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27/06/2013 Young IIM g raduates' fund g ives record fat returns : Mutual Fund, News - India Today
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INDIA TODAY GROUP : India Today Aaj Tak He adline s Today Bus ine ss Today M en's He alth Wonde r Wo
Updated 01:40 IST | June 27, 2013
In Association With
BUSINESS INDIA | M UTUAL FUND | WORLD | INFOTECH | MARKET
India Today / Business / Mutual Fund / Story
B.S. SRINIVASALU REDDY MUMBAI, MARCH 15, 2011 | UPDATED 10:45 IST
Young IIM graduates' fund gives recordfat returns
At a time when many seasoned mutual fund (MF) managers are failing to give returns matching that of
their fund's benchmark, students of the youngest Indian Institutes of Management (IIM) in the country -
IIM-Lucknow - have given alpha (market beating) returns.
What's more, this rare feat was repeated by the students for four years in a row as part of their practical
learning process, despite the limitations of lack of realtime data streams.
The equity fund for the batch 2009-11 (beginning July 2007, the fund was closed in January 2011) has
contributed an impressive 17.96 per cent return, while the derivatives fund gave a huge return of 25.84
per cent. T hese compare excellently with the National Stock Exchange index (NSE) Nifty's returns of just
5.56 per cent during the same period.
A corpus ofover Rs4 lakhwas built with the class of2009-11 contributing a minimumRs5,000 and up to a
maximum ofRs50,000.
Responding to a query, a senior MF industry captain said one has to obtain a certificate and register
oneself to sell a MF scheme, but virtually anyone can become a fund manager without any of these
hurdles.
That is the state of regulations in the country.
"A study of profile and background of fund managers, who are managing public funds, would reveal
astounding diversity in experience, education and background," the same source added.
On the other hand, selection as the fund manager of Credence Capital, the fund managing committee, was
no walkover as they had to go through the grind of managing a notional fund, and outperforming the rest
of the students before being selected as one of the five fund managers for Credence.
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The effort by the students of IIM-Lucknow is purely a student initiative in which the institution is not
directly involved. The system was introduced after the institute's faculty realised that making them
manage public money and doses of theory could mould students into excellent fund managers. IIM
professors, Vipul and Manoj Anand, guided the process.
"A committee of twelve students, including seven seniors, was formed for managing the fund. We had an
exciting process in which heated debates were commonplace.
But consensus was arrived at based on majority opinion," said Navin Prasad of the Credence Fund
Managers, or the committee.
"More than profit maximisation it was risk management and preservation of capital that were the keys. It
is not that they always made money. Strict stoplosses were crucial to success," said Prasad. The fund
managers of Credence Capital applied both fundamental and technical analysis to build the portfolio.
The students followed a systematic procedure involving selection of fund managers, appointment of a
committee to approve investment decisions, updating student investors on the past week's developmentsand expectations for the next week.
Credence is no run-of-the-mill kitty corpus, but a stickler to rules. It posted newsletters providing a
summary of the happening of the past week and expectations for the coming week. T he newsletter also
analysed futures and options (F& O) data and gleanings were emailed to all investors, every week.
"The challenge was to do all the analysis based on publicly available data. We did not have any data
streams like Bloomberg or Reuters, used in mutual funds or treasuries," said Rahul Krishna, who was one
of the leaders of the team.
Krishna, who had some prior experience of working in a treasury before boarding the management
bandwagon, said, "In fact, we are spending 60 per cent of our time in management of the fund and only 40
per cent on studies." No wonder, many of these aces have been offered positions at global financial sector
biggies like Goldman Sachs, Citigroup and JP Morgan.
Courtesy:Mail Today
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