Mutual fund industry CEOs seem to be in a hurry to pack their bags.
In the last three months, four Chief Executive Officers have put in their papers.
Mr Piyush Surana of Daiwa Asset Management, Mr Rajan Krishnan of Baroda Pioneer Asset Management and Mr Arindam Ghosh of Mirae Asset exited in April this year.
Feeling the heat
While the exit of each of the CEOs has been attributed to personal reasons by the fund houses, many industry analysts feel that with profitability under pressure, the senior management could be feeling the heat.
The latest to quit has Mr Navin Suri of ING Investments India who decided to “continue his career outside India owing to his family commitments”.
Declining assets under management, falling profitability and poor scheme performances may point to the obvious that when profitability is under pressure, the senior management could be feeling the heat.
Difficult times
“The industry is going through difficult times. There is increasing pressure on fund houses to improve their performance which is why there is a churn at the top,” said Mr E. Balaji, Chief Executive Officer of Ma Foi Randstad.
Between March 2011 and 2012, the mutual fund industry’s quarterly average assets under management declined 5.1 per cent. The AUM fell from Rs 7 lakh crore to Rs 6.64 lakh crore during this period.
The profitability of the bigger asset management companies such as HDFC and Reliance Mutual Fund, among others, may have risen but the smaller players continue to struggle with rising operating cost, said analysts.
However, there are others who believe that declining AUM or rising cost alone cannot be reason enough for such top management personnel shifting out.
“Declining asset base and rising cost is an industry-wide phenomenon. No fund house is immune to these problems. In fact, some of the bigger fund houses have also seen a huge fall but that does not mean that the CEO should leave,” said a senior research analyst.
That the cost factor is upper most on the mind of the fund houses is apparent.
In-house replacements
The exits have only led to in-house replacements.
Mr Sethuram Iyer, CIO, moved into Mr Surana’s office.
In the case of Mr Krishnan, Mr Rajeev Thakkar, Chief Operating Officer turned out to be an interim arrangement.
At Mirae Asset, Mr Jisang Yoo, Chief Financial Officer, took over the reins from Mr Arindam Ghosh.
Of late, fund houses prefer to look within the organisation for replacements during such difficult times. It is either in house talent the zero in on or in the case of foreign-owned fund houses, some one from the parent organisation is thought fit enough to execute the function.
It is goodbye to incentives when the going gets tough for business houses.
“The fortunes of asset management and financial companies depend largely on market action. While the base salary of a top-level executive may be low, performance-based incentives might be much higher. With fund houses not performing, bonuses at this point would be very flat,” says Mr Balaji.