investors should stick to the analysing the fund's long-term track-record, its ability to manage risk over different periods, and its investment style.
Kalpesh Ashar, founder, Full Circle Financial Planners and Advisors, a Sebi-registered investment advisor, said “For an investor, what should really matter is whether the fund manager delivers ethically and while adhering to the rules."
