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Simply Save | Will docking away 20 percent of fund manager’s salary really help investor?

Will fund managers and key employees in their own funds help investors in any way? Tune in to this episode of Simply Save to know more.

May 25, 2021 / 06:00 PM IST

Last month, the capital market regulator, Securities and Exchange Board of India (SEBI) said that a minimum of 20 percent of a fund manager’s salary shall be paid in the form of units of mutual fund schemes that they manage. Not just the fund managers’ salaries, all those who are classified as “key employees” of a fund house will also be covered. These include chief executive officer, chief investment officer, and other employees that the fund house identifies as key employees. It also includes entire research team that assist fund managers and the dealers who actually buy and sell stocks and bonds on fund managers’ behalf.

Joining us in today’s Simply Save podcast is Kaustubh Belapurkar, director, fund research, Morningstar Investment Adviser India and Kaustubh will unpack this regulation and tell us its implication. And also will this help mutual fund investors in any way. In this podcast, Belapurkar shares with us trends from the international markets. He says that while there are four countries, US, China, UK and India that have made it mandatory for fund houses to disclose in which schemes their fund managers have invested, India is probably the first country where a part of their salaries will now be locked away in schemes managed by their own fund houses. SEBI says that this should be an annual ritual and the money invested must be locked away for three years.

Belapurkar says that the regulation would most likely not influence the fund manager to manage his funds in any particular way. In other words, will the fund manager take lower risks now knowing that all the key employees would be investing in such a fund? “No”, says Belapurkar. He says, in this podcast, that a scheme’s risk profile should ideally not change just because the key employees now invest in the scheme.

Also read | SEBI’s skin-in-the-game circular to mutual fund AMCs has good intentions, but is not well thought out

The big question: Will fund managers and key employees in their own funds help investors in any way? Tune in to this episode of Simply Save to know more.

Kayezad E Adajania heads the personal finance bureau at Moneycontrol. He has been covering mutual funds and personal finance for the past two decades, having worked in Mint and Outlook Money magazine. Kayezad was the founding member of Mint’s personal finance team when it was set up in 2009.

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