Who Manages Your Money in Mutual Funds (Fund Managers Explained)

When you invest in a mutual fund, your money goes to an Asset Management Company (AMC). The AMC is the entity registered with SEBI that's legally responsible for managing the fund.

The AMC handles everything: launching schemes, hiring fund managers, setting investment mandates, ensuring compliance, and reporting to investors.

Each AMC manages multiple funds across various categories. The fund you invest in is just one scheme under AMC's umbrella.

The role of the Asset Management Company isn't just administrative. It sets the investment philosophy, builds the research infrastructure, and defines the risk limits within which fund managers operate.

A fund manager in mutual funds is the person (or team) responsible for the day-to-day investment decisions of a specific scheme. They're the ones deciding which stocks to buy, which bonds to hold, and when to sell.

Here's what the role of fund manager actually involves.

Researching Companies and Financial Instruments

Fund managers don't just pick stocks based on gut feel. They analyze company earnings, balance sheets, cash flows, management quality, sectoral trends, and macroeconomic factors. For debt funds, they evaluate credit ratings, interest rate movements, and liquidity.

Selecting Securities Aligned with the Fund's Mandate

A large-cap equity fund can't suddenly start buying small-cap stocks. A short-duration debt fund can't stretch maturity to chase higher yields. The fund manager responsibilities include staying within the defined investment mandate - SEBI enforces this.

Monitoring Portfolio Performance

Markets change. Company fundamentals shift. Fund managers track portfolio holdings continuously, reassessing whether existing positions still make sense.

Making Buy and Sell Decisions

When to enter a position, when to exit, how much to allocate - those calls are made by the fund manager. In active fund management, these decisions aim to outperform a benchmark. In passive fund management, the goal is to ensure that the fund mirrors the benchmark as closely as possible.

Managing Risk Within Defined Limits

Risk management in mutual funds isn't optional. Fund managers operate under strict limits: maximum exposure to a single stock, sector caps, credit quality thresholds. These guardrails help maintain balance and protect the portfolio from excessive concentration risk.

Here's what most investors don't realize: the fund management process isn't a one-person show.

Role of Research Analysts and Support Teams

Behind every fund manager is a research team - analysts who specialize in sectors, track specific companies, and provide buy/sell recommendations. The fund management team includes economists, credit analysts, quantitative researchers, and risk managers.

The security selection process is collaborative. Fund managers don't just wake up and decide to buy a stock. That decision is backed by research, internal discussions, and risk assessments.

Role of Investment Committee

Most AMCs have investment committees that review major decisions. The investment decision process includes research inputs, risk checks, compliance reviews, and portfolio construction rules.

Why Fund Continuity Does Not Depend on One Person

Fund managers change. People move firms, retire, get promoted. But the fund doesn't collapse when that happens because the process, research team, and mandate remain intact.

That's not to say fund manager changes don't matter - they do. But a well-run fund relies on a repeatable process, not the genius of one individual.

Not all mutual funds work the same way. The difference comes down to whether a fund manager is actively trying to beat the market.

Active Management

In active fund management, fund managers actively select stocks or bonds with the objective of outperforming a benchmark index. These decisions are driven by in-depth research, market insights, and careful evaluation of opportunities such as identifying undervalued companies, attractive sectors, or bonds offering better risk-adjusted returns.

While outcomes can vary, skilled fund managers can add meaningful value through disciplined research, strong risk management, and well-timed investment decisions. When executed well, active management has the potential to enhance returns and navigate market cycles more effectively than a purely passive approach.

Passive Management

Passive mutual funds are designed to closely mirror the performance of an underlying benchmark over time. This benchmark can be broad market–based (like the Nifty 50), sector-specific (such as banking or IT indices), or even theme-based (like equal weight, quality indices).

To track the benchmark, these funds invest in the same securities and in the same proportions as the index. There is no stock selection or market timing involved; instead, the approach is rules-based and systematic.

A passive fund manager plays an important role by managing the inflows and outflows, executing index rebalancing when the benchmark changes, and handling corporate actions such as dividends, stock splits, and mergers. A key objective is to minimize tracking error so the fund remains closely aligned with its benchmark.

Because of this transparent and disciplined structure, passive funds typically have lower costs and lower portfolio turnover, offering investors a simple way to participate in market-linked returns over the long term.

Importance of Consistency and Long-Term Performance

A good fund manager doesn't need to be the top performer every year. What matters is consistency - delivering reasonable risk-adjusted returns over full market cycles, not just during bull runs.

Look at performance across different market conditions. Did the fund hold up during downturns? Did it participate reasonably during rallies? That tells you more than one stellar year.

Role of Discipline, Process, and Risk Management

The best fund managers stick to a process. They don't chase trends. They don't let ego drive decisions. They manage downside risk as carefully as they seek upside.

Discipline beats brilliance in this business. Markets reward patience and process more than they reward flash.

Investment Approach Followed by DSP Fund Managers

At DSP, fund management is guided by clearly defined and disciplined investment frameworks rather than short-term market calls. Each fund manager follows a structured approach focused on research depth, valuation discipline, risk management, and consistency across market cycles. These frameworks outline how opportunities are evaluated, how risks are managed, and how portfolios are constructed with a long-term perspective. This emphasis on process over prediction helps ensure that investment decisions remain objective, repeatable, and aligned with investor interests, even during volatile market phases. You can explore DSP’s fund manager investment frameworks in detail here:

• Abhishek Singh: https://www.dspim.com/documents/investment-framework-abhishek.pdf

• Bhavin Mehta: https://www.dspim.com/documents/investment-framework-bhavin.pdf

• Chirag Dagli: https://www.dspim.com/assets/documents/investment-framework-chirag-dagli.pdf

• Rohit Singhania: https://www.dspim.com/documents/investment-framework-rohit-singhania.pdf

Why Past Performance Is Not a Guarantee

A fund that did well over the last 3 years might have been riding a sectoral boom that's now over. Or the fund manager who delivered those returns might have left.

Past performance tells you what happened. It doesn't tell you what will happen.