Common Fund Manager Disclosure Norms — What Happens When One Manager Runs Multiple Schemes or Products
It's common for a talented fund manager to run several schemes at once — a large-cap fund, a flexi-cap fund, and perhaps an FPI or PMS mandate on the side. SEBI's common fund manager disclosure framework exists specifically to give investors visibility into what happens when the same individual's decisions are simultaneously shaping multiple products, and to guard against the specific risks that arrangement creates.
The Core Concern Being Addressed
When one fund manager oversees multiple schemes or products with overlapping mandates, two risks emerge that wouldn't exist if each product had a fully independent manager:
- Portfolio replication — the manager's convictions naturally tend to show up similarly across the products they run, meaning investors in what appear to be two "different" schemes may actually be holding largely overlapping portfolios, without necessarily realising it.
- Preferential allocation — where investment opportunities are limited (a stock with limited float, a bond issuance with capped allotment), a common manager must fairly allocate across the products they run, rather than favouring one product's investors over another's.
The 70% Portfolio-Replication Test
SEBI's framework establishes a 70% threshold for portfolio overlap between products managed by the same fund manager — where the overlap between two products' portfolios crosses this level, it triggers specific disclosure obligations, on the reasoning that investors deserve to know when two ostensibly distinct products are, in substance, largely the same underlying portfolio dressed in different scheme wrappers.
Mandatory Monthly Cross-Scheme Return Disclosure
Where a common fund manager runs multiple schemes, AMCs are required to disclose, on a monthly basis, the comparative returns across the schemes managed by that individual — giving investors a standing, regularly updated view of how the manager's various mandates are performing relative to each other, rather than requiring an investor to independently piece this together from separate scheme factsheets.
The 10% Divergence Trustee-Reporting Trigger
Where the return divergence between products managed by the same fund manager exceeds a defined threshold — 10% — over a specified period, this divergence must be specifically reported to the trustees. A large, unexplained performance gap between two products run by the same individual, despite similar mandates, is exactly the kind of pattern that could indicate preferential allocation, inconsistent application of the manager's stated strategy, or other issues warranting closer trustee-level scrutiny rather than being left unexamined simply because both schemes individually appear to be performing adequately.
Why This Framework Matters for Investor Trust
Without these disclosure requirements, an investor holding what they believe to be two genuinely diversified, differently managed products could unknowingly be carrying concentrated exposure to a single manager's convictions — undermining the basic diversification premise many investors assume when they split investments across multiple schemes. The 70% overlap test and monthly comparative disclosure directly address this blind spot.
Practical Implications for AMCs
- AMCs must actively track and compute portfolio overlap between products sharing a common fund manager, not just monitor each scheme's compliance individually.
- Monthly comparative return reporting requires a dedicated disclosure process, distinct from standard factsheet production.
- The 10% divergence trigger requires ongoing monitoring and a defined escalation pathway to trustees, with proper documentation of the explanation offered for any material divergence identified.
Why This Matters
This framework is a direct response to a structural reality of the fund management industry — talented managers inevitably run multiple mandates — addressed not by restricting that practice, but by mandating the transparency that lets investors and trustees judge for themselves whether it's being managed fairly.
How Anuj Desai & Associates Can Help
We help AMCs build the portfolio overlap monitoring and monthly comparative disclosure infrastructure this framework requires, and assist with documenting the trustee-reporting process for cases crossing the 10% divergence threshold. If your AMC runs common fund managers across multiple schemes without a formalised overlap-monitoring process, this is a genuine compliance gap worth addressing.