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Network Nexus: Exploring the Impact of Alumni Connections of Managers on Mutual Fund Performance in India

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Abstract

The paper investigates the influence of the alumni social network of mutual fund managers on fund performance in India. The alumni networks of 211 managers managing 585 funds are constructed through seven network centrality measures for the period from April 2013 to March 2022. The study finds that fund managers who are more central to the network on average generate higher risk-adjusted excess return performance (alpha) and take a higher level of idiosyncratic risk. Although the centrality position of managers does not influence them in selecting small-capitalisation, value, and high market-beta stocks, more central fund managers tend to pick momentum stocks. The results affirm that the information advantages in the central position of alumni social networks improve fund performance, influence the managers’ investment style and enable higher risk-taking behaviour. The contribution of the paper is that the findings regarding investment style and fund flows are different than those of developed markets which may be relevant for other emerging markets.

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Notes

  1. The Association of Mutual Funds in India (AMFI) is regulator of the Indian Mutual Fund Industry, dedicated to protecting and promoting the interests of mutual funds and their unit holders. https://www.amfiindia.com/indian-mutual#:~:text=Assets%20Under%20Management%20(AUM)%20of,a%20span%20of%2010%20years.

  2. Databank on Global Financial Development, The World Bank. https://databank.worldbank.org/source/global-financial-development/Series/GFDD.DI.07.

  3. Securities and Exchange Board of India, regulator of Indian securities market. Web source: www.sebi.gov.in.

  4. ICRA Report on “Mutual Fund Screener 2022”. https://www.icraanalytics.com/img/PDF/MF/Mutual%20Fund%20Screener.pdf.

  5. The ACE mutual fund database is a popular data providing service in India which covers 44 asset management.

    companies (AMCs) and more than 12,000 schemes which are currently prevalent in India.

    https://www.acemfnxt.com/.

  6. Data Library for Indian Market, maintained by IIM Ahmedabad. http://www.iimahd.ernet.in/~iffm/Indian-Fama-French-Momentum/.

  7. UCINET is a software for the analysis of social network data. Weblink: https://sites.google.com/site/ucinetsoftware/home

  8. Closeness centrality measures the quality of the connections of fund managers through the importance of the other connected managers in the network.

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Authors and Affiliations

  1. Vinod Gupta School of Management, Indian Institute of Technology (IIT) Kharagpur, Kharagpur, West Bengal, 721302, India

    Sudipta Majumdar, Sankalp Bose & Abhijeet Chandra

  2. International Management Institute Kolkata, 2/4C, Judges Court Road, Alipore, Kolkata, West Bengal, 700027, India

    Sayantan Kundu

Authors
  1. Sudipta Majumdar
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  2. Sayantan Kundu
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  3. Sankalp Bose
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  4. Abhijeet Chandra
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Correspondence to Sudipta Majumdar.

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Appendices

Appendix 1: Example of Manager Bios extracted and analysed in this study-

We present a few examples of fund managers' information available on the internet, from where we extract the personal characteristics of the managers, without exposing their identity.

Extracted personal details of Manager.

1.1 Manager 1

XXXX is a Fund Manager and Senior Analyst with XXXX AMC Limited (XXXX). He has an overall experience of 13 years in the equity and capital market space. XXXX joined XXXX in February 2011 as a part of the Equity Fund Management and Analyst team. He specializes in the Banking and Financial Services sector. Prior to joining XXXX, XXXX worked with XXXX Securities Limited and XXXX Private Limited. XXXX holds an MBA in Finance from IIM Indore.

1.2 Manager 2

Mrs. XXXX is a Bachelor of Commerce & Master of Business Administration. She has been with XXXX AMC for over 20 years. She has been a Fund Manager since June 2004. Prior experience includes Fund Management of Equity, Balanced and Offshore Equity Funds, Macro Research, Quantitative Analysis and Corporate Financial Planning. Her previous assignment was with XXXX Industries Ltd in the Financial Planning Cell.

1.3 Manager 3

XXXX is the Head of Equity at XXXX AMC. He joined XXXX AMC in 2009 as an Equity Fund Manager and worked his way to Head of Equity in 2016. He currently manages the flagship XXXX Long Term Equity Fund amongst other funds. Prior to XXXX AMC, Jinesh was associated with XXXX AMC as a Portfolio Manager, where he was responsible for alternative assets across the growth, value and dividend basket, from June 2008 to October 2009. He was also associated with XXXX India Capital as a Sr. Research Analyst responsible for the BFSI & Infrastructure sector and held a sectorial portfolio manager role for investments. He was with XXXX India Capital from XXXX to XXXX.

1.4 Manager 4

Mr. XXXX, CIO, XXXX Mutual Fund was ranked as one of the top 5 equity fund managers in 2018 by ET Wealth—Morningstar. With an experience of XX years, he prefers quality businesses with differentiated offerings and a significant competitive edge over peers. Mr XXXX has proven his mettle while dealing with such situations and has delivered consistent returns over the years. Prior to joining XXXX Financial Services, he was Head of Equities at XXXX Mutual Fund. His previous assignments include Chief Investment Officer at XXXX Global Services and XXXX Capital and Co-Head—Equities with XXXX Investment Managers Private Limited. Mr. XXXX holds a Post Graduate Diploma in Management from IIM Bangalore and a degree in B.E (XXXX) Engineering from XXXX.

Appendix 2: Top UG and PG Colleges of Fund Managers

2.1 Top 5 UG Colleges

Colleges

No

University of Mumbai

112

Narsee Monjee College of Commerce and Economics

59

St. Xavier’s College (Autonomous), Kolkata

32

IIT Madras

26

IIT Bombay

23

2.2 Top 5 PG Colleges

Colleges

No

University of Mumbai

79

IIM Ahmedabad

76

IIM Bangalore

76

SVKM’s Narsee Monjee Institute of Management Studies (NMIMS)

48

IIM Lucknow

48

IIM Calcutta

47

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Majumdar, S., Kundu, S., Bose, S. et al. Network Nexus: Exploring the Impact of Alumni Connections of Managers on Mutual Fund Performance in India. Asia-Pac Financ Markets (2023). https://doi.org/10.1007/s10690-023-09435-6

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