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Picking the winners

An eminent jury analysed data, vetted the process as well as ranking parameters before finalising the Business Standard Fund Managers of the Year. Their focus was on consistency of performance and qua


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N Bajpai, chairman of the four-member Jury to select the Business Standard Fund Managers of the year, summed up the over two-hour long discussions, by saying that "a flash of a performance certainly does not entitle an individual to an award. It must be consistency". The other criteria that the Jury members looked at during their over two-hour long discussions was the quality of the portfolio which does not carry unnecessary risks.

That was the reason why the Jury took a close look at the Sharpe ratio, which measures the return for every unit of risk taken and is a better way to measure a fund's performance rather than looking at absolute returns. The adjusted Sharpe ratio is a step forward as it takes into account the total assets managed by a fund manager (across all schemes in the respective category) in relation to the total assets of the category.

In short, a ranking based on the weighted average Sharpe reflects the difficulty of yielding superior returns taking into account the asset size and the performance of all the schemes managed by a fund manager. The 91 days Treasury bills' average return during the 12 months period was considered as the risk-free return for both, equity and debt funds. This was to ensure that fund managers taking risk were appropriately rewarded.

It's not a surprise that the adjusted Sharpe ratio achieved by the winners was way ahead of the second best in their respective categories, which reflects the superior risk-adjusted returns they have delivered during this period.

The Jury comprised of G N Bajpai, former chairman of SEBI and LIC and current Chairman & Trustee of the NPS Trust; Pratip Chaudhuri, recently-retired chairman, State Bank of India; Ashvin Parekh, Senior Expert & Advisor, Financial Services, Ernst & Young; and Pradip P Shah, Chairman, IndAsia Fund Advisors.

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First Published: Mon, September 14 2020. 17:37 IST