Scripting a Comeback

Equity schemes of HSBC Mutual Fund have taken a beating in recent years. Tushar Pradhan joined the fund house around a year ago and has brought about several changes which he believes will impact performance. Here he tells us why the fund house's schemes will soon be back on track. You have just completed a year at HSBC Mutual Fund. What do you do to closely track the performance of your fund managers? HSBC Mutual Fund had an attribution analysis process in place even before I joined. It's just that after joining, I implemented the process more vigorously. We do this for each and every scheme and it is generated out of an international software called Factset. Factset gives an attribution on the portfolio on two parameters: one is the sector allocation within the benchmark and the other is the individual stock selection within the sector. It reveals what worked for the fund manager that month. Let's say that in the market the Oil & Gas sector went up. This software will show your fund's relative under- or over- performance vis-à-vis the benchmark due to the allocation in this sector. Then, it will look at what you owned in Oil & Gas because obviously some stocks would do better than others. This software will tell you about individual stocks which contributed to the outperformance or underperformance. This process was always in place but we now go more in-depth in using the data. We do it on a monthly basis accompanied by a qualitative discussion with each fund manager. These inputs are used to enhance and share learnings on what went right and what could have been done better. Further, there is increased interaction between analysts and fund managers on a formal basis. There is an increase in the feedback given by fund mangers to analysts on their recommendations. More focus is given on activity around existing recommendations and changes to views through these interactions. We have reassigned research coverage among all our analysts to ensure a reduction in duplication of coverage. We have “joined up” the research effort and now encourage the analysts to “pitch” their best ideas to various fund managers within the entire team. This has streamlined the process and has helped us utilise resources more optimally. The change also encompasses the area of evaluation of stock ideas. The research analyst and fund manager now follow a process where the identification of the investment call is transparent. While f