Mutual fund manager can generate value either by picking protable assets and earning alpha or by timing the market by adjusting the portfolio beta. While traditional theories have studied alpha component of the manager's skill, I build a model where manager has both these types of skills. In this set-up investor's learning about managerial skill is a function of performance as well as the state of the aggregate market. A period of high (low) market volatility is more informative about timing (picking) skill. This learning together with persistent and counter-cyclical conditional market volatility implies that fund flows are more sensitive during the periods characterized by high volatility and low market return. I test and conrm these predictions in the data.