How India’s oldest equity mutual funds have performed

Old is gold they say. In the case of equity mutual funds, the earliest ones to be launched have been a mixed bag, going by the returns they have delivered from the time they were rolled out 30-37 years ago. Optically, many of these funds have delivered excellent returns, provided an investor stayed put through all these years. These returns are also not reasons enough for taking investing calls in these funds afresh. More so, as they were grouped into specific categories with defined mandates compared to more liberal and looser definitions that prevailed before 2018.

But we merely set out to understand how some of these funds have fared over time and how they have changed in flavour over the years.

What vintage funds did

Many of the funds in the earlier era did not have rigid mandates. So, even a fund calling itself large cap or bluechip would also house mid cap stocks. There was no mandate on allocation across small, mid and large-cap stocks to be followed. Except, specific theme funds, most others took a broad-based approach to the portfolio. Of course, a bluechip or large cap fund still had a portfolio dominated by such stocks, but the kicker still came from going down the market cap curve. The flagship fund of most fund houses a few decades back was just called equity fund. It was mostly large-cap dominated, though the flavour was multi-cap overall.

All that changed in 2017-18, after market regulator SEBI created specific defined mandates for equity, debt, hybrid and commodity funds.

The earliest fund to be rolled out was UTI Mastershare, nearly 37 years ago. It was a large cap dominated fund then and continues to be so even now. It has delivered a robust 17.2 per cent returns over these many years, which is creditable. But in the last 5-10 years the fund’s performance has not been that spectacular.

SBI Magnum Equity, a diversified fund morphed into SBI Magnum Equity ESG, a thematic scheme, though only relatively recently. This is a case of a wider mandate narrowing down to a theme category. Another multi cap fund from the same house, SBI Magnum Multiplier has become SBI Large & Midcap, which has delivered well over the past several years.

Two tax-saving funds – from Canara Robeco and SBI – have been around for more than 30 years with the same mandate and have delivered solid returns. Their performance in recent years has been steady and consistent.

Divergent performance trends

Then, there are funds that represent a study in contrast. Some have low returns since inception, but picked up pace over the past decade or at least 5-7 years. And there are those whose returns look great from their launch time, but have slipped considerably over the past 5-10 years.

Tata Large & Midcap (Tata Contra earlier, which merged with Tata Equity Opportunities) has given about 13 per cent annually over the past 30-plus years. HDFC Large & Midcap (HDFC Growth Opportunities earlier) has delivered just 12.6 per cent returns since February 1994. But both these funds have done well in recent years and are now reasonably good funds in the category.

Franklin India Bluechip a large cap fund and Franklin India Prima, a midcap scheme, have given 19.1 per cent each annually since their launch. But in the last 5-10 years, these funds have fallen behind in terms of their performance and are among the lower quartiles compared to peers. Aditya Birla Sun Life MNC’s return since launch is an impressive 17.3 per cent. However, it has slipped considerably in the last 5-7 years.

Takeaway for investors

While it makes for good reading to see how much an investor could have earned had she stuck around with the same scheme over all these years, it is more of a hindsight bias. No one would have known three decades back that a fund would deliver well or record underwhelming returns. An aside though is that even if a fund underperformed for 5-7 years, it could still look optically robust on the returns front over a 25-30-year window, a period barely a handful of investors stick around for. Besides these are point to point returns and thus have their own disadvantages while making a fund-buying decision.

There is no substitute for rigorous analysis – of rolling returns, risk ratios, consistency measures, portfolio structures and so on. A fund, no matter how long in existence, must be exited (or SIPs discontinued) if it underperforms its benchmark and peers over, say, 2-3 years.

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