A majority of actively managed equity mutual funds have underperformed their respective benchmark indices in the past five years, a study by S&P Dow Jones Indices in association with Crisil has shown.
While the percentage of funds had shown a declining trend since December 2010, the number of underperformers exceeded the outperformers. Majority of the large-cap equity funds ‘failed to beat the S&P CNX Nifty’, which was the benchmark index for large-cap companies listed on the NSE.
In case of diversified funds, over 53.10 per cent of them outperformed the benchmark S&P CNX 500 in the one year ending June 2012. This was higher at 61.6 per cent over a three-year period but this fell to 49.5 per cent over 5 years.
In case of ELSS, the percentage of funds outperforming the benchmark in over one and three years was ‘stable’ at around 70 per cent, this dived sharply to 44.83 per cent over a five-year period.
The report showed that equity funds in India continue to record losses during the year with the asset-weighted large-cap funds being down by close to five per cent whereas their equal-weighted equivalents were down six per cent.
Hybrid funds trail
Their benchmark S&P/CNX Nifty fell by close to five per cent in the year ending June. The equity oriented hybrid funds also trailed their benchmarks over one- and five-year period.
But what was surprising was the performance to the majority of actively managed debt oriented hybrid funds or Monthly Income Plans (MIPs) which outsmarted the benchmark CRISIL MIP Blended Fund Index over 3 and 5 years. For the year ending June 2012, a majority of gilt and balanced funds underperformed, where as the majority of debt, ELSS and diversified funds were able to beat their benchmarks.
The study has shown that asset-weighted large-cap equity funds have given a return of 5.86 per cent over the past five years compared to 4.61 per cent for their equal-weighted equivalents. This showed that the ‘funds with better performance over longer time frames had larger assets under management’.