Over 82% of large cap funds underperformed benchmark in 5-year period – Check Mid-cap, ELSS performance
As a mutual fund investor, one would want one’s scheme to beat the benchmark returns over the long term. Any underperformance by the MF scheme may reflect poorly on the fund manager’s acumen in fund management. In a recent study, titled S&P Indices Versus Active Funds India Scorecard, published by S&P Dow Jones Indices, the world’s leading index provider, it has been seen that over 82 per cent of Indian equity large cap funds underperformed their benchmark in the five-year period ending December 2021.
S&P Indices Versus Active Funds India Scorecard, studied the performance of three categories of actively managed equity funds with their respective benchmark indices over 1-, 3-, 5- and 10-year investment horizons ending in December 2021.
Equity Large-Cap Funds: Over the one-year period ending in December 2021, the S&P BSE 100 was up 26.53%, with 50% of the funds underperforming the benchmark.
Over the second half of 2021, 54.55% of the funds underperformed the S&P BSE 100.
Over longer horizons, the majority of the actively managed large-cap equity funds in India underperformed the large-cap benchmark, with 67.61% of large-cap funds underperforming over the 10-year period ending in December 2021.
ELSS Funds: Over the one-year period ending in December 2021, the S&P BSE 200 ended in the green, returning 29.11%, with 26.83% of funds underperforming the benchmark.
During the second half of 2021, 39.02% of the funds underperformed the benchmark.
Over the 3-, 5- and 10- year periods ending in December 2021, 63.41%, 79.07%, and 58.33% of funds underperformed the benchmark, respectively.
Equity Mid-/Small-Cap Funds: The S&P BSE 400 Mid-Small-Cap Index was up 51.77% over the one-year period ending in December 2021. Over the second half of 2021, 37.25% of the funds underperformed the benchmark.
Among all the categories evaluated in the SPIVA India Scorecard, the Indian Equity Mid-/Small-Cap category fared the best for active funds, with 56.06% of the active funds underperforming the S&P BSE 400 MidSmallCap Index over the 10-year period ending in December 2021.
Though investors in this category may have witnessed a broad spread in fund returns (the difference in the first and third quartiles was 19.57%), exposing fund selection risk challenges.