The Hindu Business Line : Diversified equity funds post 41% average return in 3 years

Imagine this: You love diversified equity funds and have entered them in the fairly early stages of the current bull phase. You have stayed put for the past three years or so. And you are a very unhappy person, your misery caused by your decision to invest in what (on hindsight) have turned out as the worst-performing funds.

You are probably not alone. For all you know, lots of others may be sharing your fate, having bought funds that have simply paled in comparison with the best performers. At the end of the day, that great sense of loss gets even more compounded when the huge difference between the leaders and the laggards comes to the fore.

Okay, let's end the preface right here and go straight to the funds that have turned in the most outrageous scores. Considering a three-year period ending December 8, these include LIC Sensex Advantage, Taurus Discovery, Birla Dividend Yield Plus, UTI Master Value and LIC Equity.

These funds, based on data released by Value Research, have delivered returns between 25.9 per cent and 31.7 per cent.

At the top of the league tables are Magnum Global, Magnum Contra, Sundaram Select Midcap, Magnum Multiplier Plus and Reliance Growth. SBI MF's Magnum Global heads the list with a smart 73.8 per cent. The rest have delivered returns in the 53.3-69.4 per cent range. The relatively poor performers have obviously dragged down the three-year average score, which stood at 41.17 per cent as on December 8.

If you had invested in the likes of LIC Sensex Advantage three years ago (and feel like staying committed to it), it is time to ask why these funds have gone off-track. Why should some of them under-perform so markedly, especially when so many others are well above the average? Why should the fund houses/fund managers concerned not be identified for the comparatively inferior show they have put up?

These questions must be asked - and the answers demanded - in the interests of all concerned. And this brings us to another aspect of MFs' performance: The great swathe of middle-of-the-road performers. These are, let us consider for our purposes, funds that have given anything between 35 per cent and 45 per cent. Incidentally, there are more than 70 diversified funds with at least three years behind them.

This may come to you as a shocker, but the current list of pedestrian performers (on a three-year basis) includes some of the oldest and best-known names in the MF space. We are referring to funds such as Franklin Prima, Franklin Bluechip, Birla Advantage Fund and HDFC Capital Builder.

The same Franklin Prima happens to be one of the toppers over a five-year period, along with its peers such as Reliance Growth (the champion, with 65.48 per cent), Magnum Contra and Reliance Vision.

The laggards here include ING Vysya Select Stocks (27.8 per cent), LIC Equity and UTI Brand Value. There are just over 50 funds with five-year track records.

Investors need to realise that league tables such as these are not sacrosanct. They simply keep on changing, and funds that have gone down in terms of achievement may not remain at the bottom for long.

That said there is always scope for revising your asset allocation for the better. Improve it, while the party lasts. Even time is not infinite.

Feedback may be sent to nilanjan@thehindu.co.in

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