Kenneth Andrade exits IDFC Mutual Fund leaving investors jittery

MUMBAI: The exit of Kenneth Andrade from IDFC Mutual Fund might prove a drag on the asset management company’s prospects in the foreseeable future. Wealth managers may stop selling IDFC Mutual’s equity schemes for now, while some existing investors could redeem from the fund house’s products and stop their systematic investment plans (SIPs) on worries the absence of Andrade, a top equity fund manager, would hurt performances. As the chief investment officer of IDFC MF, Andrade managed its flagship IDFC Premier Equity Fund, among the top 10 equity schemes with assets under management (AUM) of Rs 7,229 crore. He also managed IDFC Equity Fund (AUM of Rs 291 crore) and IDFC Equity Opportunities Fund –I (AUM of Rs 274 crore).

Top wealth managers said many investors had put money in IDFC Mutual’s schemes, mainly Premier Equity — a mid and small-cap equity fund, because of their steady performances even in uncertain times. With Andrade moving out, there is a lack of clarity on whether the funds can continue to be among the top performers. “Fresh investments into IDFC Premier Equity Fund will be put on hold. We will look out for announcement of the new fund manager’s track record, whether he follows the same investment philosophy as the previous fund manager, and for his performance before recommending fresh inflows,” said a senior official at a leading bank’s wealth management arm.

In response to an email query on the matter, an IDFC spokesperson said, “IDFC MF has a 15 member investment team with stable & experienced resources... Our Investment philosophy is consistent across the range of funds at IDFC MF and individual fund portfolios are constructed based on this common investment process and the specific objective of the individual fund”. IDFC, however, did not comment on a query on Andrade’s successor. IDFC Mutual Fund did not respond to a questionnaire on who will succeed Andrade, who is said to be joining a private equity fund.

Changes in fund management team are tracked closely by financial advisors as it has a bearing on the schemes’ performance. Many leading distributors and wealth managers had stopped selling Fidelity schemes in mid-2012— at least for a brief period — after L&T bought out the US asset manager’s equity schemes.

In the case of IDFC Mutual, Andrade’s stock picks such as Bata India, Page Industries, Kaveri Seeds, Blue Dart and Va Tech Wabag had powered the performance of his schemes. While Andrade was appreciated for his stock picking skills, rival industry officials said his schemes could have amassed more assets had he interacted better with mutual fund distributors. Some financial planners plan to put IDFC MF’s equity schemes on their watchlist. “When there is a change in fund manager, we put such funds on a watchlist to track performance closely before making a change. We avoid fresh allocations to this fund during that period,” said Vishal Dhawan, a Mumbai-based financial planner.

Ranjit Dani, chief financial planner at Think Consultants, said, “We will not ask investors to exit the fund but if there is any need-based redemption request, we will advice to exit this fund first.”