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Nilanjan Dey

You don’t have to be a capital market wizard to know that the past three years and more have been superlative for equities. Stocks have surged ahead, firmly shoring up India’s stature among all emerging markets. Equity funds have, generally speaking, put up a good show during this phase. The top performers among them have actually turned in over 65 per cent, considering the end-June numbers.

So, what are funds such as LIC Mutual Fund Equity, UTI Master Value or Birla Dividend Yield Plus really doing, having delivered extremely uninspiring returns, lower than 35 per cent in each case?

Witness the returns generated by the best names, featured on the other side of the spectrum, and you will realise how different these are from the laggards. Just for the record, Magnum Global, Magnum Contra and Sundaram BNP Paribas Select Midcap have provided 73 per cent, 68 per cent and 66 per cent respectively.

And if you are stumped to see the differences between the laggards and the leaders (on a three-year basis), you will indeed be shocked by some of the one-year scores.

Consider the winners. Standard Chartered Premier Equity has 79 per cent to its credit, followed by ICICI Prudential Services Industries (76 per cent), JM Basic (73 per cent), ICICI Pru Infrastructure (64 per cent) and DBS Chola Opportunities (64 per cent). At the other side are JM Emerging Leaders (12 per cent), DBS Chola Global Advantage (15 per cent), Principal Dividend Yield (19 per cent), UTI Contra (20 per cent) and ABN Amro Dividend Yield (20 per cent). All these figures, pertaining to June 30, are taken from Value Research.

We are not trying to confuse you here with too many names. We are only attempting to bring to your notice a simple thing – a poorly performing equity fund, which obviously has an messy portfolio of stocks, can ruin your case even if the overall market is doing well.

Sometimes, funds managed by the same asset management company can display wide differences in returns. JM Emerging Leaders, positioned as it is at the bottom of the heap, is obviously having a bad time. JM Basic, on the other hand, is among the best performers. We are talking about one-year scores here, mind you.

How are the players positioned over a five-year period? Take a look at the latest stats. Reliance Mutual Fund and SBI Mutual Fund are two fund houses with a special distinction. Each has two representatives in the grand list (‘Top Five’). Reliance Growth (59 per cent), Magnum Contra (57 per cent), Magnum Global (56 per cent), DSP Merrill Lynch Equity (52 per cent) and Reliance Vision (51 per cent) make up the coveted set.

The ‘Bottom Five’ is made up of LIC MF Equity, Taurus Discovery Stock, UTI MNC, ING Select Stocks and UTI Mastershare. These have provided returns in the 28-34 per cent range.

It is for the fund houses concerned to correct things that are going wrong. A consistence underperformance will not get them more assets. Instead, assets will deplete and more investors will consider pulling out. For the fund managers, the moral of the story is simple: Perform well, assets will grow; perform poorly, you will have to look for your next job sooner than you thought.

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

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