Fund House Selection Criteria
Fund House Selection Criteria is a framework investors and advisors use to evaluate Asset Management Companies (AMCs) holistically — examining factors such as track record across market cycles, investment process discipline, fund manager stability, AUM size and growth trajectory, and corporate governance — before allocating across that AMC's schemes.
India had 44 SEBI-registered AMCs as of mid-2024, collectively managing over ₹60 lakh crore in assets. The diversity of fund houses ranged from large domestic promoter-backed AMCs such as SBI MF, HDFC MF, and Nippon India MF, to foreign-promoted AMCs like DSP MF, Mirae Asset MF, and Franklin Templeton India, to newer boutique players. Selecting a fund house rather than merely a scheme is relevant because fund-level attributes affect multiple schemes simultaneously.
Track record evaluation looks beyond one- or three-year performance, examining rolling five- and ten-year return consistency across multiple categories. AMFI's monthly performance data and third-party analytics platforms provide rolling return percentile rankings that reveal whether a fund house consistently generates above-median returns across equity, debt, and hybrid categories, or whether strong performance was concentrated in a single scheme or era.
Investment process discipline is a qualitative dimension. Well-regarded AMCs publish detailed investment philosophy documents, hold regular portfolio disclosures, and explain portfolio decisions in monthly fund manager commentaries. Consistency between stated philosophy and actual portfolio construction — for example, a value-oriented fund consistently holding high-dividend, low-PE stocks rather than drifting toward growth at peaks — is a positive indicator.
Fund manager stability matters because performance attribution studies show that individual portfolio managers explain a meaningful portion of scheme-level outperformance. AMCs with high fund manager turnover, or where star managers left to start competing ventures, historically showed performance disruption in affected schemes. SEBI's fund manager disclosure requirements under the SAI (Statement of Additional Information) enable investors to track tenure and changes.
AUM size has a non-linear relationship with performance. Very small AMCs may lack the research bandwidth to cover the breadth of the market adequately. Very large schemes within an AMC face liquidity constraints in executing in mid- and small-cap segments without moving prices. Well-managed AMCs voluntarily close or restrict inflows into small-cap schemes when AUM reaches levels that would impair execution.
Corporate governance and promoter stability became scrutiny areas after the Franklin Templeton India debt fund winddown in 2020, which affected six schemes and blocked approximately ₹28,000 crore for months. Investors increasingly considered parent-entity financial health, promoter commitment to the AMC business, and the AMC's own balance sheet resilience as part of fund house due diligence.