Most equity-focussed mutual funds, both in large-cap and mid-/small-cap space, have underperformed their respective benchmark S&P BSE indices, for the one-year ended December last year, finds a report.

According to S&P Dow Jones Indices’ scorecard SPIVA, for the year ended December 29, about 59.4 per cent of large-cap equity funds had underperformed their respective indices.

In the case of mid- and small-cap space, the underperformers are very high as 72.1 per cent of mid- and small-cap funds have failed to beat their respective indices in returns.

The scorecard is not better even for the three-year time-frame.

Fifty three per cent of equity large-cap funds had underperformed the S&P BSE 100 benchmark index over the three-year period, while 80 per cent of mid-/small-cap funds underperformed the S&P BSE MidCap index.

Bond funds do better

However, the performance of bond funds are better. According to the SPIVA scorecard, 34 per cent of the composite bond funds underperformed the S&P BSE India bond index over one year.

“As of December-end 2007, there were 127 large-cap equity funds available for investment. Of these 127 funds, 38 either merged or liquidated over the 10-year period ending December 29, 2017, resulting in a survivorship rate of 70.08 per cent,” said Akash Jain, Associate Director, Global Research and Design, Asia Index.

“Another 30 funds underperformed the S&P BSE 100 which led to a total of 53.5 per cent of the funds underperforming the index,” he added.

Asia Index is a 50-50 partnership between S&P Dow Jones Indices and domestic bourse BSE.

Large spread in returns

Over the 10-year period, the return spread for the actively-managed large-cap equity funds (between the top and bottom performers) stood at 3.23 per cent, pointing to a relatively large spread in fund returns.

Owing to the volatile nature of the mid- and small-cap segment, the return spread for the actively managed mid-/small-cap equity funds was even higher at 4.44 per cent.

Govt bond funds falter

According to the study, the asset-weighted return of large-cap equity funds was 87 basis points higher than the equal-weighted return, over the 10-year period.

In contrast, the margin between asset- and equal-weighted return for mid-/small-cap funds was only 12 basis points.


Besides, most of the government bond funds underperformed the S&P BSE India Government Bond Index over three-, five- and 10-year periods, the SPIVA study said.